It’s hard to break into the music industry and even harder to succeed as an artist in the long term. Traditionally molded by industry gatekeepers, curated Top 40 lists,and contracts with legacy record labels, rejection is a common hurdle for new artists climbing the industry ladder.

But blockchain technologies, such as non-fungible tokens (NFT), are shifting the power dynamics within the music industry and creating new opportunities for growth and engagement. Proponents of change say NFTs give artists the tools they need to grow an engaged community from scratch, starting with just a small group of loyal fans. This “1,000-true fans” model was first coined by Wired’s Kevin Kelly in 2008 and suggests that an artist really only needs 1,000 engaged fans to achieve success.

Musicians arguably now have more tools at their disposal to bypass, or at least get a headstart on, the traditional pathway to career success by building their online communities from day one. Web3 – what some are calling the next blockchain-based iteration of the internet – will likely transform the way fans consume music and interact with artists.

“The ethos and focus of Web3 is identity, ownership and community,” said Shannon Herber, managing director of A0K1VERSE, an NFT-gated fan community created by DJ and crypto collector Steve Aoki. Because many new NFT projects are centered around fostering community, having a few thousand followers on social media is what Herber calls “actually quite a large number in terms of Web3 fandom.”

We spoke to industry leaders with collective decades of experience about how to break into the music industry and cultivate an engaged audience using a Web3 toolkit.

“DYOR” (Do Your Own Research) is a mantra used colloquially throughout the crypto ecosystem. It is also applicable to musicians who want to understand the steps needed to build a brand on the blockchain, including creating and minting your first NFT.

“The first stage is always education,” said Inder Phull, CEO of PIXELYNX, a Web3 music company that combines gaming, augmented reality (AR) and the metaverse.

Many established artists have found creative ways to integrate NFTs into their existing business plans. For example, Grimes, Steve Aoki, Kings of Leon and 3LAU have each released new music as NFTs, while Pharrell recently signed on to NFT brand Doodles to produce music for the project.

The technological learning curve for NFTs can be a “key barrier to entry,” said Lin Dai, CEO and co-founder of OneOf, an environmentally conscious NFT marketplace that champions emerging musical artists. “About 99% of all creators have not been able to really participate yet,” Dai said.

If NFTs make sense for your community-building ambitions, it is important to first consider which blockchain to build your project on and what NFT marketplaces offer to best mechanisms to suit your specific needs.

According to Nansen.ai, Ethereum remains the top choice of blockchain for NFT projects. Prior to the recent Ethereum Merge – which upgraded it to a more efficient proof-of-stake consensus method – gas fees on Ethereum-based NFT marketplaces could range as high as $200 per mint, Dai said. This meant that it was previously cost-prohibitive for some artists to mint an affordable NFT collection. In the weeks since the Merge, gas fees have been much lower, making NFT collecting even more accessible.

Outside of Ethereum, a number of artist communities have sprouted up on other blockchains that offer faster speeds, lower minting costs and require less energy consumption.

“Music artists care deeply about the environment,” said Dai, adding that OneOf chose to support the Polygon and Tezos blockchains when it launched in 2021 due to their speed and environmental efficiency.

While the largest NFT marketplace OpenSea has a dedicated catalog for music NFTs, industry insiders say these are some of the most popular music NFT platforms, categorized by the blockchains they are built on:

Ethereum

Polygon

Solana

Tezos

Creating new experiences using game design elements – also known as “gamification” – has become a popular way for Web3 artists and fans to interact with one another.

“The future of fan-artist relationships is now all about co-creation and new ways for fans to show their love for the music and the artist they're passionate about,” said Phull.

As an example, he referenced a music video competition that Pixelynx and Deadmau5 launched last year, where fans were given a number of digital art assets to help create a music video inside game-driven metaverse Core for a new song called “When the Summer Ends.” The gamified experience offered a $50,000 grand prize for the winner, which encouraged thousands of fans to create content.

Independent artists can also experiment with gamification through social tokens, explained p00LS head of community Melanie McClain. Social tokens are like loyalty points minted on the blockchain, which artists can send to their followers as a reward for accomplishing tasks like attending special events, taking weekly quizzes, signing up for newsletters, listening to the latest album release and more.

Web3 supporters feel that the level of fan engagement enabled through social tokens is an upgrade to how consumers traditionally engage with albums on popular streaming apps like Spotify and Apple Music. “It shows fans have a deeper understanding,” said McClain. “It’s not just a passive activity, but rather something that’s very, very intentional.”

Online gaming worlds like Fortnite have also welcomed virtual concerts, while metaverse platforms like Decentraland have organized music festivals that bring new listening experiences to users.

Unlike traditional royalty structures within the music industry – which often have a fixed percentage payable to songwriters, music labels and various other rights holders – NFT minting gives artists the ability to choose their own royalty structures. Sometimes called “creator fees,” royalties represent a percentage of every NFT sale when the asset is resold.

For example, an artist may choose to receive 10% of secondary sales as royalties. They can enter the royalty amount at the time of minting, which triggers a smart contract to automatically direct the specified portion of sales to a designated crypto wallet. Some NFT platforms allow artists to include multiple crypto wallets in case they want to share royalties with collaborators, such as bandmates, sound engineers, producers, managers, or friends and family.

Music-focused NFT platform Royal, for example, allows fans to purchase music rights as NFTs, allowing them to benefit from the streaming royalties of their favorite artists’ music.

Not every NFT marketplace allows for such flexibility with NFT royalties, though Rarible is known for having a more robust royalty system than some others. Meanwhile, some marketplaces are trying to opt out of royalty payments altogether.

While Web3 technology can be used to enhance an artist’s reach or engage a community, traditional methods still have their place.

While Herber notes that the NFT market can be volatile, she recommends using NFTs and metaverse platforms as complementary pathways for fundraising and fan engagement – but doesn't suggest moving away from traditional record deals entirely.

One method for utilizing NFT sales is to earmark them as a fundraiser of sorts, she advised, thinking of NFT sales in the way independent artists may use a crowdsourcing platform to fund their first album. Dai agrees, noting that OneOf offers a program called Co//Sign to help emerging independent artists mint their first NFTs and launch new music.

“In a traditional music industry model, you are essentially taking out a loan against your future,” said Dai. “Labels basically are making a lot of bets.”

Herber agrees, adding that an independent artist may still ultimately want a major record label to help them gain exposure to a broader market. “Web3 still has not hit mainstream adoption,” she said. “In terms of reaching the broader music market, you may still have to go through traditional methods to do that.”

While blockchain-based streaming services like Audius have grown in popularity, releasing music across traditional streaming services and as NFTs may help to cast as wide a net as possible and welcome in new fans from a range of spaces.

One major tool in creating a thriving NFT community is what’s known as “utility.” Both independent and major artists may attach special privileges to NFT ownership, giving holders access to events, pre-sale tickets, merchandise and more.

“[Buying an NFT] is something like a membership club,” said Herber, adding that “NFTs are sort of the keys to the kingdom” and can unlock special perks.

Dai notes that building out a network of rewards for NFT holders can be especially helpful for independent artists in creating a beneficial feedback loop. “There is a big use case for independent artists to use NFTs as a way to actually set up their career so fans can participate on the upside. When they become famous, the NFTs’ value can increase.”

The “Cosmic Genesis” collection released by DJ Alesso in partnership with OneOf, for example, offered fans a tiered structure for collecting different chapters of his musical NFT based on increasing rarity traits. The final NFT in the collection was only available as one 1-of-1 edition, which came with a trip to space with tourism company World View.

While not every artist can guarantee their fans a trip to space, Dai says that any artist can take a lesson from the superstar DJ’s playbook. “You can kind of see how this applies to the biggest artists and to independent artists,” he said, noting that creators can experiment with the way they create engaging experiences through the timing, pacing and rarity of their NFT drops.