If you haven't heard about the new trend, everybody who is somebody is doing something in crypto. But that's good, right? Using their influence as a celebrity to support new technology? Yes it is - potentially - unless they are trying to rip people off.
The main motivation for this article was a recent announcement of LilleCoin, a cryptocurrency which should enable people to earn more the more they watch Lidija Bačić, a popular Croatian singer and the owner of what is to be LilleCoin.
There still isn't a lot of information available concerning the coin, but I think we can assume how it's going to work.
Not a coin
To get that out of the way: yes, it is probably not a coin but a token based on the Ethereum platform. This just means that it will not try to replace traditional currencies, but will use the same decentralized technology (some variation of a blockchain). I assume it will be based on Ethereum because it is a somewhat proven (and free!) platform. It is also much easier than making something new from scratch - and Ethereum will still do the job - and do it well.
The great feature of Ethereum is that the token will be able to use the Smart Contract System (SCS) to ensure the people get what they're promised. Say, for instance, Lidija promises to give every owner of the coin a percentage of her revenue - a smart contract can be programmed in such a way that we do not have to trust her to comply, the contract will do that for us.
It's been done before
This isn't the first time an artist released a cryptocoin. In November last year, Gramatik, a Slovenian electronic music producer, launched the GRMTK token. The launch was a big success, raising around 2.5 million dollars, which amounted to 25% of GRMTK.
Most of the people expected it to be some sort of a revenue dispersal mechanism; you buy a percentage of the tokens which makes you entitled to a percentage of Gramatik's revenue (at least of the money made by his music). Unfortunately, it looks like it was only a glorified donation scheme. And that is the worst part, we can only speculate, because even now nobody knows what the benefits are or how the money is distributed (if it's distributed at all). No terms were ever explicitly expressed. Some speculate that SingularDTV, a platform on which Gramatik launched GRMTK, bought most of the tokens themselves, thus ensuring the success of the project and getting some good PR.
Be it as it may, Gramatik is the world's first "Crypto-Artist". Hopefully the next one will be a bit more transparent.
Why is it better than direct donations?
If there is no sharing of revenue, this isn't much better than direct donations. But, the potential is definitely here.
Publishing an album is no small feat; first you have to pay for the instruments and the recording studio, only then you can make the music. That in and of itself isn't cheap, and then comes post production, marketing costs, platform/publishing costs, etc. The costs tend to stack up. This is where big label companies come in, they take care of everything for you, while you focus on the music.
And that does sound good: focus on the music. The problem is the label companies have a lot of controlthat way: they choose who will get published and under what terms. They take a (potentially) large percentage of the revenue generated by the music and could refuse to publish a (potentially) popular artist (if they deem them risky).
Imagine a band wanting to publish an album. Imagine if they could issue an album token. The token contract could be crafted in a way similar to company stocks - all the revenue the album earns is fairly divided amongst the token holders (dependent on the amount of tokens owned). The band would, of course, keep a significant amount of the tokens.
Why is that so great?
If implemented correctly, the price of the token would be determined by the free market, meaning the band would (theoretically) get a fair deal, gathering as much money as people consider their music is worth. The percentage of the revenue they have to give up to do this would also be fair, as they would issue only as much tokens as he needs money for the album.
This can also enable the band to choose their own marketing campaign, studio, people they work with... In essence, it gives the power of decision to the band and makes them more independent, which can be good. On the other hand, it can also be bad, if the band does not have enough experience in making the right decisions or enough drive to actually publish an album without someone constantly nagging them about deadlines.
Should record labels be worried?
The idea of artists having total control is great, but most artists do not want to take care of all of that bureaucracy. They just wants to make music! There will always be someone who will get paid to do it for them. However, this definitely does enable smaller artists, who would otherwise never get published, to get a chance to do so. And it does make for some hefty competition to the label companies, which is always good!
We can expect a lot more token launches from the music industry, especially after the path has been paved. People will definitively experience some early adopter burn, because the standard still doesn't exist and it is easy to misjudge a token contract (not everybody is a lawyer).
We can also expect some music streaming platforms (like Deezer or Spotify) embracing this and automatically share the revenue to the token holders.
A standard of some sort is bound to emerge, putting the whole process in a strictly defined legal framework.
The bottom line
The potential impact on the music industry is positive overall, while still supporting a new technology and bringing it to the mainstream, which is, of course, great. Whether LilleCoin is a scam or not depends purely on the benefits of owning the token. Sharing the revenue with the token owners would, however, be a step in the right direction.