Stop, what’s that SOUND?
Introduction to SOUND Utility Token and Stakeholder Rewards
Hi, I’m Obie, the founder and CEO of Let The Music Pay (LTMP). Almost a year ago, my team started work on RCRDSHP, a now popular platform for electronic music artists and related brands such as festivals, record labels, and nightclubs to market unique, NFT-backed digital collectibles. We will expand to other genres later this year, but the biggest development so far in our universe is almost here.
Our plan is nothing less than to revolutionize the way that musical product is marketed and distributed in the future—not just for electronic music, but for all music around the world. SOUND token is at the heart of our plan, so let me tell you about it and explain how we will use it at RCRDSHP.
This blog post is Part 4 in a series leading up to today’s announcement.
Note that throughout our blog posts we use the terms creator and content partner interchangeably depending on context.
What is SOUND token?
SOUND is a digital token hosted on the Flow Blockchain that functions as a raw material for NFTs minted on RCRDSHP (and future platforms built by our parent company LTMP.) Each of our collectibles has a certain number of SOUND tokens associated with it. We think that this combo of fungible and non-fungible tokens is one of the most exciting areas of innovation in crypto.
At the moment, RCRDSHP takes care of everything related to SOUND on behalf of our content partners in order to keep things simple. But as we relax our invitation-only policy and begin to allow self-service minting, our content partners will need to have a positive balance of SOUND in order to create new NFT-backed digital collectibles on our platforms.
As we push towards decentralization, SOUND token may also do double duty as a governance token so that stakeholders can have a voice in strategic decisions that shape the growth of the platform. A governance roadmap should be expected no earlier than 4Q’22.
SOUND is not for speculation
SOUND is not intended to be a vehicle for speculation for anyone, but especially not the general public or RCRDSHP players. That said, we will be working hard to get the SOUND token listed on a number of exchanges and automated market makers.
If you’re wondering how our “not for speculation” stance makes sense, you might consider SOUND kind of like the vinyl that goes into making a record. After the initial expected burst of curiosity, we think most RCRDSHP players will think about the value of SOUND tokens as often as they think about the price of other kinds of traded commodities, mostly never.
We shield RCRDSHP players from SOUND token for admittedly ideological reasons: We do not think that members of the public should speculate on any platform’s utility tokens, period. This stance and the way that we put it into practice in our projects not only protects LTMP and creators on our platforms from moral hazard, it also makes our tokens less interesting to bad actors and helps us to avoid the kind of legal and regulatory dangers that plague other projects in the NFT world.
Price stability
We will not try driving the price of SOUND tokens to the moon, in fact we are designing the entire platform so that whatever price appreciation might happen occurs in a slow and predictable fashion. Remember, SOUND is meant to be the raw material cost for our NFTs. Creators need price stability in order to successfully turn a profit on the products they mint using SOUND.
Once the use of SOUND is fully integrated into RCRDSHP, holders of the token will primarily include private investors, LTMP creators, and a handful of airdrop recipients from the team and community. Eventually that circle will expand to third-party ecosystem partners that provide value-added services to creators and players.
Tokenomics
SOUND token is deflationary, meaning that a fixed total of 2 billion tokens have been minted, and they will become more scarce over time as they are bound into NFT-backed collectibles. We reserve the right to employ splits of SOUND token for usability reasons, but we do not intend to expand its supply.
The biggest chunk of tokens (42.5%) is allocated towards backing of content partners, meaning musicians, record labels and other kinds of creators and music-related brands such as festivals and nightclubs. The support is accomplished via subsidies and stakeholder rewards. During the next few years, those subsidies and rewards are the main pathway for SOUND tokens to flow into LTMP platforms for use in minting new collectibles.
Content Partner Subsidies
As we proceed to integrate SOUND token accounting into RCRDSHP Creator Suite (the software used by our content partners to manage their accounts and mint new content) they will begin to see SOUND token balances corresponding to tokens actually held for them in their custodial wallets.
Subsidies help content partners get bootstrapped on RCRDSHP without initial cash outlays. But they don’t get more SOUND unless they actively engage with the RCRDSHP community and help grow it with their own fans.
Creators are incentivized to optimize their NFTs for return on investment and prioritize quality over quantity.
The basic idea of using SOUND as a raw material cost is that minting new collectibles on our platforms should require conscious investment of a scarce and potentially expensive resource. Providing subsidies helps creators deal with startup risk while still incentivizing quality over quantity.
Ecosystem Fund
The Ecosystem Fund is meant to help third parties get up and running as ecosystem partners, external entities that will help grow the size of LTMP platforms such as RCRDSHP by providing marketing, technical, and other similar kinds of help to our artists and players.
RCRDSHP will be using a portion of the Ecosystem Fund to airdrop SOUND tokens to a few hundred of our most dedicated early adopters as a reward for their sustained support since our launch. The airdrop is not simply a gift either. We think that many of these early adopters are well positioned to start small businesses providing value-added services to RCRDSHP and future LTMP projects!
Stakeholder Rewards
We will make daily SOUND token disbursements to artists based on the staking behaviors of RCRDSHP player. The amount will be published on the RCRDSHP website and fluctuate based on a rolling average of the number of daily active users.
It’s worth noting that the original RCRDSHP Whitepaper (released privately in July 2021) called for passive allocation of staking percentages based on attention metrics. Based on what we have learned since then, we have decided to implement active staking instead. This means that RCRDSHP players will be encouraged to choose which artists they want to support, and leaderboards will be used to rank an artist’s biggest patrons.
Initial staking functionality will be relatively simple. You can showcase and then stake certain kinds of collectibles (primarily artist cards) for a fixed period of time. Once a staking roadmap is developed, it will be published here on this blog.
This use of stakeholder rewards in this way (to benefit third parties) is completely novel in the music industry, and we expect its application at RCRDSHP to evolve as we experiment and draw new conclusions from artist and player behavior.
Other Allocations
Tokens in the treasury will be used primarily for private sales and to fund liquidity pools for the token. Other than that, team and advisor allocations are self-explanatory.
Stakeholder Rewards
The idea behind stakeholder rewards is to give favored status to creators who most successfully engage with their fans on LTMPs platforms. Rewards are disbursed on a daily basis, flowing proportionally to creators based on how much coin (in-game currency, not SOUND token) their fans have staked for them inside their showcases.
Showcasing is the practice of publicly highlighting certain collectibles in a player’s collection. Normally showcasing is done just for showing off (or flexing) the most valuable items in your collection. Showcasing can also function as a mechanic related to challenges: collect certain designs and show them off in order to win. Players can add and remove from their showcases at will.
Your showcased artist collectibles serve another very important function: You can stake them in favor of the artist depicted on the card. Staking locks the staked card (and its bound SOUND tokens) to your showcase for 30 days at a time. During that time, the coin value of the staked cards is used to calculate the proportion of daily stakeholder rewards paid out to each participating artist.
Players are given a limited amount of staking slots to start out with, with the possibility to get more as they level up their player profile. When we calculate how to divide the daily stakeholder reward, we add up all the staked coin value amounts on a per-artist basis and distribute proportionally according to formulas that will be shared with the public. The more engaged fans that an artist is able to get on RCRDSHP, even if it’s just to have them do a minimal amount of staking, the greater their share of stakeholder rewards that they will capture every day.
The SOUND cycle
Stakeholder rewards are paid in fractional amounts of SOUND that automatically and regularly flow into creator’s SOUND balances. Rewarded tokens are locked, meaning their only useful function (other than potential governance privileges) is for minting new collectibles that can be sold to generate new revenue in fiat at a zero material cost basis.
In other words, if you can get your fans to stake for you, then you can continue to mint new NFT-backed collectibles on RCRDSHP at no cost. On the other hand, if you don’t have any fans to stake for you then you’ll eventually run out of SOUND tokens and be unable to mint any more collectibles unless you buy SOUND on the open market.
The optimal strategy for creators to maximize their profit potential thus becomes to keep fans engaged so that SOUND tokens keep flowing back to them via stakeholder rewards in a virtuous cycle.
SOUND tokens awarded to creators via stakeholder rewards are locked, meaning that they can only be used for minting additional NFT-backed collectibles. But shouldn’t we allow them to sell their SOUND on the open market for cash money? The answer is that while we want them to make money, we want them to make money by selling quality music and collectibles to their fans, not by selling SOUND to speculators.
The most efficient strategy for maximizing RCRDSHP profit thus becomes to keep fans engaged and the SOUND stakeholder rewards flowing in a virtuous cycle.
Locking SOUND acquired via stakeholder rewards achieves an alignment of incentives that benefits everyone, but destroys motivations for bad actors to try gaming the system. Think about what would happen if there was an easy mechanism for quickly turning relatively “free” stakeholder rewards into fiat. I can assure you that we would almost immediately be overrun with hackers and bots trying to exploit the system for easy gains. Eternal and costly whack-a-mole would be required to keep up with bad actors, forcing us to implement features that risk ruining the user experience for everyone else trying to use the system legitimately.
My concerns about bad actors are not theoretical. They are rooted in my experience with Choon, a pioneering digital streaming platform that offered artists the ability to immediately earn cryptocurrency for every stream of their tracks and gave listeners rewards for creating playlists.
Choon crashed and burned in late 2019, but not before I managed to rack up an extraordinary amount of their NOTES cryptocurrency. During its final stages when I was desperate to rescue some value from my holdings, I did all I personally could do, including offering up technical help and becoming an informal strategic advisor to the project. In other words, I got a close-up view of what happens when motivations and incentives are not properly planned on a project. You fail.
Over the course of years, as the rewards system is up and running effectively, we may develop methods for artists who have a surplus of rewarded SOUND to sell it. We also have some ideas for how artists can gift, share, or lend their SOUND holdings to other players in the system to create win-win scenarios.
Can it be profitable to market collectibles on RCRDSHP as an artist that ignores stakeholder rewards? We don’t know, but since they would have to regularly acquire SOUND token somehow (e.g. on the open market) then we suspect the answer is no, it would not work well, if at all. There is a slight possibility that if we succeed beyond our wildest expectations, relatively wealthy artists could just treat SOUND as a cost of doing business.
A final thought: Is the stakeholder reward system exclusionary to creators that do not have any fans (or in many cases, talent)? The simple answer is yes.
Essentially we’re going to let players act as A&R representatives and street teams.
Keep in mind that one of the reasons we exist is the massive oversupply of content on existing music platforms dragging down the value of all recorded music. By Spotify’s own account, only 200 thousand artists on their platform have “professional aspirations”. Rather than letting everyone and anyone liberally upload content to our platform, and dealing with the ensuing chaos and discovery challenges that would inevitably follow, we want to experiment with aligning incentives in favor of legitimate, working musicians creating quality music.
Future announcements will describe in detail how up-and-coming talent with a small but dedicated following can get started on RCRDSHP without having to buy SOUND. In a nutshell, players with coin balances will be given the ability to sponsor new artists and become part of their team. Essentially we’re going to let players act as A&R representatives and street teams. Winning outcomes for new artists will produce winning outcomes for the players that supported them, in ways that are both intrinsic (the joy of helping others succeed) and also extrinsic (personal gain).
Verification required
Note that staking will require verified identity to prevent cheating with the use of fake accounts. We of course reserve the right to add or modify policies related to staking and stakeholder rewards based on player activities, in order to minimize the effect of bad actors and to keep the game fun and effective.
Burning, Revisited
RCRDSHP players can harvest coins (backed by SOUND) for their own account by burning unwanted collectibles. If you think about it, that makes burning a kind of penalty for creators that make unwanted collectibles, in the sense that those creators lose capital that could have been staked in their favor. In that sense, burning acts as a disincentive for minting collectibles with no anticipated audience.
The threat of burning also puts a constraint on face value inflation, the expected tendency of creators to want to make all their designs expensive in terms of coin value. Collectibles that do not offer enough quality content in comparison to their coin value, even if they get sold, will probably end up being burned out of spite by the buyer if they feel duped.
Massing and Melding
Artist cards are the key to unlocking stakeholder rewards, but you can only stake one artist card at a time per artist. That makes massing and melding the primary mechanism for players to boost the level of rewards that they can direct towards their favorite artists.
Massing is a mixing operation on RCRDSHP that takes multiple cards of identical design and reduces them to just one. Generally speaking, the lowest serial number card in the mix “wins” and the rest are burned. Sometimes a player may want to mass to something other than the lowest serial number, and we plan to introduce ways to more finely control massing at a later date.
Melding is essentially the same operation as massing, except that it lets players meld (or fold) different kinds of cards associated with an artist (e.g. moments and releases) into an artist card. Melding presents engineering challenges that massing does not, so it will not be released until later this year.
Maximizing coin value
The most important result of massing and melding is that the sum total of coin values in the mixed cards is transferred to the winner, meaning you will be able to craft artist cards that are worth hundreds or even thousands of coins more than their usual starting ten-coin value. Because of their nature, we expect heavy-coin-value artist cards to quickly become some of the most coveted on our platform.
For what should be obvious reasons, our preference is that an artist have a single artist card on RCRDSHP per artistic identity. That is, if a single artist releases on three labels and each represents a different style of music made by that artist, then we are okay with that artist having three artist cards. The same rule applies to artist aliases.
It’s totally normal and expected that an independent artist, especially one just starting out on RCRDSHP, may have just one artist card. A band (or act made up of individual artists) may have an artist card for their band, and one or more for themselves as individual artists or soloists. That’s fine.
There will eventually be many coin boosting mechanisms, but massing already works and this blog post functions as its official announcement. Melding needs more work because we want to make sure that when you meld a card, the music and other content it contains is added to the artist card (or otherwise continues to be available in your collection) even though the melded card was burned.
Doesn’t staking reward artists with wealthy fans?
Assuming this entire system works then yes, in theory a creator could convince a set of wealthy patrons, or perhaps their record label, to invest in creating massive coin value artist cards and staking them in their favor. Artists might even try massing the cards themselves and then gifting them to their favorite fans.
The problem with that strategy is that staking is not perpetual. Staking is meant to reward creators that invest the time in regularly engaging with their fans on RCRDSHP, so fans can only stake for 30 days at a time. When staking expires, the fan needs to “hit the button” again, which gives them an opportunity to decide to stake for someone else.
While we’re eager to see what kind of interesting staking reward strategies develop, we think that in the long run the most effective and profitable approach for our artists will be to simply produce quality music and recruit as many of their fans to RCRDSHP as possible, even if most of those fans only stake relatively modest coin values in their favor.
Keeping the game fun for players of modest finances
As a RCRDSHP player with relatively low disposable income or no desire to commit large amounts of money to the platform, you might be wondering how this is going to be fun for you.
The answer is that given the large number of artists on RCRDSHP and the fragmented nature of music fandom, there should always be a constant supply of unwanted and inexpensive cards entering the marketplace. We’re also pretty sure that no matter what, we will continue to have players that prefer to recover some cash value from their unwanted purchases instead of burning them for coins. Undercutters will always undercut.
Given that constant supply of low-cost cards, fans that prefer to grind instead of dropping large amounts of money on individual cards can do so, essentially playing a kind of value-investing game: picking up cards that they feel are undervalued in fiat compared to their coin value.
Trading for fun and profit
Another game that can be played by those of modest financial means is trading cards, kind of like many of us did with our baseball and Pokémon cards as kids. If you have a card that someone else wants, and they have something that you want, then you can trade. Unlimited gifting was made available to verified players this month (March 2022).
Existing RCRDSHP players should note that the individual ‘Peace’, ‘Love’, ‘Unity’, and ‘Respect’ cards in the Jakob Haglof set combine to form a rare ‘P.L.U.R.’ artifact that enables unrestricted gifting and trading of cards between verified players.
Patron Rankings
Once the staking rewards system is operational, we will begin tracking how much every player has generated for every staked artist that has ever been featured in their showcase’s staking slots. Based on those metrics, we’ll publish leaderboard-style rankings on a per-artist basis, tracking who has generated the most rewards for a given artist during given time periods and for all time.
The most significant outcome of these leaderboards, which we refer to as patron rankings, is that the focus of airdrops and special gifts from artist to fan will shift. Coming up with incentives for set completion and ideas for challenges is a task that has proven difficult at times. We will instead encourage artists to generously and lavishly shower top patrons with exclusive gifts, merchandise, show tickets, and other kinds of special access. And we know that they’ll do it, too, because top patrons are the prime source of their stakeholder rewards.
Conclusion
With the introduction of SOUND and stakeholder rewards, I believe we have finally designed a viable game loop and associated token economy that aligns artist and player interests in ways that are revolutionary.
Artists get to focus their energy primarily on delighting their fans with amazing music and experiences, and make a living wage or better in return.
Fans get to financially support the artists that they love, not for selfish gain, but for the gratification and satisfaction that comes from helping the people we love and receiving their love and recognition in return. It’s only an added bonus that they sometimes get some pretty amazing gifts and a chance to make some money if that’s what motivates them.
This concludes our four-part series. Planned future blog posts on the subject will delve further into the details of SOUND token and coin values, stakeholding, player rankings, and advanced game strategies.
