From music NFTs to AI content: how Web3 analogues of Spotify and SoundCloud work

Streaming services once revolutionised the production, distribution and consumption of music. Scouts now sift through thousands of recordings online in search of future stars; Billie Eilish and Doja Cat found global recognition thanks to SoundCloud; and Spotify has more than 615 million users.

Yet the industry’s giants are not without flaws, and independent artists in search of money and acclaim are increasingly decamping to alternative platforms. ForkLog examined how Web3 counterparts to streaming services emerged and what they offer budding musicians, ordinary listeners and crypto investors.

Swedish radio

By 2006 many mobile devices already had internet access and a built-in player. A Swedish programmer, Daniel Ek, had the idea of listening to music like radio—without downloading tracks.

In 2008 Spotify officially launched in Europe with a monthly subscription. The company acquired streaming rights from the recording giants Universal, Warner, Sony and EMI. By 2013 its library numbered 20m tracks and was available to 24m subscribers in more than 30 countries.

Around the same time, Alex Ljung and Eric Wahlforss, graduates of Sweden’s Royal Institute of Technology, launched SoundCloud. The core idea was to create an open community of musicians to share and discuss compositions.

By 2012 SoundCloud had won recognition from star performers such as Snoop Dogg, Destiny’s Child and The Strokes, completed a third funding round, and opened new offices in London and San Francisco. The platform’s audience at that point stood at 10m registered users.

The tide soon turned: in 2013 only 5% of SoundCloud customers had a paid subscription. Staying afloat required several large cash injections and management reshuffles. A shift to a more commercial course alienated many musicians seeking creative freedom and independence from market fashion.

“Optimisation” of the business strategy periodically backfires on Spotify, too. In 2016 users never saw the latest Radiohead album at the time: one of the world’s most popular bands boycotted a service they believed threatened the industry’s future. And in November 2023 Spotify’s management revised royalty payments—in favour of already-successful artists and to the detriment of newcomers.

Although such platforms helped launch many careers and even forged an entire genre—SoundCloud rap—opaque monetisation models and dependence on corporations are pushing musicians to seek other ways to share their work.

Music NFTs, ownership and DAOs

As Web3 took shape many performers began minting their songs—and even entire albums—as NFTs.

In 2021 Kings Of Leon sold the album When You See Yourself this way, raising $2m. And in March 2024 Wu-Tang Clan’s Ghostface Killah announced exclusive music as Ordinals on the Bitcoin blockchain. Thus the notion of the music NFT emerged, forming the foundation of crypto music.

The resulting stack comprises applications that operate largely with non-fungible tokens: NFT marketplaces, DAOs, streaming services, crowdfunding platforms and even entire labels.

The advantages of music dapps include:

• closer ties with favourite artists, interaction on social platforms, and co-creating tracks;
• financial upside from investing in a musician or a project token. If an artist succeeds, a music NFT’s price may rise;
• discounts on concerts and access to special zones at events; 
• potentially higher income than on Web2 platforms. In 2021 Barbadian rapper Haleek Maul’s earnings on the Web3 platform Catalog totalled $226,800 versus just $178 on Spotify; 
• participation in music DAOs and crowdfunding. These let artists win grants, obtain DeFi loans and take part in governing music organisations such as Noise DAO;
• access to cutting-edge AI for recording and mixing;
• expanded ownership rights and royalties. Some projects specialise in ensuring streaming payouts to NFT holders.

Usually music NFTs merely attest to ownership of a token linked to a music file and grant no additional rights, royalties included. A few projects offer more:

Opulous. Integrates royalties into MFTs (Music Fungible Tokens). Token holders receive a share of copyrights via a contract with the artist. The platform also offers innovations: musicians can take DeFi loans against the value of royalties they expect to generate over a year; investors earn returns for providing capital.

Holders of the OPUL token get priority across platform activities and can stake the coin for passive income. The dapp was initially deployed on Algorand and is now migrating to Arbitrum.

Royal. Helps artists release royalty-bearing NFTs—Limited Digital Assets (LDAs). These allow streaming income to be shared with token holders. In October 2021 DJ 3LAU released the first LDA on the platform for his song Worst Case.

Web3 tools for music

Beyond general-purpose NFT marketplaces such as OpenSea and Rarible, there are specialised music platforms. Some bundle extra features: a streaming service and even a recording studio.

Audius. Launched in 2020, the platform combines a music NFT store, streaming, and music and message sharing. Artists can interact with fans, share their work and monetise tracks via the AUDIO token. Users include Skrillex, Diplo, deadmau5, 3LAU and The Stafford Brothers. 

In 2020 the Binance Labs incubator became a lead investor in the decentralised protocol, which raised $1.25m. The following year the company closed a successful $5m round. Among the backers were stars of the first rank: Katy Perry, Nas, The Chainsmokers, Jason Derulo and Pusha T.

Users can connect via Solana and Ethereum; the app is available on desktop and on iOS and Android. 

Catalog. An NFT sales company built on the Zora protocol. A digital shop that also serves as a platform for interaction and streaming. Unlike many rivals, Catalog hosts only one-of-one recordings. 

The dapp lets artists distribute on third-party services. Previously, artists could capture 100% of initial sales and commissions on resales. In July 2024 the company rebranded, broadened its remit and shifted monetisation to a split of 85% to the artist and 15% to a development fund. 

Launched in December 2021, the streaming platform Sound.xyz enables limited-edition releases, for instance co-owning a single track via 25 NFTs. 

The platform is known for frequent airdrops of music collections—several times a week—boosting the visibility of new performers.

In 2023 the startup raised $20m in a Series A led by a16z’s crypto arm. Other participants included Snoop Dogg, actor Ashton Kutcher, producer Ryan Tedder and producer Tay Keith.

That same year, to cut transaction costs, the dapp integrated OP Mainnet and released a song about Vitalik Buterin with a free mint. The music NFT was created by Optimism co-founder Ben Jones and Sound.xyz co-founder Gigamesh. 

The project has no token yet—which means a chance of an airdrop for on-chain activity. At the end of 2023 the company reported milestones: the platform counted 2,555 artists who had released more than 5,500 songs, and musicians had earned over $6m.

Viberate. A professional music platform for monitoring broadcasts and live streams and for working with statistical data on artists and tracks. Producers and managers get talent-discovery tools. Users can track artists’ metrics, streaming statistics and fan-base growth. 

The VIB token, launched on Ethereum, is used for internal settlements and trading.

Among narrowly focused projects with an emphasis on AI-assisted recording and the creation of AI content are:

• Arpeggi. A free workspace in the form of a browser extension for creating and releasing tracks as NFTs. The dapp offers two core functions: a recording studio and an assistant for creating and licensing voice effects—Kits AI;
• LimeWire—an AI content generator with the LMWR token;
• Rocki—a marketplace and streaming service with a tilt towards rock music and its own ROCKI token.

Conclusions

Music NFTs and on-chain streaming platforms have become commonplace as dapps proliferate across blockchains. The progress of Audius and Sound.xyz suggests room for expansion. 

Most of Web3 music now resembles SoundCloud—but with crypto features. As practice shows, young authors can raise more money faster than on Spotify. The latter, chasing the crypto bandwagon, has repeatedly tested NFT-gated access to playlists.

Text: Sergey Golubenko