If you haven’t heard of bitcoin yet, then you may want to get in the know. Bitcoin is a new technology developed by Satoshi Nakamoto, an anonymous figure who published the first bitcoin specification and proof of concept in 2009. Bitcoin can be viewed as cash for the internet, a global currency for the ever connected worldwide society we now find ourselves in. Bitcoin is a decentralised peer-to-peer payment network that is powered by its users, with no central authority or middleman.
To offer a quick summary of Bitcoin, here is the definition provided on the Bitcoin.org website:
“Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of Bitcoin’s is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.”
Bitcoin can be a confusing topic for those new to the subject, especially if the little information they have has come from mainstream media. Mainstream media tend to focus on the negative news, such as price volatility, regulations and bans enforced by various countries, and of course the infamous crash of bitcoin exchange Mt Gox.Using mainstream media to formulate an opinion on bitcoin could be a bad idea, as the reporters likely have an extremely limited understanding of how bitcoin works, and are in the business of creating revenue through views and click-throughs, not enlightening the masses. At present governments worldwide are unsure on how to approach Bitcoin in terms of regulation, and how to define it; Is it currency? Is it an asset? Is it legal? etc.
Bitcoin is a new technology, and with all new technologies come teething problems to manage as the surrounding infrastructure builds and develops. But if the last several years have taught us anything about Bitcoin, is that it is a resilient technology, backed with an incredibly passionate and determined community. The implications of mainstream bitcoin adoption are immense to say the least, and the timing for such a technology could never be better.
Bitcoin Educational Resources
There are some great resources already out there to help teach and explain what Bitcoin is, here are some links to various media I have personally found useful:
What is Bitcoin? (1.5 minutes )
A short, and easy to follow video on the basics of Bitcoin.
Andreas Antonopoulos on Bitcoin’s Disruptive Power (20 minutes)
Andreas Antonopoulos is a prolific speaker on the Bitcoin scene, and one certainly worth listening to. He has earned degrees in Computer Science and Data Communications and Distributed Systems from UCL. With experience ranging from hardware and electronics to high level business and financial systems technology consulting and years as CTO/CIO/CSO in many companies — he combines authority and deep knowledge with an ability to make complex subjects easy to understand.
The above Podcast at 3 hours in length provides a more in depth discussion about Bitcoin and its implications. Aimed at Bitcoin beginners and newbies, this is a fantastic primer that can be downloaded for free to listen to on your daily commute, or watched on YouTube.
Bitcoin’s adoption rate is increasing worldwide at a rapid pace, and is showing no signs of slowing down. Blockchain, one of the mainstream digital wallet providers just surpassed two million wallets on its service, up from one million in just January of this year. Additionally, in the last 12 months we have seen some huge companies come on board to start allowing customers to purchase their products using Bitcoin, these include: Dell, DISH Network, Expedia, Newegg and Overstock.
Bitcoin and the Music Industry
The music industry has seen enormous changes since the advent of the internet, and Bitcoin is poised to continue on this theme. We can already see Bitcoin’s influence in the music industry, with start-ups and artists moving in on the space to utilise its numerous benefits. Although public knowledge and adoption of Bitcoin remains low, early adopters are capitalising on this by having both increased exposure due to its marketability, and reduced competition due to under saturation of the market.
Why Artists Should Consider Bitcoin
Artists have already begun to experiment and take advantage of the Bitcoin technology with great success. Artists such as 50 Cent and Mastodon both accept payment in bitcoin for their latest albums, and recently Hip-Hop heavyweight Nas threw his weight behind the technology. Nas suggested that bitcoin could be one of history’s best investment opportunities, and hinted that he will accept bitcoin for future releases:
“Bitcoin will evolve into an industry as big, if not bigger, than the Internet. My man Ben Horowitz really opened my eyes to that point. This isn’t of the Internet age; Bitcoin is its own age.”
The Benefits of Bitcoin
For artists there are many advantages to utilising bitcoin as a payment method, these include:
Zero Processing Fees – Unlike traditional payment methods such as MasterCard and Visa which take a 2-4% cut on transactions, Bitcoin has virtually no processing fees. This can allow artists to keep a larger cut of their sales which they can then put towards continued growth and future recordings, or even offer a discounted rate for those willing to purchase their products with bitcoin.
Low Risk of Fraud for Customers – Credit Cards are now over 50 years old, and have lagged behind in innovation. Simply put, credit cards were not created with the internet in mind, and even now in 2014 are still far from an elegant solution to making payment over the internet. Bitcoin offers a much safer method for making payment, as users do not need to provide any sensitive information during the transaction. (Global Credit Card fraud is climbing yearly, with 2012 estimates as high as $11 billion dollars.)
Faster Collection Methods – Bitcoin payments are processed immediately, with funds showing up in the vendor’s digital wallet instantly, and are able to be re-spent within approximately 10 minutes (Once the transaction has been verified by the block-chain). This is irrespective of your location anywhere in the world; Bitcoin protocol does not care or take into account your physical location.
No Charge Backs – Charge backs, where consumers go through their bank or credit card providers to force a refund can be very costly to businesses, and ultimately lead to failure of one’s business. With bitcoin there is no risk of charge backs. Because each transaction is pushed, there is no way for someone to ‘pull’ funds away from you. Unlike with a credit card company or a bank, the money that is in your possession is yours; no one can take that money from you.
Increased Exposure to New Markets – Bitcoin offers artists exposure to new and exciting markets. Not only is accepting bitcoin a great, cheap way to gain free marketing and exposure, bitcoin enthusiasts love supporting companies/businesses that accept the digital currency.
Viral-like Ability of Youth Markets – The young generations are no slouches when it comes to adopting new technologies (Facebook, Twitter, Spotify, Netflix etc) and it is, and will be the same with bitcoin. Bitcoin will allow artists to utilize social platforms by embracing and spreading the word of Bitcoin and their association with it, and in turn please current fans while finding new ones.
Fund Control – Bitcoin creates the opportunity for artists to have complete control of their funds due to its decentralised nature. Additionally, by using a payment processor such as Coinbase or BitPay, artists can eliminate the current price volatility by having the bitcoin exchanged (at the time of purchase) into the fiat currency of their choice, or receive a combination of both fiat and bitcoin.
Dissolve Frustrating Fiat Exchanging – The music industry is a worldwide industry, with the internet acting as the intermediary in which artists and fans can connect like never before. Utilising a worldwide currency such as bitcoin could favour and encourage more worldwide collaborations, eliminating the hassle of transferring funds around the globe with exotic fees, and the troubles of exchanging between different fiat currencies.
Why Music Fans would want to use Bitcoin
Besides the artists utilizing Bitcoin, we should ask the question of why fans would want to use bitcoin. The current methods of using fiat currency ‘work’, so why bother changing and adopting an alternative method?
Passing on Savings – By using bitcoin as a payment for music, merchandise, concert tickets etc, fans are supporting the artists they love even more by passing on the savings to the artist. Although savings passed on by a single individual may be small, the aggregate effect of many small savings can quickly accumulate to a vast amount of money.
Exclusive Content & Discounts- Artists can give fans that pay with bitcoin access to exclusive content, or even offer the content at a discounted rate. For example, Mastodon gave Bitcoin purchasers two downloadable tracks before the albums official release.
Artist Tipping – Bitcoin allows for fans to effortlessly tip musicians anywhere in the world. Cheers, a Bitcoin powered service has developed a mobile platform that enables bitcoin tips to be sent to musicians with social network structure, that allows users to share information, send messages to friends, and search for new artists to support. Such services allow you to send money to musicians whether you’re watching them perform at a local bar, or if you caught one of their videos on Facebook.
Decentralised Record Label?
One fascinating facet of the Bitcoin technology is its ability to allow for a decentralised record label. Bands/Artists would retain full control over their catalogues, as well as the ability to manage their own finances at virtually no cost beyond the programming and server maintenance required for its operation. Functioning as an escrow service, a theoretical label could allocate revenue to artists instantly, taking its cut (which would be considerably smaller than traditional record labels), while charging for individual “marketing packages” which could be offered as part of its service. The artists and label would all receive instant payment for their contributions to the website.
The concept of a decentralised music label is already being tested by Rhino Coin based in Montreal, Quebec. According to their website, “Rhino Coin is a decentralized music label that owns its very own recording studio. On a monthly basis Rhino Coin holders will be paid a dividend equal to the previous month’s earnings of Rhino Recordings.” Clients and credits of Rhino Recordings include: The Brains, The Planet Smashers, Ellie Goulding, Kesha and many more.
The record labels fiat earnings will be converted into bitcoin, then to their own ‘Rhino Coin’, and paid out to its corresponding shareholders. Dividends will be paid out in Rhino Coin on the first of each month and divided based on the balances of each Rhino Address. Every month the Rhino community will vote on an artist that will be completely backed by the Rhino Coin Community, from pre-production to recording and release of their songs. These artists will have their songs available for download at rhinocoin.org or iTunes under the Rhino Coin Records umbrella where all proceeds generated will be returned to the community.
To get things kicked off, Rhino Coin carried out an IPO where investors could purchase Rhino Coin (XRC) at 10,000 XRC per Bitcoin, with the total amount of XRC available at 20,000,000.
Although early doors and still to be firmly established, this concept demonstrates the incredible power of the underlying technology of Bitcoin.
In my opinion, the music industry and the Bitcoin technology are a perfect match when contemplating the now globally connected society we live in. Middlemen in the industry have intervened and overreached for too long, squeezing as much money and control from artists as possible. Bitcoin offers a solution for artists to take back control over both their catalogues and finances, to better connect with their fans worldwide, and most importantly to engage in a financial future in which the banking ‘elite’ are not required.
Bitcoin has the potential to do for mobile payments what Napster did for the digital music industry; Peer to Peer technology to eliminate the bureaucracy and limitations surrounding traditional payment services.
Although still in its infancy, the Bitcoin snowball is rolling, gaining momentum and size day by day. There will be obstacles along the way as with all new disruptive technologies, and you can be sure that the current power holds will object and push back. Unfortunately for them, Bitcoin is a decentralised network (like the internet) of which there is no central authority or physical location of control. It will be up to the individual to choose how they financially engage and interact with future industries, and Bitcoin provides an opportunity to do so in a manner which brings control back into the hands of the people and artistic providers.
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