Blockchain 101 for the Music Business

by George Howard

The amount of ink spilled trying to explain what this magical blockchain thing is could fill all the swimming pools in Orange County. I’m not innocent; my fascination – and thus my ink spilling – began on this topic many moons ago in the form of numerous articles and interviews in my Forbes column (shameless self promotion: these articles have been compiled along with a new introduction into a book called Everything In Its Right Place: How Blockchain Will Lead To A More Transparent Music Industry). I think it was Twain who said, “If I had more time I would have written you a shorter letter.” Consider all my prior verbiage on the topic to be that (overly) long letter, and this piece’s brevity to be the product of the ensuing time.

Look, blockchain, much like The Jesus and Mary Chain, reaps disproportionate attention due to its name itself. “Blockchain.” It’s a satisfying word to say, and just sort of naturally tickles the brain. But, unlike The Jesus and Mary Chain, whose awesomeness and nuance expands over time, blockchain is actually pretty darn simple.

Here ya go. A blockchain is a database (some will insist on referring to it as a “ledger”; I don’t have the energy to debate this… if it makes you happy, call it a ledger). If you’ve ever used Excel, let alone MySQL, you know what a database is: something that you can store information in. Blockchain is the same thing at its core.

However, unlike an Excel or MySQL database, a blockchain has some superpowers. Blockchains have been around a long time, but the blockchains that we’re all obsessed with today are notable for a set of superpowers that were exploited by the founders of Bitcoin.

Reacting to the global financial collapse of 2007/8, which the Bitcoin founders believed was directly related to the centralized and interconnected nature of financial markets, they set out to employ the unique attributes of blockchains in order to devise an alternative to so-called “fiat” currency.

The reasons for this choice concisely articulate blockchain superpowers, and while I’m talking about it through the lens of currency, it’s useful to let your mind run to other ways these unique attributes might have an impact on non-financial instruments… like, I don’t know, musical instruments and what emanates forth from them.


In order for money to change hands in a controlled manner, there needs to be a record of the transaction. Ideally, this record is permanent; not one that whomever might desire to change or obfuscate the transaction record (for whatever reason) could do so. The first blockchain superpower that differentiates it from a regular database or ledger is this permanence/immutability. A transaction or record that is entered onto a blockchain is permanent. This does not mean that you necessarily know who entered a record onto a blockchain, but it does mean that once it’s entered, it — like Bob says — ain’t going nowhere. And whenever someone transacts – buys, sells, transfers, etc. – this item, another record (or “block”) is attached to the prior record, in a… wait for it… chain-like fashion.

This is hugely significant as it relates to financial transactions, but also pretty much any other information/asset in which an audit trail is beneficial. This could be money, obviously, but also things like land title or items in a supply chain… or copyrights for music.

The music business is plagued by non-existent/inaccurate information with respect to the “provenance” of a work… who owns it, who controls it, who sold it, etc.

While blockchain can’t (necessarily) determine the identity of the person making the transaction/controlling the rights, it goes a long way towards showing how the rights are being transferred; i.e. an audit trail.


Returning to the Bitcoin founders, beyond ensuring that there was a permanent record of financial transactions, a dominant concern was addressing the fact that a massive power dynamic exists with respect to the distribution of money. That is, vast quantities of the total global capital is controlled by a tiny number of institutions. This centralization inevitably results in precisely what occurred in 2007/08: a small number of bad actors got over-leveraged (Moral Hazard) and, due to their malfeasance and the centralization of capital, once they began to topple the proverbial dominoes axiomatically did as well.

It’s no surprise therefore that the second key element of blockchain tech employed by Satoshi et al. was the feature of decentralization of blockchain. The easiest way to understand this is to utilize BitTorrent as a heuristic. If you’ve ever torrented a file (I won’t tell), you know that the way it works is that you are not downloading The Fast and The Furious 15 via one poor person in Murfreesboro, Tennessee, but rather from hundreds if not thousands of other people who all have the movie (or various parts of the movie on their hard drives). In fact, once you have downloaded enough of Vin Diesel’s masterwork, you stop simply being a free-rider who is downloading from others, and become a “seeder” who others who are looking to get their Vin Diesel fix are downloading from. Behind the scenes, your torrent client is managing and assembling all of these disparate pieces of the file from countless decentralized computers into a comprehensive whole.

You know what else works like this (for now)… the Internet. Until Amazon Web Services completely powers the entire internet, the way it works is thousands of “nodes” prop up the entire Internet.

Blockchains – in their Platonic ideal state – are the same. Nodes scattered across the globe prop up the entire system. This is true of the Bitcoin blockchain. It is not true of all blockchains. Increasingly, companies and institutions have proprietary blockchains that are powered by their own proprietary nodes, and thus are centralized.

Such is life. However, this betrays the ethos of databases that are not owned or controlled by a single entity/institution, but decentralization is (or was) a fundamental tenet of blockchains, and one that is wildly important with respect to the music industry.

The music industry, since inception, has relied on information asymmetry in order to profit from those who don’t have the understanding or resources to protect their assets/rights (i.e. artists). A large part of this has been accomplished via collecting information and keeping that information silo-ed in proprietary databases that are completely not interoperable with any other database.

That is, the information that a record label has about an artist’s work is separate and distinct from the information that a publisher or Harry Fox or a performance rights society might have. And, like a two year old… none want to share.

Each of these firms believe that their value and worth comes from the closely guarded nature of this information: that they, and they alone, can control/license/exploit/etc. this information. In fact, they believe that this is their sine qua non.

The problem of course is that not only is this a thought process whose time ran out once we moved from economies of scarcity to economies of connectivity, but also – much like the disproportionate tsunami that occurred when Bear Stearns fell – a centralized database that goes down (ahem… MySpace) takes with it the data of the creators.

Neither power nor information is best utilized when consolidated amongst a small number of actors. The incentives become deeply corrupted.

Blockchains at their best address William Gibson’s bon mot of “The future is here… it’s just not evenly distributed.”

A decentralized database portends the possibilities of artists controlling and defining how/when/at what price their works may be utilized…without increasingly unnecessary intermediaries leveraging their control for commerce.

Smart Contracts

The law dude in me comes out here. Much respect to Nick Szabo and the conceit “smart contract,” but this term… oy… this term has caused so much confusion. A smart contract is not prime facie a contract. I’ll spare you the vagaries of what precisely is necessary for a contract to be durable, but I will tell you that just calling something a smart contract does not make it a legally binding agreement.

Instead, it’s best to think of smart contracts in the way the Bitcoin originators did: a set of IFTTT rules. That is, if a set of criteria are met, then – absent any intermediary – a transaction can occur. These rules are just code/software that are baked into the asset itself, and as it relates to Bitcoin, allow for verification – via proof of work – to occur so that one could feel reasonably confident that they could utilize Bitcoin without being scammed.

For the music industry this notion of a set of machine readable set of rules that are set by the content creators is, in fact, the grail. This is what gets me out of bed. I as a guitar player could bang out something, that for whatever ill-advised reason think others might enjoy, and then stipulate the terms upon which it would take for someone to do so (price, manner of use, etc.) and that someone could search for this type of work, find mine, then meet the requirements I’ve stipulated in the software (remember, “If this then that”). This idea gives me an abundance of hope.

The fact that should someone find my work, meet my requirements, transact with me, and that a permanent record of this transaction is logged on a database that is not owned by any one institution…. Uhm… yes, please.

Summing Up

So, that’s kind of it. Like I said at the top, there’s a literal million more words that could be written about this (I didn’t talk about blockchains being “distributed”… it’s stupid… It just means that the power required to prop up a blockchain, which is VERY non-trivial, is shared amongst a ton of computers – but of course it is, because it’s… decentralized), but the above are really the key points.