How can music royalties be tokenized?

Tokenizing music royalties involves creating digital tokens that represent ownership or entitlement to the future revenue generated by music royalties. This concept leverages blockchain technology, particularly through platforms like Royal, which was initiated by Justin Blau (3LAU). Here's how it generally works:

1. Creation of Tokens: Music rights are converted into digital tokens on a blockchain platform. These tokens represent shares or stakes in the royalties received from music tracks.
2. Distribution and Trading: These tokens can be bought and sold on blockchain platforms, allowing fans and investors to purchase a stake in future royalty streams.
3. Royalty Payments: As the music generates revenue through various channels (e.g., streaming, licensing), the owners of the tokens receive payments proportional to their holdings. The blockchain technology ensures these transactions are transparent and secure.
4. Legal and Regulatory Considerations: There are complexities concerning security laws, as tokenized royalties could be classified as securities. The conversation around adapting old securities laws to new technological capabilities is ongoing, and adjustments may be necessary to fully accommodate this innovation in music and finance.

This approach democratizes access to music royalties, previously accessible mostly to industry insiders and large companies. It empowers artists and fans, potentially leading to a more direct financial relationship between them. However, it also introduces challenges related to securities regulation and the technological scalability of blockchain platforms for such uses 1 2.