Benefits of staking the SOUNDAC token
There are plenty of crypto projects that have tokenized models and it isn’t always clear what the token is actually for. Is it to be used as a currency? Is it a profit sharing or dividend paying instrument? Is it merely required to pay transaction fees within the network in question? Let’s dive into the use of SOUNDAC’s core asset and define where its token – XSD – derives its value from.
XSD is a utility token, not a cryptocurrency per se. It was designed to bring utility/value to those that stake it. It is useful to a very niche audience, the music industry and its consumers. There is nothing preventing someone from using XSD to buy a dozen eggs. It is after all a fungible, divisible, scarce asset with zero transaction fees (which is true for most of the DPOS chain assets) but baked into the code are perks that will interest a specific sector of the economy. XSD is literally a token that brings utility to those in the business of producing, distributing and even consuming music, podcasts and other audio content.
A deeper dive
XSD has two forms, liquid or staked. The latter (often called VIP) means locking up your tokens for a period of time. Staked tokens are the ones that provide you with perks and grant you influence over the network. For the rest of this article, we will refer only to the staked tokens.
Digital Service Providers (DSPs)
Also referred to as music streaming platforms. These companies have a powerful incentive to hook up to SOUNDAC, as they get their royalty payment obligations covered by the blockchain. For example, 70% of Spotify’s expenses are payments to the copyright holders for the music that was streamed by the users on their platform. This is why they must charge high subscription fees or rely on advertiser dollars to support their massive royalty expenses. By plugging into this new system, playing music which is tied to a Smart Contract, and reporting all streams to SOUNDAC, the chain takes care of sending out royalty payments to the rights holders.
The supported artist will see increased exposure (hence streams and income) the more his fans use the support feature.
Streaming platforms are elected by holders of XSD. In order to get votes (to receive this subsidy), DSPs need to provide value to the SOUNDAC ecosystem. More on this in the Listener section below.
Elected DSPs need to report to the blockchain what song each user has just streamed if they want SOUNDAC to pay the royalties in their place. The more active users the DSP has and the more content they listen to, the more transactions the DSP needs to make to the chain. The number of transactions an account can make goes up with the amount of XSD it has staked. In other words, the more it wants to use the chain, the more XSD it needs to have.
To the DSP, XSD is the thing to buy and stake in order to get royalty costs offset. This is part of XSD’s demand from these businesses. The other, bigger part of demand comes from its incentives to please XSD holders, which we cover in the final section of this article.
Music creators, producers and copyright holders
By joining SOUNDAC, a copyright holder opts into an ecosystem that can pay her directly, instantly and where she is put in control of her metadata. Whenever she logs into the rights management portal (RMP) to update some music metadata, the entire music industry is made aware of the change within seconds.
In order for her content to be trusted enough to be picked up by elected DSPs, it must have a solid reputation score along with the accounts of the uploader and participants.
A username’s reputation score is based on two things:
- The account’s connections - think on-chain LinkedIn connections, or Facebook friends
- The account in question and its connection’s amount of staked XSD
In other words, the bigger an account’s network is and the more XSD it and its connections have, the more likely the account is legitimate (and not part of a botnet.)
A smart contract’s (song entry) reputation score is the average of all participants of that specific piece of content.
When a DSP pulls in content to make available to its customer base, it needs a way to distinguish copyright infringing content from legitimate content. Not paying the rightful owners opens you up to severe lawsuits. One method is to manually vet each and every entry the DSP comes across, which is possible but not scalable. The second method is to see which trusted accounts are vouching for this specific piece of content before choosing to import it to your service, something SOUNDAC supports. The final way is to go off of reputation scoring. A DSP could choose to accept all content with a reputation score over X. These 3 methods are not mutually exclusive mind you.
As mentioned above, a song’s reputation score is derived by the average of each participants own reputation. This means that if one of the rights holders has not staked any tokens or contributed to the graph/network of trust by connecting his account to his label’s, his drummer’s or his publisher’s account, he is bringing down the trustworthiness of all pieces of content he is a participant in. This reduces the chance that his music will be picked up by DSPs. Peer pressure can get him to get his act together in order for all participants of that song to increase the potential earnings from their creation.
Another incentive for musicians to hold XSD is discovery.
Elected DSPs need to abide by some community rules & guidelines if they wish to stay in their privileged position. One of those guidelines is to have their user’s newsfeeds and the discovery section of their streaming platforms account for the reputation score of the song’s smart contract (based on amount of XSD of each participant).
XSD is therefore a tool for discovery on all elected DSPs. Artists looking to get discovered can buy and stake XSD until they reach the level of fame they are comfortable with.
This also removes a lot of sell pressure on XSD. Instead of cashing out their RYLT tokens (the ‘stablecoin’ used to pay out rights holders on SOUNDAC) artists can convert it to XSD, stake it and get more exposure on multiple streaming platforms, granting them even more exposure throughout the ecosystem.
XSD is therefore a tool
for discovery on all elected DSPs.
An artist can also increase his exposure in the short term by buying and burning XSD (Sending to the @null address). This will put his content into more listener’s newsfeeds and increase his chances of being picked by the discovery algorithm. This can be used like a paid marketing campaign to promote a new release for example.
Elected DSPs being economically incentivized to please XSD holders means abiding by community guidelines (keep in mind some of these guidelines could be implemented on the protocol level if ever it makes sense to do so).
Another one of these guidelines is to prevent abuse and ensure users are real. Most of us have seen the “are you still listening?” message on music or video streaming platforms. It ensures the platform is not paying out royalties while no one is listening/watching. PeerTracks, the first elected DSP, has implemented an “are you still listening?” feature that takes into account the XSD balance of the user. The more XSD a user has, the less frequently he will be asked if he is listening or tested on his humanity. People trying to funnel funds out of the system by creating a thousand fake accounts to stream music 24/7 will need to properly fund their botnets first.
Elected DSPs can also decide to restrict the number of streams a user can make on their platform based on their contribution to the SOUNDAC ecosystem – this could be a protocol-level future upgrade.
It is up to the DSP to navigate the fine line between pleasing its customers and the XSD holders. The best DSPs will please both and increase the value of the entire ecosystem because of it.
DSPs, being their own business, with full control over what they chose to do can provide different perks to consumers that decide to add value to the ecosystem. This could include providing High Quality audio or giveaways to anyone with over X amount of XSD. It’s essentially up to the businesses running streaming platforms to get creative.
Here is a new feature that PeerTracks is developing which will go into testing soon. Fan-side stake-weighted voting. This has far-reaching ramifications and we hope other DSPs tinker with these types of ideas as well.
Users on PeerTracks will soon be able to Support Artist. This will button will essentially upvote that content on the PeerTracks platform. The more XSD the supporter has, the more powerful his vote will be. The supported artist will see increased exposure (hence streams and income) the more his fans use the support feature.
Users can also Boost an individual song/podcast/video using their stake. You can once again, Like and Share the content you find engaging, but you can also Boost it with your stake and make it rank higher in the platform’s discovery section and newsfeeds.
Both these voting features give multiple parties very interesting metrics to play with. Such as, number of supporters, how much fan voting power is behind the artist/song, and most powerfully (in our opinion) who your biggest supporters are.
This opens up an entire new world, similar to what we see on Twitch and Patreon.
This opens up an entire new world, similar to what we see on Twitch and Patreon.
Artist can ask their followers to Like and Follow, sure, but they can also ask their listeners to Support them and Boost their content – with a simple click of a button.
Artist can now give out perks and privileges to their top supporters, which can range from simple shout-outs, to free tickets to their next show to backstage passes.
This can even bring in advertiser value. Brands that want their image associated with a specific artist can approach the artist in question and ask that he reward his top 10 supporters with the brand in question’s product.
DSPs can experiment with content sorting section such as Hot, Trending, Fan Supported, and any combination of metrics algorithm creators feel like playing around with.
These features mean there will be artists prompting listeners to support and boost them by staking more XSD. There will be fans that want to be part of their favorite bands top supporters. Both of which increases the value captured by XSD.
After having read through these use cases, I hope you can understand why we consider XSD to be more than a transactional cryptocurrency. Its role is to be useful to the music world and solve real world problems by providing incentives, perks and privileges to Digital Service Providers looking to reduce their expenses. Musicians looking for a simpler music industry. Copyright owners wishing to get paid in a simpler, faster, middleman-free fashion. Performers wanting to get discovered and to engage with their fanbase. Finally, Listeners looking for free music that actually gets their favorite bands paid while giving them a new way to support them and making them feel like they are a part of the efforts.
The SOUNDAC Team