Abstract.​ This article describes Musicoin, a decentralized system for the publication and consumption of music, which combines a cutting-edge cryptocurrency($MUSIC) to a peer-to-peer file sharing network. Musicoin allows musicians to license their content as a “programmed contract” directly to a decentralized database called a “blockchain”. These contracts automate the collection and distribution of royalty payments and remain in the control of the artists themselves. Listeners can access a global catalog of music stored on a peer-to-peer network and pay artists directly using digital currency, based on their usages. Ease-of-use tools can be designed to allow a seamless experience for both listeners and musicians, and an open protocol will allow third-parties to build a rich ecosystem of value-added software and services. By providing a distributed and highly transparent platform that connects musicians and listeners directly, Musicoin lays the groundwork for a new age of music that is sustainable, borderless, and fair to all stakeholders.

The digitization of the music industry began in the 1980s and, in hindsight, was inevitable. By the late 1990s, with the rise of Napster, digitization officially became a disruptive force, and one that music industry is still grappling with today. At the heart of the struggle is a system of licensing, distribution, and promotion that dates back more than a century. As technology outpaces (and in some cases simply circumvents) the traditional system, there is growing concern and consensus that the century-old music industry might collapse under its own weight after nearly two decades of decline.

And, while the transition to digital music has largely been a boon to listeners, who now enjoy access to an ever-expanding catalog of music through services like Spotify and iTunes, it has been difficult at best for musicians. The industry still keeps the large majority of revenue and is painfully slow to cut a check to musicians, making it increasingly hard for musicians to earn a living.

However, the same technological advancement that has wreaked havoc on the music industry for the past 20 years also presents us with an extraordinary opportunity to redefine the relationship between musicians and listeners. Digital currency (or “cryptocurrency”), in particular, will allow nearly instantaneous payments with minimal transaction cost. “Programmed contracts” will allow musicians to maintain control of licenses, rather than relying on a third party.

The remainder of this paper gives a brief overview of two relatively recent and dramatic changes to the way people interact with music, both of which have ultimately failed to produces a sustainable and fair system. Finally, a detailed proposal for a path forward is given.

Two Failed Models

Napster, which was the first peer-to-peer (P2P) file sharing network widely adopted, marked the beginning of the end for the traditional approach to music distribution and consumption. In many people’s eyes, it’s seen as the assassin of the music industry. In this model (which we call the “Torrent Model”), content was casually shared on a P2P network and downloaded by other users without the musician’s permission and without sending any form of compensation. This model is doomed by itself, not only for its legal breach, but also because it is not sustainable as musicians’ benefits were totally annihilated.

Torrent Model, featured as peer to peer sharing without anonymously, where musicians are entirely disregarded.

More recently, a “Subscription Model” has become popular (see Figure 1). In this model, services deliver streaming content based on a centralized catalog and charge users a level of subscription fee (mostly 9.99USD/month), which is often overpriced. In turn, these streaming services (like Spotify) pay labels and publishers a big portion of revenue to acquire licenses.

Subscription Model (right), which retains all of the complexity and inefficiency of the legacy music industry, and ultimately pays musicians a small fraction of total revenue.

This model is an improvement over the Torrent Model, since revenue is actually collected from listeners, nevertheless, the portion of that revenue makes to musicians is extremely small, because there are so many intermediaries taking a major cut. Ultimately, over 80% of royalty fees were kept by intermediaries. The reason for this is largely historical. Prior to the digital age, musicians needed these intermediaries to help them organize, plan, record, produce, and distribute their music. This spawned the creation of many agencies in the music industry, such as music labels, PROs, distributors, retailers, studios, PR agencies, and marketing agencies. After the Digital Millennium Copyright Act (DMCA), more agencies were created, and all of which took their share of revenue. If we look at the income distribution structure, we would be really surprised how little we pay musicians.

Figure 2. The current industry myth on distribution

One famous case is the complaint by singer James Blunt, “I get paid £0.0004499368 per stream”. For 1 million playbacks on Spotify, James Blunt only receives £450! It’s actually not the worst case, many artists can’t even bargain such a rate and are paid far less. For this reason, many musicians still can’t make a living, which forces them to be part time or just change careers. Given the ubiquitous technologies and social media today, it’s worth asking: Do all of these organizations still add value? Most musicians today are very busy marketing themselves, creating and recording music themselves, and sharing content online directly.

New Paradigm

We need a new model that re-structures the entire process, from creation, to consumption, to compensation, and to more creation. The model we propose here is based on the theory of Sharism, which emphasizes a tight coupling between sharing and rewarding.

Figure 3. Sharism Model creates a closed circuit between musician and listener.

In Sharism Model, each playback represents an exchange between the musician and the listener. The listener sends a payment to the musician, and in exchange is granted access to a specific work. This model requires a payment mechanism that is fast, has a low transactions cost, and works across borders.

Same wise, almost all traditional licenses and terms can be executed after sharing, if we can make Sharism model works everywhere. Fortunately, with the rise of digital currencies and blockchain technology, such a system is already possible.

A Universal Blockhcain for Music

To support the Sharism Model, we need to create a digital ledger specifically tied to music consumption to close the loop. We call the ledger Musicoin for easy understanding. In this design, for every playback, a digital coin is sent directly from the listener’s account to a “little program”(someones like to call it “smart contract”) that lives on the blockchain.This little program actually helps enforce a “Pay per Play” license(PPP). So whenever a music was shared to a listener, the little program will help execute the license terms to charge corresponding amount of coins and send to the owner of the license. Under this, every playback will count.

With PPP license, blockchain can also distribute the payment to several beneficiaries within seconds. For example, a band may release a license that pays 50% to the song writer, 25% to the singer, and 25% to the guitarist. Critically, the way in which the funds are distributed are controlled entirely by the musicians and no intermediary is required to facilitate the payment other than the blockchain.

Illustration of the payment flow, in which a user sends payment along with a request to play a particular work and in return is granted access. Specifically, granting access means providing a key that can decrypt an encrypted audio file that is stored on a distributed file system.

We recognize that proposing such a system is quite simple, and that actually building, testing, and refining it is another matter. We also recognize that it is not uncommon for new blockchain projects to over-promise, collect ICO funding and allocate large sums to the creators, only to fail to produce any tangible results. Therefore, we have taken the following steps to earn trust and stability:

A new token will be introduced together with the chain, which we call it $MUSIC (or MC). With every block generated by miners, there will be 314 $MUSIC being issued based on social consensus. Since the music industry has long priced far below the real value of music in human society, we are not going to set caps to the money supply for its future scaling up. It means the quantity of this coin will be every increasing and self-adapting to the related demands. We will explain more in the section of “Musiconomy” on why this policy was designed and applied. To fully respect equality and free economy, the blockchain should not allocate any coins to anyone at the genesis . This means there will be even no coins be allocated as reward to the creators. Of course, based on this principle, the creator of Musicoin expect much profound business models emerged from such an open platform, instead of narrowly centralized ideas. UX is relevant. Whatever blockchain promised are still in hype stage. To make it really useful to public mass, it requires to make the entry barrier as low as possible for musicians and listeners alike, to avoid the risk of becoming yet another echo chamber of blockchain enthusiasts interacting only with other blockchain enthusiasts. We aim to be generally useful and accessible to the general population from day 0.

To those ends there will be a global music catalog, which enables musicians to create and publish their licenses and also funds playbacks out of it’s own account (as long as we can mine them fast enough), so that listeners can test the system without needing to acquire coins.

Musiconomy

From micro to macro, it’s fairly safe to assume the biggest concern for new entrants here is money supply. If it’s just a cryptocurrency, the concern is valid and probably takes a long time to justify its value. However, the design of Musicoin is to attach to music consumption, which lead to the bigger topic called Musiconomy.

The consumption model of $MUSIC is based on the logic of “Pay Per Play”, which means the minimum supply of the coin should be one to match how many songs could be played. In 2015 alone, over 5 trillion (5,000,000,000,000) songs were played online. This means that if we assume a rate of $.01 per $MUSIC, the market calls for 50 billion USD worth of $MUSIC in order to sustain itself for a year.

Of course there could be several years that $MUSIC can really peg to each music consumption. During this period, consumers will be helping to stabilize the value of the currency, because if $MUSIC price was too high, they simply will not pay to listen to it, forcing the coin leaning to inflation. But if so, consumers would be able to pay less to consume music based on PPP. In the short term, the inflation rate is high to match expected growing demand. In the long term, the rate of inflation will slow as demand levels off.

Another thought, it would take us literally 10,000 years to reach target if we really wanted to have 5,000,000,000,000 $MUSIC in circulation, eventually $MUSIC would then be getting much higher than $.01/$MUSIC because there won’t be enough speed to catch the consumption with PPP, by then, there should be other solutions to defy the deflations, e.g. musicians re-price PPP.

Open Opportunities

Musicoin is not only designed for a new paradigm, but also offering a great opportunity for larger stakeholder groups. Big labels may have to adapt, but they can benefit from this platform because the whole market scale can be enlarged, they can work once and harvest forever and worldwide. They can put their copyrighted content onto Musicoin blockchain and keep enjoying the upscaled consumption.

With Musicoin, today’s streaming music services don’t need to process hectic paper works to prepare reports and pay musicians, instead, all the information are open to access by anyone in the world, instantly. Musicoin is designed for both musician and listeners, but will eventually benefit the whole industry — even traditional players.

Marketers, promoter, DJs, and social curators can also benefit from this system, which can spawn new values for listeners, thus generating returns to them.

Startups can build more innovative technologies and services upon Musicoin system to meet diversified demands from the network; Hardware makers can create tangible and wearable smart gadgets to extend the glory of musical devices in our cultural legacy. Imagine your home speaker can be much smarter someday, not only caching music when you are not at home, but also help you mine coins to pay musicians when you play, it’s the most beautiful thing in the digitized world.

Big open data on Musicoin blockchain can also lead to more intelligent music recommendation. Based on Musicoin system, AI can play more and more important role to help users to discover music based on their taste, which is learned by the machine. It can be very personalized because every playback history will become the foundation of more accurate recommendation in the next. It’s the gold mine to AI researchers.

Conclusion

“Someone is making an enormous profit,” says Krukowski, a musician that shared his royalty check online, “and it’s not the musicians.” This is the complaint made by many musicians in the past. Today, with Musicoin, we can definitely change this. Musicians will make money and 100% income will go to their own wallet.

In an age of turbulence, we can also expect paradigm shifting. The changes rely on everyone to participate. We’d call all musicians and their appreciators to join this great transition to make music more meaningful to our life!