The Cryptocurrency Sector and the Music Industry – Three Parallelsbr>
As the chief operating officer for a bitcoin retirement platform, people frequently ask me what my predictions are for the cryptocurrency sector as a whole, be it six months, one year, or five years from now. Given the relative newness of the space, as well as the volatility, it makes sense that people want to hear concrete predictions as a way of sorting through uncertainty. But rather than discussing price predictions, I find it’s more helpful to look at the cryptocurrency sector in the big picture. By understanding the industry’s origins, and the reasoning behind current trends, I believe we will have a more pronounced understanding of where the space is going.
As a means of comparison, I think it’s helpful to look at the trajectory of another industry, which, though it may initially appear markedly different on the surface, has gone through a transformation that shares a lot of parallels with the cryptocurrency space: the music industry. Let’s look at three distinct similarities between the two industries as a means of providing a bigger picture view of where, I believe, bitcoin is headed next.
Both Industries Were Profoundly Shaped by the Concept of Decentralization
Following the 2008 financial crisis, people began gravitating towards alternative means of conducting transactions, removed from third-party middlemen they felt they could no longer trust. Then came Satoshi Nakamoto’s whitepaper announcing bitcoin, the decentralized currency that took personal information out of the hands of bank behemoths and back into the hands of their rightful owners. In 2009, the digital currency officially came into existence.
Meanwhile, if we go back almost 10 years earlier, the music industry experienced profound change back in 1999. The technical capabilities of the internet were continuing to grow and evolve, and amidst all of that, the online peer-to-peer streaming service Napster launched, making it easy for people to share MP3 files with one another. The company spoke to a larger desire amongst people to be able to consume in both a digital and more cost effective format than ever before.
With the rise of decentralization, however, comes the issue of regulation. For a time, the bitcoin space was largely unregulated, and met with its share of controversy due to hacks and scams. Similarly, sites like Napster were shut down due to issues surrounding copyright infringement. In spite of the troubles within both industries, however, people recognized the power in these tech savvy innovations, and began looking ahead to find sustainable, long-term solutions. This marked the next stage in both the music industry and crypto’s transformation: to balance the consumer’s desire for autonomy with the very real need for regulation.
Both Have an Evolving Relationship with Mainstream Institutions
Both the cryptocurrency sector and the music industry have gone through a transformative relationship with mainstream institutions, and it has been fascinating to watch. While at one point we might have considered big banks and crypto businesses completely at odds with another, much like big record companies and online streaming services, the evolution and health of both the finance space an the music industry has in fact led to a blurring of those lines.
In the music industry, “The multi-year gap between the death of Napster and the birth of iTunes was very damaging… too many years went by with few decent legal options to download or stream music,” said senior writer at Rolling Stone Brian Hiatt. The industry got the memo: they needed to adapt to an increasingly digital economy, and fast.
It took some time, but Apple launched the iTunes store in 2003, which was then followed by streaming giants such as Pandora and Spotify. In 2016, thanks to paid streaming services, the record industry saw an increase in sales for the first time since 1999. “The only reason we saw growth in the past two years, after some 15 years of substantial decline, is that music has been one of the fastest adapting sectors of the digital world, ” said Michael Nash, executive vice president of digital strategy, said in 2017.
Similarly, just as record executives have grown to appreciate streaming services and recognize them as vital to the industry’s well-being, large financial institutions, and the regulatory sector, have developed an increasingly cooperative attitude towards — and even appreciation of — cryptocurrency. CFTC Chairman J. Christopher Giancarlo has advocated for a “do no harm” approach in regulating cryptocurrency, and has said that ignoring such innovation “will make them go away, nor is it an appropriate regulatory response.” Similarly, David Solomon, the upcoming Goldman Sachs CEO, has also demonstrated a pro-crypto attitude, saying that the bank must “evolve its business and adapt to the environment.”
Both Industries Are Using Technologically Savvy Solutions to Improve Customer Experience
Thanks to technologically innovative transformations, I believe that customer experience has been vastly improved in both the finance and music industry.
The cryptocurrency sector includes far more offerings than just decentralized currencies. Take a look at digital currencies ether and XRP, and the platforms ethereum and Ripple as an example. Ether is a cryptocurrency, but ethereum is a platform that’s built specifically for creating smart contracts, a digital contract that has transformed the way agreements are processed in a variety of industries, ranging from healthcare to real estate. Similarly, while XRP is a digital currency, Ripple is a platform that serves a number of important functions, the primary one as an enterprise solution that allows banks to instantly settle cross-border payments with end-to-end tracking. All of these solutions are transforming the ways that businesses run today, and making many people’s lives easier as a result.
Similarly, the rise in streaming solutions in the music industry has also been a major win for the consumer, in which they pay less and have more options.In the Newsweek article “How CDs Have Been Supplanted by Music Streaming,” author Mark J. Perry writes: “We spend two-thirds less per person on music today on recorded music than in 1999, and yet have access to an almost infinite library of recorded music through streaming services like Spotify for about $10 a month, (with access to more than $30 million songs).”
Revenue in the music industry is increasing, and luckily, it seems to largely be on customers’ terms. I believe, that given mainstream financial institutions’ increasing acceptance of digital currencies, a similar trajectory is in store for the cryptocurrency space.