Decentralizing Creative Markets With NFTs and CeDeFi: HUSL’s Take
The HUSL is one of the projects accelerated by ZenX Labs and a participant of Dynamic Multi-Asset Staking. To get $HUSL tokens, stake $ZCX on DMAS: https://app.unizen.io/earn
As finance, communication, education, and other fields become increasingly digital with every year, digital art (that has been around for quite some time already) is yet to establish itself as an industry. Creators understood the benefits of digital creativity a long time ago — it’s innovative, accessible, and shareable. Self-publishing and direct communication with fans are perhaps two main benefits of the digital transition. However, the market for digital-first work wasn’t there — musicians, writers, illustrators are confined to the highly competitive monopolized channels.
That was before NFTs came along. Non-fungible tokens gave digital art a new way to flourish — by establishing a market where original digital art can be freely sold and bought. NFT’s boom quickly became one of the most impressive DeFi applications — now NFT monthly sales amount to more than 300 million dollars.
However, compared to traditional sales, these numbers are at best modest. Non-fungible tokens are far from wide adoption now — the question is, can they get there?
Challenges of NFTs and DeFi in Creative Fields
Decentralized markets generally are known as the Wild West, and NFTs are, without doubt, one of its most hectic regions. With little to no governance, regulatory oversight, and moderation, the non-fungible token market is up against issues — some are typical for creative industries, others are specific to decentralization.
Centralized markets and companies (record labels, publishing companies, media) have already developed mechanisms for regulating copyright. Fakes and stolen ideas are still a problem, but at least, people get punished for stealing ready artistic work.
The problem is, copyright laws for NFTs are not yet defined. Given the anonymity of blockchain, an anonymous user can easily upload and sell NFT. The lack of KYC measures on platforms prevents artists from uncovering entities behind copyright frauds. Also, the creators of original work should prove that their ownership is legitimate, and there’s no established procedure for digital non-fungible art.
Pricing artwork is difficult even outside decentralized markets (which are, as it is, often accused of their speculative nature). Buyers want to know that the work is original, that it has creative value (defined by fans or critics), and that there’s a market where assets can be exchanged — among other things. For NFTs, all three are not easy to ensure. Legitimacy is in jeopardy because of copyright issues, the criteria for determining artistic value are not established yet, and the market is at the nascent stage.
When you are buying an NFT, how can you be sure that it’s worth something? An even harder problem is estimating NFT’s worth in the future. This is why a lot of record-breaking deals were made not with genuine artwork, but rather with celebrity tweets, memes, and famous GIFs. So far, the NFT market is better at rewarding hype than creativity.
Creating infrastructure for an open
Even if market participants recognize the value of the artwork, they need to have a secure environment to sell and buy NFTs. Basically, buyers and sellers should be verified, vetted, and safely connected to each other. Financial risks (like volatility and fraud) are present with NFTs, too — and it takes an organized system to minimize those.
So far, there are no highly reputable NFT exchanges. The same goes for NFT creation, claiming, and evaluation tools. Also, if we take into account the differences of NFTs — selling a painting is different from a beat — it’s clear that one-stop-shop might not be an answer either.
Engaging established artists
If reliable infrastructure were to emerge, the NFT market would move one step closer to wide adoption. However, even then, NFT advocates are necessary to get the word out to larger fan communities. While established creators (like Shakira, Snoop Dogg, and others) are already exploring the NFT land, it’s still far from mainstream.
With all the risks, artists might be yet waiting for the NFT market to establish itself better before they start encouraging their fan bases to participate.
Security and safety
All the security threats that apply to other DeFi applications are just as prominent for NFTs. Several users reported being hacked on the NFT platform. Shady trades and giveaways are multiplying quickly as the stakes grow.
On the regulatory side, investor protection measures haven’t been introduced to the market. From the tech perspective, on-chain and off-chain flaws, security vulnerabilities, and data breaches pose even more threats.
CeDeFi and NFTs
The decentralized nature of the NFT market solves many issues. Artists and their fans are free to interact, digital creators can reach new buyers, and the process is much more liberal. However, decentralization also poses a lot of unique challenges, which shouldn’t be left unsolved — if we are keeping eyes on the prize of wide adoption.
DeFi relies on anonymity and independence from institutions. Bringing some processes and assurances, developed by traditional actors, though can be a step forward. The concept of CeDeFi allows NFT market to take the best of both worlds — accessibility and freedom from DeFi, legal insurance, and large-scale impact from centralization.
Regulators and institutional advisors have been pointing at DeFi’s neglect of KYC as a potential threat. Full anonymity indeed can facilitate tax evasion, fraud, and money laundering — detecting criminals and enforcing consequences is a challenge. For NFT’s, all the above hold true — and also, there’s copyright to consider. So, the incentives for adoption self-identification are even higher on NFT markets.
With an intuitive, secure KYC system, buyers and sellers can be sure of the legitimacy of artwork’s ownership, prove their participation, and protect themselves from malicious dealers. For creative industries, where the personal brand is everything, KYC is a way to make the NFT experience more personal (an indisputable advantage for fans).
Taking regulatory initiative
The decentralized companies take the wait-and-see approach to regulation. Until regulators have definitely made up their minds about legislation, decentralized communities prefer to not formalize things. However, for the NFT market, this course of action is a definite no-go. Artistic work has to be protected and identified — custom-made watermarks cannot compare to legally recognized identification. If NFTs are to have decades-long value (which they hopefully will), the ownership has to be registered clearly.
It’s not just copyright, though. All the regulatory needs that are pointed out about DeFi, in general, are just as true for NFTs. This includes taxation, definitions of asset classes, trading regulation, etc. And the initiative should come from the decentralized party — since for now, NFT bans, strict or not, are a very real possibility at least in some countries.
Cooperation of DeFi and CeFi providers
Since NFTs can be financial assets and investments, there are should be a way for NFT DeFi instruments to connect to centralized institutions. Custody, money transfers, crypto-to-fiat conversion are poorly developed at the non-fungible market. In fact, it’s a problem for the entire DeFi — particularly for a yet emerging NFT sector.
While banks and financial institutions are racing for claiming the leading spot on the DeFi market, they don’t seem to be convinced about NFTs yet. There isn’t much-growing interest from leading players — but a CeDeFi provider with contacts on both CeFi and DeFi sides might be able to shift the curve.
Increasing liquidity, decreasing volatility, and structuring markets
NFTs aren’t particularly the most liquid asset. Each artwork is one of its kind — the unique nature is the whole purpose of the non-fungible token. Exchanging those for fair and steady prices might be even harder than cryptocurrencies — but not impossible.
Institutional interest in the asset class has been shown to increase liquidity and reduce volatility in traditional assets. Of course, NFTs aren’t exactly real estate — but still, inviting institutions to participate is a good way to increase trading volume, reduce price swings, and end up with more stable market movement.
Institutional participation is one scenario for stabilizing the market, but it’s not the only one. Social sentiments indicators and AI monitoring help define the real value of an asset, predict market movements and call out destabilizing participants.
EXAMPLE OF NFT MARKET INNOVATION:
HUSL — THE NEXT GEN MUSIC LABEL — POWERED BY BLOCKCHAIN
The idea behind the HUSL was simple — the old way of working is broken, so let’s create a new record label, but on the blockchain. We asked ourselves the question — Can we empower artists and give them the tools needed to go directly to the consumer and their fans? Yes, we can. Can we give artists the power they lost to some record labels, and create a space that their creativity shine? Again, yes, we can. On average 88% of revenue artists generated goes to other people and not the artist themselves. This has to change, and the HUSL is the solution that brings about this change.
NFT’s as a use case:
Looking at the various use cases for music NFT’s, the possibilities are endless. We live in a digital world, meaning we have the ability to do things differently, so we ask the question, why should we keep using a broken system? More and more consumers are craving things that come to them directly. The music industry is no exception, as is the way in which music is consumed. We are able to instantly stream music to our phones and watch concerts anywhere in the world but all of this is through a third party. With the HUSL, the above will allow artists to go direct (on a global stage), cut the middle man out, and allow their fans, to participate in their favorite artists’ careers.
It’s only a matter of time before the music industry catches on to the fact that NFTs are a way to empower artists, and for it to become something artists start demanding. This is not simply a fad, it is a disruptive technology that will change the way things are done forever. When this was identified, we decided to dedicate the HUSL’s purpose to ensuring we are the go-to NFT Music Destination.
Decentralizing is key to the process of musical creation, production, and sales going forward:
The goal of the HUSL, is to have artists from all over the globe, whether they are big or small, established, or new, come to the HUSL to get exposure. Not exposure in the sense of people who ask artists to perform for free as they get exposure to an audience, we are talking about exposure to the almost 3 trillion dollar digital asset space.
Artists will devise the type of NFT they would like to post, and together we embark on a marketing campaign to make their vision a reality. If an artist knows of a specific group of people that they want to work with, that is great, we can assist. However, if they just have an idea and have no clue where to start, we will assist and see it is done. Artists will be able to sell their NFTs directly on our platform, and in real time see the money entering their web 3.0 wallet. An additional benefit, is that royalties continue to come in indefinitely.
Components of HUSL’s ecosystem
The HUSL token is what powers the ecosystem. Artists are able to post content on our platform, holders (the artists fans) can stake their tokens and earn bags. Bags is a valueless off chain token that is redeemable for exclusive NFTs, perks and experiences — simply put, you as a NFT holder can get exciting rewards.
To sum it all up, the old way of working is broken. It is time that the artists and their fans have an option that ensures the revenue goes to the artist, the loyal fans are rewarded, and the middle man is cut out. The time is now for change, and the HUSL is the solution that brings about this change.
We are focused on building a versatile CeDeFi ecosystem. NFTs, being a huge part of DeFi, have the potential to democratize multiple creative industries. Creative industries keep growing and evolving. The digital revolution started more than ten years ago, and now decentralization can carry the torch. So, we are excited to be a part of HUSL’s growth and see this partnership with ZenX Labs evolve.
HUSL is already proving that artists are very interested in NFTs. Often, they don’t know where to start or how to advocate for the technology (which is not exactly the most straightforward one) — but they learn quickly and enthusiastically. Combining creative, financial, technological, and regulatory expertise, it’s possible to build a safe NFT environment. HUSL is the first project of this kind in the music industry — and they are only getting started.