Wrapping one’s head around NFTs can be enough of a challenge. We’ve grown up seeing digital content in a certain way, and this new technology really has its way of flipping our whole way of seeing things around.
But once we successfully take that mental jump, we quickly learn that the current forms and use-cases of NFTs are just scratching the surface. For the most part, we are seeing NFTs in their most simple and static states.
The artwork and music for each NFT is algorithmically generated. This means that when someone comes along and mints one of these NFTs, the art and music are created then and there. The algorithm used to generate these pieces is based on a math function by Leonhard Euler — a famous mathematician of the 18th Century.
Using metadata from the actual purchase transaction along with Euler’s function, each output is a piece of artwork with unique colors, shapes and sounds — all properties that give each piece a different level of rarity.
(If you’re interested in getting into the weeds on how this is all done, the EulerBeats about page and Discord server are great places to start.)
This means that the original purchasers of the 27 Genesis LPs play a role in the actual creation of the NFT artwork.
But the generative art details are just the tip of the iceberg. The EulerBeats project may go on to act as a historical case study, showing us just how powerful the potential for NFTs truly is.
Interacting with the EulerBeats project automatically throws you into an experiment that nudges its way into many fields of study — music theory, math, tokenomics, blockchain technology and more.
While most NFTs today are a static transfer of digital art ownership, this project brings NFTs much more to life.
Each of the 27 Genesis LPs consists of 1 original LP and 120 prints. The original LP is generated through the process we just discussed, and each subsequent print is an exact replica of the original.
Ownership of the original LP comes with its fair share of perks:
But wait, there’s more…
As we said, prints are direct copies of the original LP. The price of prints are based on something called a bonding curve — a fancy formula that makes it so each print is exponentially more expensive to purchase. Print #1 is a whoooole lot cheaper than print #120.
So we know that when you buy a print, 8% of that money goes to the original LP owner.
Another 2% goes to the EulerBeats core team. That leaves us 90%...
Enter the “burn fund”. The burn fund is essentially a digital vault where 90% of the revenue off print sales sits. Print owners have the option to burn their print at any time. Burning a print — in the case of EulerBeats — is a lot like selling the print back to the project itself. If you burn your print, you receive 90% of the current print price of that LP.
Is your head spinning yet? Don’t worry, mine was too.
Here we get to the crux of why EulerBeats has built in all these complex contraptions...
By incorporating a bonding curve and burn fund, EulerBeats baked in the conditions to incentivize early supporters of the project.
This is best explained with an example:
Say it’s the first day this project launched. Not a lot of people know about it yet, and I come along and think it’s pretty cool. I notice that all 27 original LPs have been minted, but no prints have been purchased yet. So I scoot on over to LP 01, play it back and really dig the song.
I purchase print #1 for 1 ETH.
Because of the 90% burn fund, I know that if no one else ever buys a print, the worst case scenario is I burn my print and get back 0.9ETH. There is no way my investment is going to zero.
But! If the project does start to take off, and people start buying prints of LP 01, the print price is going to grow exponentially. Suddenly a few weeks go by, and let’s say the price to print LP 01 has gone up to 10ETH. I can burn my print and receive 9ETH for it, a profit of 8ETH!
Herein lies some pretty sweet ideas for creators of all kinds. By incorporating bonding curve pricing and a burn reserve fund, you can entice people to get in on the ground level of your newly launched projects.
For fans, this offers some amazing avenues to gain off of your taste. If you have a love and ability for finding talent early on, these pricing models create the perfect ecosystem for you to make those sorts of bets on people and projects. You get to support the artists you love, and take on a very limited risk while exposing yourself to potentially exponential gain.
Another place the EulerBeats project pushes at the edges of NFT tech is at a much needed one — on-chain royalties. As we went over, the proceeds from print sales are split between the burn fund (90%), the original LP owner (8%), and the core team behind the project (2%).
The flow of these royalty splits are baked directly into the NFT smart contracts. Meaning that when a print is sold, no one party needs to do anything to make those splits go to the proper rightsholders. They just flow automatically into the proper digital wallets.
We can extrapolate out and see how this technology can affect pretty much every business. Think about how many industries rely on intermediaries to figure out the flow of rights and royalties.
Let’s look at the music industry for instance. We’ve got labels, publishers, PROs, all sorts of other rights organizations — all of them busy scouring every nook and cranny for royalties earned off music and getting them to the proper rightsholders. This process usually takes months, often a whole year!
With the proliferation of this technology, all of that goes away.
Suddenly we can envision a scenario where a little restaurant halfway across the world plays my song, and that song playback is recorded on the blockchain. The royalties associated with that song playback flow instantly and automatically into the digital wallets of all parties involved — and my share of the revenue streams directly into my wallet moments after (or perhaps even while) the song is played.
That, my friends, is a whole new world.
EulerBeats is just a few weeks old, and the team behind it has plans to evolve it in many directions. They have now begun dripping out information on the next phase of the project called Enigma.
As Tyler Mulvihill of Treum (the team behind EulerBeats) explained to me, there are two sides to each EulerBeats record. The Genesis LP is one side, and Enigma LP will be the other. That’s about all we know so far, but Tyler alluded to the fact that this release will make it possible for many more people to get involved and interact with the project.
It sounds like there is a lot more yet to come within the EulerBeats project. Perhaps even more importantly, there is a lot more it can teach us about NFTs — a technology that is surely going to eat its way into every corner of our digital world.
