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How NFTs could change the music industry … for better or worse

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If you’ve been trying your best to ignore this whole crypto thing, it’s probably time you started paying attention. At this point, your favorite musician likely knows this stuff better than you do.
The Grammy Awards announced this week that next year’s show would be commemorated by, what else, a series of nonfungible tokens. A staple in the crypto world, NFTs can take the shape of just about anything: original tweets, video game features, basketball cards. But they’re most commonly a combination of digital art and digital receipt — proof from the seller of a digital item that the buyer is the only authentic owner or one of a limited number of authentic owners. NFTs allow creators of digital items to make those digital items scarce and hence, more valuable.
There are no signs yet of what exactly the Grammy NFTs will look like or how much they will cost. Music superproducer Quincy Jones is behind OneOf, the company partnering with the Grammys to create them. A sneak preview could be the “Crystal Token” recently released by the rapper Doja Cat on OneOf, seen below. It sold for $188,000.
The Grammys’ NFT announcement is the latest example of how the technology underlying the brave new world of crypto is influencing how musicians make their money … for better or worse.
Steve Aoki is one of the most famous EDM DJs on the planet. If you’re unfamiliar with EDM, it stands for electronic dance music … ask your kids about it. Or just ask that annoying co-worker who won’t shut up about Burning Man.
Like most other musicians, Aoki had some unexpected downtime in 2020. The pandemic nixed the endless stream of live shows that was his life, not to mention his biggest source of income.
So Aoki did what a lot of people did during lockdown: He got into collectibles.
“I got, like, the Michael Jordan rookie card for $85,000. I got two of those,” Aoki said.
Not a cheap hobby. But around the same time, Aoki was getting into selling his own collectibles. He collaborated with an Italian digital artist to make something called “The Dream Catcher” series, a multimedia mashup of art and music.
Art is subjective. One person’s “Dream Catcher” series is another person’s Van Gogh. And “Dream Catcher” series fetched a Van Gogh price — $4 million in sales.
“The same way people are buying jerseys of their favorite athletes, or they’re buying Pokemon, whatever it is that they’re collecting. Now music is another huge collectible industry,” Aoki said.
In a world where musicians earn less than a penny per Spotify stream and live touring can disappear with the next COVID-19 lockdown, Aoki sees digital memorabilia as an important new revenue source.
OneOf, the Quincy Jones company, is hoping to convert music fans into more crypto-literate consumers by making NFTs slightly less expensive. Think merchandise — a digital replacement for a concert T-shirt or poster as opposed to one-of-a-kind art only the ultra-wealthy can afford.
“It is our ambition to bring as many of these fans into the blockchain, and do so for the very first time,” said Adam Fell, co-founder of OneOf. “We don’t necessarily believe that it’s about trying to convert them into blockchain believers. They’re coming on and buying digital goods because they’re fans of the artist.”
Of any music genre, EDM probably has the most musicians turned crypto evangelists.
“When you release an electronic record that you put on Spotify or iTunes, if it’s not a worldwide hit, you don’t gain any real money out of it,” said Alesso, a Swedish DJ who has released his own NFT series. “[Crypto] could save a lot of people’s careers, making money on their own art.”
Alesso points to what one of his contemporaries has done — Justin Blau, who goes by the stage name 3lau.
Last month, Blau gave away 50% of the streaming rights to his song “Worst Case” to 333 fans. Via NFTs, those fans will get a cut of the royalties whenever someone plays “Worst Case” on Spotify, Apple Music or another streaming service. Prominent venture capital firms have invested in Blau’s “Royal,” a platform that hopes to be a marketplace for fans to buy music rights via NFTs.
Steve Stewart is the CEO of Vezt, an app that allows users to buy fractionalized shares of music rights, similar to owning a stock. He said the model of artists giving equity in their songs to fans is mutually beneficial.
“When you see Justin Bieber say, ‘My new record’s coming out, everybody stream it as much as you can,’ imagine if he had incentivized his fans with some ownership, with an ability to share in these profits,” Stewart said.
Vezt doesn’t operate on blockchain technology yet, but the company is experimenting with it. In the future, Stewart sees NFTs allowing music rights holders to get compensated in near real-time, every time a song plays, anywhere.
“[NFT]s allow a song to be valued, tracked and monetized,” Stewart said. “So you can say, that song was played in a bar in Berlin, it’s worth 10 cents, and that song is broken down by these owners. That money can be remunerated quickly. I mean, there’s no reason it can’t be done in near real time.”
Nika Roza Danilova has been making industrial-tinged pop music under the stage name Zola Jesus for over a decade.
When live touring dried up, she experimented with creating her own NFTs — digital self-portraits with original soundtracks.
“I saw it could be a multimedia art form, something I could play with and expand my skills into something more audio-visual,” Danilova said. “The lack of limitations was very exciting.”
Danilova sold two NFTs and made a little money. But the rapid speculation she saw in the music NFT space — with tokens selling for millions of dollars to what she saw as rich people more interested in NFTs than art — left a sour taste in her mouth.
“They weren’t being sold for the quality of the art or the intention of the art,” she said. “They were being sold as miniature banks or stocks. This didn’t really seem like a decentralized financial system.”
At the same time, she was partly relieved that it wasn’t her fans that bought her NFTs; instead, the buyers were NFT collectors. She worries about introducing her fans to a risky asset class.
Danilova knows firsthand how difficult it is to make money as a musician. And she sees the appeal of new tech that would allow fans to buy music rights and finance smaller artists like her directly. No more big, bad record labels and other intermediaries putting financial pressure on musicians.
But the thought of turning her fans into investors just doesn’t feel right to her.
“When you own the rights, you are embedded in the success or failure of the music,” Danilova said. “You have an invested interest in the music, not just emotionally or metaphorically. It’s literally financial investment. And at that point, when finances are involved, there are expectations involved.”
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Starbucks details its blockchain-based loyalty platform and NFT community, Starbucks Odyssey – TechCrunch

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Starbucks is today officially introducing Starbucks Odyssey, launching later this year — the coffee chain’s first foray into building with web3 technology. The new experience combines the company’s successful Starbucks Rewards loyalty program with an NFT platform, allowing its customers to both earn and purchase digital assets that unlock exclusive experiences and rewards.
The company had earlier teased its web3 plans to investors, saying it believed this new experience would build on the current Starbucks Rewards model where customers today earn “stars” which can be exchanged for perks, like free drinks. It envisions Starbucks Odyssey as a way for its most loyal customers to earn a broader set of rewards while also building community.
To develop the project, Starbucks brought in Adam Brotman, the architect of its Mobile Order & Pay system and the Starbucks app, to help serve as a special advisor. Now the co-founder of Forum3, a web3 loyalty startup, Brotman’s team worked on Starbucks Odyssey alongside the Seattle coffee chain’s own marketing, loyalty and technology teams.
While Starbucks had been investigating blockchain technologies for a couple of years, it has only been involved in this particular project for around six months, Starbucks CMO Brady Brewer told TechCrunch. He says the company wanted to invest in this area, but not as a “stunt” side project, as many companies are doing. Rather, it wanted to find a way to use the technology to enhance its business and expand its existing loyalty program.
It opted to make NFTs the passes that allow access to this digital community, but it’s intentionally obscuring the nature of the technology underpinning the experience in order to bring in more consumers — including non-technical people — to the web3 platform.
“It happens to be built on blockchain and web3 technologies, but the customer — to be honest — may very well not even know that what they’re doing is interacting with blockchain technology. It’s just the enabler,” Brewer explains.
To engage with the Starbucks Odyssey experience, Starbucks Rewards members will log in to the web app using their existing loyalty program credentials.
Once there, they’ll be able to engage with various activities, which Starbucks called “journeys” — like playing interactive games or taking on challenges designed to deepen their knowledge of the Starbucks brand or coffee in general. As they complete these journeys, members can collect early digital collectibles in the form of NFTs (non-fungible tokens). Starbucks Odyssey, however, does away with the tech lingo and calls these NFT collectibles “journey stamps” instead.
Additionally, a set of limited-edition NFTs will be available to purchase in the Starbucks Odyessy web app, which also works on mobile devices. Though hosted on the Polygon blockchain, these NFTs will be bought using a credit or debit card — a crypto wallet is not required. The company believes this will make it easier for consumers to engage with the web3 experience by lowering the barrier to entry. It also won’t complicate consumers’ transactions with things like “gas fees,” preferring to offer a bundled price.
The company is not yet ready to share what its NFTs will cost or how many will be available at launch, saying these are decisions that are still being ironed out.
However, the various “stamps” (NFTs) will include a point value based on their rarity and can be bought or sold among Starbucks Odyessy members in the marketplace, with the ownership secured on the blockchain. The artwork on the NFTs is being co-created by Starbucks and outside artists, and a portion of the proceeds from the sale of the limited-edition collectibles will be donated to support causes chosen by Starbucks employees and customers.
By collecting the stamps, members will gain points that can unlock exclusive benefits.
These perks go beyond those you can earn with a traditional Starbucks Rewards account and its “stars.” While today, members can earn things like free coffee, free food or select merchandise, the points earned in Starbucks Odyessy will translate into experiences and other benefits.

Starbucks Hacienda Alsacia. Image Credits: Starbucks(opens in a new window)
On the lower end, that could be a virtual espresso martini-making class or access to unique merchandise and artist collaborations. As you gain more points, you may earn invites to special events hosted at Starbucks Reserve Roasteries, or even earn a trip to the Starbucks Hacienda Alsacia coffee farm in Costa Rica. It’s expected the very largest perks will be reserved for those who purchase NFTs, though lesser versions may be offered to those who earn their way up.
For instance, a paid NFT could offer the full travel package and farm tour, while an earned NFT could offer the tour alone with flights and hotels left up to the user. Starbucks hasn’t made any formal decisions on this front, however.
But what the company can say is that it wants to deeply integrate the program with its existing loyalty rewards, beyond simply using the same user account credentials for both programs.
Brewer says Starbucks is already imagining how some of the activities that earn NFTs will be connected to real-world Starbucks purchases, for instance.
In Odyssey, users earn NFTs by doing challenges, which might also include a real-world activity like “try three things on the espresso menu.” This would require the user to show their barcode at checkout — as they would if earning stars — to have their transaction counted toward the Starbuck Odyssey challenge. The company is still determining what mix of games, challenges and quests it will include at launch.
“But we’ll have experiences that do link directly to customers’ behavior in our stores,” Brewer stresses. Most importantly, the company wants to make gaining NFTs something anyone can do — not just those with money to blow on digital collectibles, as is often the case with current NFT communities, which price out the average user.
“There will be a lot of ways for people to earn [rewards] without having to spend a lot of money,” says Brewer. “We want to make this super easy and accessible. There will be plenty of everyday experiences customers can earn like virtual classes or access to limited edition merchandise, for instance. “The range of experiences will be quite vast and very accessible,” he adds.
Starbucks says it explored all the different blockchains for the project but landed on the “proof-of-stake” blockchain technology built by Polygon for this effort because it uses less energy than first-generation “proof-of-work” blockchains, which is more in line with its conversation goals.

Image Credits: Starbucks (opens in a new window)
The idea to enter into the world of web3 makes sense for a company known for taking advantage of emerging technologies and making them more approachable and easy for consumers to access. In years past, Starbucks introduced Wi-Fi in its stores to encourage customers to spend more time during visits. It also pushed the idea of mobile wallets long before Apple Pay became ubiquitous. And it made mobile ordering the norm well ahead of the COVID pandemic, when other restaurant chains picked it up.
But one criticism leveraged against many traditional businesses when they enter the web3 market is that they’re approaching it as a marketing stunt, not a real endeavor. Starbucks, of course, argues that’s not the case here — but only time will tell how serious its interest may be.
“We’re bullish on the future of these technologies enabling experiences that were not possible before,” Brewer claims. The intention is to be flexible and move with the customers as the web3 market changes, he explains. “It’s really important that we’re looking at it for the long-term,” he continues. “But, given that we’re plugging it into our industry-leading, massive scale rewards program — we’re committed,” he says.
The company says its web3 platform will open its waitlist (waitlist.starbucks.com) on September 12 and will launch later in the year. It will remove the waitlist and open the platform more broadly sometime next year.

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Tyler Hobbs' Fidenza NFT Project Gets $1M Pump Over 48 hours – CoinDesk

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DOJ Asks Congress for Tools to Limit NFT Money-Laundering Risk – PYMNTS.com

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Down at the very bottom of the crypto crime report the Justice Department issued last week was a request that could make it a lot harder to buy and sell NFTs.
Citing examples of criminals using the sale of the popular nonfungible tokens that hold art, video, music and collectibles to launder funds, the Justice Department asked Congress to define some of all NFTs as “value that substitutes for currency” under the Bank Secrecy Act (BSA).
Doing so, it said in “The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets,” would “make clear that its key [anti-money-laundering (AML) and countering the financing of terror (CFT)] provisions — including the obligations to have customer identification programs and report suspicious transactions to regulators — apply to NFT platforms, including online auction houses and digital art galleries.”
See also: DOJ Seeks to Double Jail Time for Money Transmission Crimes
The impetus, the department said, is the “explosive growth in the demand and corresponding markets for NFTs, perhaps most notably in the area of digital art.”
Substantial Risk
This “presents substantial money-laundering risks,” it said, citing a February Treasury Department study on money laundering in the broader art market.
“NFTs can be used to conduct self-laundering, a sequence in which criminals purchase an NFT with illicit funds and then resell to a purchaser who pays for it with clean funds unconnected to a prior crime,” that report noted.
It also found that in most cases, “digital assets that are unique, rather than interchangeable, and that are used in practice as collectibles rather than as payment or investment instruments … are generally not considered to be virtual assets under [international regulations].”
The “nonfungible” part of NFT means that each is unique and cannot substitute for any other, as opposed to cryptocurrencies like bitcoin which all have the same uses and value.
NFT marketplaces “may take the view that this definition [of a ‘value that substitutes for currency’] does not apply to their activities — and that they are thus not subject to the BSA’s anti money-laundering and anti-terrorism laws, the department said.
Justice is asking Congress to amend the BSA “to make clear that its key AML/CFT provisions — including the obligations to have customer identification programs and report suspicious transactions to regulators — apply to NFT platforms, including online auction houses and digital art galleries.”
Already There
Redefining NFTs as “value that substitutes for currency” would allow the Treasury Department’s Financial Crimes Enforcement Unit (FinCEN) to “potentially seek to regulate such activity under its money transmission regime,” a trio of lawyers at Skadden, Arps, Slate, Meagher & Flom wrote in an April blog post.
That, according to Jamie Boucher, Eytan Fisch and Javier Urbina, would require NFT marketplaces to register as money services businesses (MSB) with FinCEN.
Some types of NFTs — notably those used to fractionalize tangible assets like physical artworks and real estate, but also other valuable art or collectible tokens — are likely securities, the Securities and Exchange Commission (SEC) has said.
See more: How Did NFTs Become SEC’s Newest Crypto Target?
In FinCEN’s view, the trio noted, those can be repurposed to fit the definition of “value that substitutes for currency” and thus may already require MSB licenses.
 
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