Episode 1 Why I don’t think blockchain will change the music industry

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Keywords of Episode 1 Of Sound Mind.
Keywords of Episode 1 Of Sound Mind. Picture | HARKII

Hi there! Welcome to Of Sound Mind. My name is Karen Liu. I’m your host of this podcast and one of the bloggers behind HARKII, a content creator focusing on independent musicians, creative audio and sound research. You can learn more about Of Sound Mind and other podcasts that we recommend at HARKII.com.

This is our first podcast and we are going to kick it off by discussing a very popular topic at the moment: Whether blockchain will change the music industry. I have spoken with David Gerard over phone, who is a music journalist and the author of Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts. David is actually a very controversial figure to the community of bitcoin and blockchain because of his critical views on these technologies. He has been so constantly sceptical of these technologies that some people describe him as ‘strongly biased’. However, he represents a group of people who don’t believe that bitcoin or any related technologies is as beautiful as it seems. For our question that whether blockchain is going to change the music industry, his answer is obviously ‘no’. To know more about the argument, let’s listen to the interview.

 

Karen: Hello David. You are our guest today to talk about blockchain and the music industry. So, could you tell us a bit more about yourself, especially what you have done or researched about this area?

David: My name is David Gerard. I have written a book, Attack of the 50 Foot Blockchain, which covers the whole bitcoin, cryptocurrency, blockchain and smart contacts area. I started following this stuff around 2011 actually, quite early on, because I’d heard about this exciting new thing called bitcoin, where you could get rich for free or get rich quick. And there is basically no such thing as a ‘get rich quick scheme’. I started writing on this like late 2016, when nobody cared about bitcoin. And by the time I released it, the bitcoin price had started taking off again, in early last year. And so it was released in July, and suddenly it was a hot topic, so the book has sold quite well. I originally thought I’d sold about one or two hundred copies, I’ve actually hit about seven thousand, which I’m told is really good sales for even published books, let alone self-published. So, my formula for success is ‘be lucky and guess correctly’, this might be a hard scheme to reproduce, of course! So, I have become someone who basically talks about why blockchain and bitcoin isn’t quite as good as it is painted.

Karen: You are also a music journalist. Can you talk a bit about that?

David: Yeah. I used to be a music journalist. I got out of that and got into IT because it pays a lot better. Sadly, there isn’t a lot of money in music journalism. I still keep up with it. I have a music blog, Rocknerd.co.uk, which is like 18 years [old] now. I actually have a bit of blockchain coverage on that, so when I came [to the] time to write the book, I decided that music industry would be a good case study, since it’s a specific case of blockchain in business. Now the thing about this is it’s like when you are selling blockchain, you are not selling a database or something useful, you are selling a whole bunch of dreams and ideas that come along with bitcoin. Some of the promises are really quite remarkable, and often quite silly, but they dress it up in the euphemism ‘blockchain’, to make you think that you can get these magical ideas without that. Though actually you can’t even get the magical bit with it.

Karen: If you Google it, bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralised digital currency and the system works without a central bank or a single administrator. And a blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. There are a few terms, like hash, timestamp, distributed ledger, which may be difficult for people who know little about it.

David: The enthusiasts tend to be very enthusiastic and not so clear sometimes. I will sort of try to sum it up as quickly as I can without going too deep into the computer science details. But basically, the idea of bitcoin is that you want to have a digital form of cash. Now, that is a reasonable thing to want, right? Like, if I want to give you 10 pounds, I would hand you a 10-pound note. If I can’t do that, then how would I transmit that digitally? I mean I can send it via Paypal, bank or whatever, but that is sort of annoying, complicated and it has that central authority. So, you want something that is equivalent to handing someone a 10-pound note. That’s a reasonable thing to ask for. So, bitcoin tries to do that job. Now, the other thing about bitcoin, though, is it was also founded as a sort of ideological proof-of-concept and attempted to push certain ideas on how money and politics should work. This is where a lot of its problems or weirdness comes from. Now, the people who invented bitcoin, basically what they wanted was absolutely no central control, even in principle, because they are deeply, deeply against the idea of governments being involved in anything, or banks or central authorities. They don’t trust anyone. They wanted to make it such that you could have this thing work with nobody actually being in control of it. So, you have the chain of blocks, as we’ve discussed. Now this is really simple. It’s just an accounting ledger, you know, the list of transactions, money goes in and money goes out from person A to person B and so on. It’s just a ledger. That is a really simple concept, everyone’s seen this. You get the ledger, and you put little check digits on it. You know the last digit on your credit card, if that number is wrong then the bank knows that that isn’t actually a valid credit card number and you’ve missed out a number. So, a hash is just like the check digit that’s the last digit on a credit card, if even one dot is slightly wrong, it would be completely wrong. And it is really hard to fake a hash. If you have a hash of a given piece of data, then that data has got to calculate to that hash. So, if you have seen a string of random letters and numbers like A133224B or whatever, it’s probably the hash of something. You’ll see these in computers a lot. So, what you do is on each line of your ledger, you put a hash on it. Good. You know that transaction hash is put there, if someone messes with the transaction [then] the hash is wrong. But if they mess with the old record, you have a hash of the hashes. You have that on the end. So, you have a block of transactions, the hash free transaction, and you have the hash the whole thing at the end, Then if one block changes, all the hashes would be wrong. So, what you have there is, a ledger that you can only add to, because you can’t go back and alter old things. Now that’s a fairly simple idea. It’s pretty useful obviously. I mean, there is obviously uses for this thing. What bitcoin does is it takes this idea of the append-only ledger, that’s tamper evident, and then add this really weird mechanism to make sure that nobody can control it. So, there is the good bit and the weird bit. The weird thing is they do a thing called bitcoin mining, where they literally waste electricity, and compete wasting electricity to see who gets to add transactions and gets the bitcoins. Now this has obvious incentive problems because the incentive is to spend as much electricity as possible. It’s literally just a lottery. It’s a computerised lottery to guess numbers. And if you guess the right number, you win the bitcoins. And if it gets too easy, they make it harder. And this ends up with bitcoin using 0.1 percent of all the electricity in the world. And that is bit of a problem. The thing that bitcoin promises is that ‘it’s completely decentralised, nobody can control it, and completely irreversible and unchangeable’. The trouble there is that because no one’s in control of it, it means you can’t fix mistakes and you can’t reverse thefts, or hacks. And if you make a mistake, you’ve lost all your money. So, bitcoin isn’t actually very good at being digital cash, it turns out that having a little bit of centralisation actually helps a whole lot, but you can’t tell bitcoin fans that.

A blockchain, in the business idea, is sell this idea of how bitcoin works, not just the ledger but the completely silly decentralisation mechanism, to businesses. Now, the ledger bit is actually good and useful. Every good business blockchain product I have seen basically uses the append-only ledger. As I have pointed out, this was not new with bitcoin. We had those since 1979, it was commonly used across computing when they are useful, because it is a good idea. But for a few cases, what they try to do is sell it to business with the magic of decentralised everything, no one’s in control, and no one can it mess around, everything is marvellous and also you get a magical pony at the end. And the thing is when people are selling you blockchain or digital ledger technologies, which is the distributed ledger technologies, which is the new euphemism for ‘blockchain’, like blockchain was a euphemism for ‘bitcoin’. They are not just selling you an accounting ledger, or a database or whatever, they are selling you a sort of magical dream of the promises of bitcoin and claim that you can get this in your business by using this database technology.

Karen: So, in your book, you have criticised the problems that bitcoin has been abused by some people, are these the main reasons why you are against this concept or against the market at the moment, I would say?

David: I don’t think there is a way to do this well or usefully, or certainly not the way bitcoin does it. It would be nice…I would not say that it’s philosophically impossible to make all this work, but I would want to see it first. Because if you hear about cryptocurrency or blockchain, you would discover that people promise all sort of things that are ‘definitely coming soon, any moment’, that don’t ever actually happen. So, I won’t say that it’s philosophically impossible that someone can make all of this work, but it’s been 9 years, and no one’s seen any examples yet. So, the burden of proof is definitely on the people making the claims to produce something that works in production.

Karen: Okay, I’ve got a question here. Do you think bitcoin, blockchain or whatever related to them are just overestimated concepts instead of being on the wrong track?

David: They are on the wrong track as well. The idea of blockchains in business, they are pushing this for 4 or 5 years now, and so far there is like no production systems. Or if there is a production system it’s a thing that uses some blockchain software and it has one participant who’s like…at that point you are just using a very slow bad database. You will see this stuff all over the press, like ‘some company is now using a blockchain trial’ and the thing about the way this works is that they talk about things that could happen, ‘blockchain could do this for you’ and the ‘could’ sort of becomes an ‘is’. I’ve heard this from blockchain salesmen a lot, where they’ll say some idea that doesn’t actually exist and there is no software that does that particular thing. They’ll say ‘blockchain can give you this’ as if they actually have software can do this. So, every claim that a blockchain salesman makes, double check that it really, really exists in the real world right now. In the general business case I’ve found zero uses of blockchain in the full blockchain sense. There has been some useful software, as I’ve said that is actually just the append-only ledger. And it’s sold under the brand name ‘blockchain’, sort of. The buzzword ‘blockchain’ is good for selling people this stuff. There is actually useful stuff, like if you hear about blockchains, ‘how everything in Estonia runs on blockchains, and blockchains are hugely successful in Estonia and everything works really well on blockchains in Estonia’. They have their favourite software, which is called Guardtime KSI Blockchain, which is made by an Estonian company. It’s just this append-only ledger. It works really well for what it does. They actually started this in 2007 before blockchain and bitcoin even existed. They rebranded it with the word ‘blockchain’ a few years ago for marketing purposes, which has worked really well. But, you get people saying ‘this is great news for blockchains and cryptocurrency will take over the world’, and it’s not even a blockchain.

Karen: Let’s move on to blockchain and the music industry. There have been companies applying blockchain to their music services, have you noticed their development?

David: The general case there is any business and organisation wants to be more efficient, because all businesses and all organisations have bureaucracy, like, they have machinery that makes them do their job. That’s normal. But, they want to make it more efficient because then they can do more of what they do, or do it faster, or for more profit or whatever. So, there’s that. But there’s also, I noticed this especially in music, there’s a lot of resentment-based marketing, where they market things based on ‘you’re getting ripped off, but if you buy our magical product, then you won’t get ripped off’. That’s the whole pitch. It’s especially common in music. You will get people saying that ‘if you sign up to our blockchain platform, nobody can interfere with it, completely decentralised’, except for the bit where they actually control the systems they are running on the blockchain.

Karen: It seems that they share a common mission, which is to help musicians to get fair payment. My question is whether they can achieve their goal?

David: No, not really, because essentially, they are running on a decentralised platform at some level, maybe they are running on Ethereum, as the platform they run on. But their actual thing is totally centralised and they’re in control of it. You’ll see this every time. They mix up a lot of concepts which are claims about blockchain and bitcoin, and then transpose these to the world of music and often they will say things that are true in some limited computer science sense of the word only under certain circumstances, but they’ll use it like it’s an English word and is always true under all circumstances and scales up to millions of people no matter what. And of course you can’t do that, because you know, taking a very, very specific thing and trying to claim it is generally true, usually isn’t true. Like with the idea of, another one I have to introduce, smart contracts, basically just little computer programmes that are triggered when particular things happened on a cryptocurrency blockchain, like Ethereum, which is the second biggest cryptocurrency. That’s its whole thing: run little things on the blockchain. What they’ve actually used it for is, of course, is to do ICO tokens, where they sell you sort of… someone prints off a pile of completely centralised magic beans and sells them as being completely decentralised blockchain technology and you buy me some ICO tokens and then magic happens, apparently. You get a lot of this in news as well. But the idea is that the smart contract is just a computer programme. It will run when certain circumstances are triggered. So they say, if someone buys your song off iTunes, we will trigger it and we automatically work out who gets how much of the money and the money goes straight to you. That’s a nice thing to promise. Every musician would like that. Or you get a stream on Spotify, suddenly you get your share of the money from the stream, publisher, record company, it’s all done automatically – your record company can’t steal the money from you. See what I mean, ‘resentment-based’ marketing. You’ll see a lot of these, they’ve all got these pictures in them. The trouble is with this, none of this can possibly scale up even very far up at all. One thing about blockchains is they’re really slow at data processing, particularly a fully-distributed decentralised bitcoin or Ethereum-style blockchain is really not very fast at processing data. Ethereum in particular. A lot of these, they try to run their music industry platform on Ethereum. Have you heard of Cryptokitties? This was a game which was put on Ethereum where you would get little pictures of cats automatically generated on the Ethereum blockchain, and people buy and sell them for Ethereum. It was just fun. It literally didn’t do anything useful. It was just pictures of cats – just inherently amusing. And it was so popular that it clogged the Ethereum blockchain for a day, because the chain was full and it couldn’t pass any transactions. So, you have these systems that can’t scale up. And sometimes they say ‘we will use a different blockchain that’s more efficient’, but this more efficient blockchain doesn’t exist or it’s completely centralised, so it’s basically a database or other such things. Blockchains don’t scale up and they can’t possibly scale to even part of the size of the music industry, or even a local bit of the music industry.

The other thing about smart contact is that they have the same problems of cryptocurrencies: they are permanent, you can’t change them. This is bad for programming as it means you can’t fix bugs in them. One of the most famous smart contracts, when smart contracts started getting popular, was one called the DAO, this was in 2016. They tried to do a distributed venture capital firm on the blockchain where you’d have people put money into the DAO, which stood for D. A. O. – Decentralised Autonomous Organisation, and it would automatically… you put projects up and it would then take a vote from people who put money in, on who to give the money to. So that sounds fun. But, what happened was, because you can’t fix a contract once they’re deployed – or not easily, there was a security bug in it. They were warned about it saying ‘look, don’t go live with this, don’t go live with it. It will be a disaster’, and they went ‘ah, it’ll be fine’. They went live and someone promptly hacked it and stole 50 million dollars. And they couldn’t stop them because they couldn’t deploy a fix in time. So, if you have this vast complicated smart contract with millions of dollars in it, say, it’s an obvious target for hackers. And if you want to programme well enough to make that not happen, you basically have to programme nearly perfectly, ahead of time, before you know exactly what you are doing. That’s almost an impossible task in computer programming because every programme has bugs. Every programmer makes mistakes. The only way that you are not going to ever have a mistake in your code is like if you’re NASA programming a spaceship. That sort of programme is extremely slow and expensive. And no one is going to do that when their actual goal is to try to sell the musicians on buying the tokens.

Karen; So you’ve mentioned about that the speed of blockchain technology is quite slow. Is it just like in its early stage, or is it that the infrastructure has not been built up yet?

David: Well, the thing is that the speed of transactions is sort of very hard to speed up. Like Ethereum know this problem is coming because Bitcoin has had a lot of trouble being any good at digital cash since about mid-2015, because basically it reached capacity. And there were various plans to expand the capacity but none of them have come through. One change went through recently that has helped bitcoin a bit, but really not enough to make much difference. So, Ethereum knows that this is coming, and they know that already they have problems, as I said, when one popular Ethereum application can block the whole chain. So they’re working desperately to try to fix this, but they literally have to come up with new computer science to fix it. And they’re working hard at it, I mean I give them full credit for the effort, but I’ll believe they can do it when they’ve done it. There are other ways to do this, that are more centralised, sort-of not-quite-blockchains, but at that point, you’ve got more centralised platform anyway and why are you even using a blockchain? You might as well do all your computing in a centralised manner rather than messing around with a distributed system that isn’t actually decentralised at all?

Karen:And what are the differences between the existing streaming platforms compared to those using blockchain technologies? So, I am wondering which is a better choice.

David:I mean the trouble is, a completely decentralised trust-less automatic system isn’t going to happen. So, you have to think about other ways to do things. One of the big problems with musicians with getting paid well these days is sheer competition. There’s like 7 times as many albums released in per year than there was 20 years ago, because anyone can make music now and they do. Like in 2018, anyone can make a record, anyone can put out a book, as I just showed. You can go to independent record stores on the web, like Bandcamp, who pay musicians 85 percent. And how is that enforced? Well basically Bandcamp are trustworthy. You know, people trust them. And so far, they’ve come through, so they keep trusting them, so they behave like a trustworthy organisation. And anyone can publish, that bits completely solved – anyone can make a record. 100 percent of your problem is getting people to know you exist: publicity. So how do you do this? You might sign to a label and then they have some work to do. Or you might want to put out a book – you might sign on to a publisher, but you don’t have to. So, a lot of the problem is that even though there’s even more people consuming music, there’s so many more musicians and so many more records to divide up the money between. So yeah, a lot of it’s just sheer competition. With getting money from Spotify, the record industry has painted Spotify as the reason why musicians aren’t getting paid, but if you look at the way the numbers work, the labels themselves are making a fortune. They are making more money than ever did before. And Spotify itself is losing money hand over fist. Also, you look, and you realise the record companies take mandatory minimum payments from Spotify, which is another way of saying free money for no reason. So, basically if you want to get a better deal from the record companies, you will have to enforce the record companies behaving better and a blockchain is not going to magically do that for you.

Karen: You’ve mentioned it many times that a completely decentralised platform is not going to happen, why?

David: Because it’s impractical and the science isn’t going to work. Well, basically we are not going to have a completely decentralised platform because even Bitcoin and Ethereum have both recentralised again. Like the thing they tried to enforce decentralisation with no ultimate control whatsoever, was the operation of bitcoin mining – proof of work, or proof of waste – where you just burn electricity to prove that you deserve the bitcoins. The trouble is that the money mechanism has economies of scale and what this means is if you’re big you do a better job of it than you’ll do if you’re smaller. And what this means is that it automatically recentralises just because it has economies of scale – if you’re bigger you’ll do better. So what we’ve ended up with in Bitcoin is like there’s four or five big mining pools that basically do all the mining. So you’re back to centralisation again, except wasting a lot of power in the process. And Ethereum is even more centralised and it’s like 3 big mining pools basically in control, and we have no way of actually ensuring that these are actually separately owned or not controlled by the same people either. So, blockchains, as constructed, automatically recentralise for a technical reason, because you can’t actually enforce things being completely decentralised, and so they ended up being not decentralised, or not very decentralised. But also wasting a lot of power to be decentralised. It’s a complete mess.

Karen: This is the last question. What do you think about the future of blockchain?

David:I think that basically people are starting to say “yes, but where’s the production systems?” already, like across business blockchain. Like “yes, this is all great dreams, but where is the actual substance?” And as I said, there’s not a lot of it. I think that what eventually have to be is: the good bit , which is that append-only ledger construction. As I said, there are things that being sold as blockchain now, they are basically that. So if that’s more widely adopted, I can live with that, even if it’s branded ‘blockchain’. The other thing you see in a few industries, like there’s this cynical view that if you say ‘blockchain’ then you’ll get funding to do a lot of boring back-office clean-up work, and clean up your data and so forth you could never get them to fund before. I can verify that this is actually true, and it works. One blockchain trial that Walmart ran: the actual trial, they decided not go ahead with it, but everyone was very happy that they’ve run the pilot programme because they got to clean up a lot of stuff, digitised a lot of stuff they hadn’t had digitised before and so on. So basically they did a lot of cleaning up stuff they should have cleaned up ages ago but they finally funded it because they called it ‘blockchain’ instead of ‘clean up our mess’. That’ll be good.

Now for music, I mean music is an area where you are literally selling people subjective experiences, so it’s the area where there’s a lot of dreams and a lot of feelings, and not a lot of real-world boring, disappointing detail, because there is a strong bias towards dreams, hype, and speculation. So, I expect that people will keep trying to sell this stuff as long as they can market it to resentful people, because resentment is a powerful marketing force, and you see over and over that you never have to actually deliver the thing, you can just keep selling it on resentment. And I think that will probably happen a lot too. So, I would suggest don’t fall for it, make sure of what you’re buying, check that it can actually scale up at all, how many people a day can it cope with? That sort of thing. There’s also the issue, and this is very important, Music and media-type blockchains, it’s really inconvenient and annoying, and you look at things like Spotify and Netflix, people pay money for this, right? Why don’t they just get all their movies on BitTorrent? Because it is sort of annoying and difficult to use, they actually prefer convenience, they will pay Netflix money for a convenient thing and everyone gets paid, instead of pirating it, because pirating it is tedious and dull. And the same with Spotify, why would you pirate stuff when you can just stream it, 10 dollars a month, you’ve got a stream, good. You cannot sell people, you will not sell people on a new music platform that is more inconvenient than what they’ve got. Convenience is king. Convenience will beat always beat any other aspects as far as I can tell. I think the history of piracy versus Netflix and Spotify really shows that.

Karen: Thank you David, thank you for sharing your views with us.

Thanks to our guest David Gerard. Thanks for listening. Next time, we will speak to an entrepreneur who has already applied blockchain technology in his music startup. This episode was hosted by Karen Liu and produced by Spencer Zhang for HARKII.com

 


 

David Gerard has been an award-winning music journalist (1991 Golden Award for Services to the Industry, West Australian Music Industry Awards), and is currently a Unix system administrator. He has blogged about music at Rocknerd since 2001.

He is also a volunteer spokesman for Wikipedia, and is on the board of the RationalMedia Foundation, the hosts of skeptical wiki RationalWiki.org. He lives in east London with his wife and daughter.

He is the author of the book ‘Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts’, and the blog ‘Attack of the 50 Foot Blockchain’.

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