Understanding Decentralized Music Streaming Audius: The Breakdown and Establishment of Intermediaries

Original Title: "Decentralized Music Streaming Audius: An Experiment to Cut Out the Middleman"

Author: echo_z

The potential of Web3 is exciting, and if traditional internet applications are reshaped in Web3, it will create a massive wave. The music platform Audius is one of the pioneers, attempting to reconstruct the way music streaming is shared through blockchain design.

In the music streaming field, creators are generally in a disadvantaged position. According to a 2019 survey by music industry analysis company Soundcharts, Spotify, Apple Music, and Google Play pay creators about $0.003 to $0.005 per stream, music creators can only receive 13% of the total platform revenue, while the remaining 87% is primarily controlled by streaming platforms, record companies, and other third-party companies. Additionally, the publishing rights of creators are also in the hands of third parties.

Audius leverages the decentralized nature of blockchain to address the issues of excessive profits for intermediaries in the traditional music industry and copyright verification. Users' basic information is stored on the ETH or Solana blockchain, while music and image data are stored on a self-built distributed storage network based on IPFS technology, achieving decentralization and immutability.

Creators earn token rewards by sharing music, regular users can listen to music for free, and purchase VIP services for certain platform privileges. Token holders can establish nodes or stake to vote for nodes, providing security and data storage for the network, earning additional token rewards, and participating in community governance to adjust the platform's operations and token economy. Future plans include creating fan tokens for creators to enhance the social attributes of music.

The project was established in 2018 and released its white paper, entered the testing phase in 2019, and launched its mainnet and token $AUDIO in October 2020. The current circulating market value is approximately $800 million, ranking 107 on CMC.

Table of Contents

1. Product Features: Ultra-Low Barrier to Entry

2. Product Operations and Growth

2.1 Creator Onboarding: Incentivizing Influencers and Grassroots Creators with Tokens

2.2 Community Operations: A Music Community with Reduced Crypto Overtones

3. Token Economic Model

3.1 Core Role of Tokens One: Incentivizing User Participation in Node Operations

3.2 Core Role of Tokens Two: Granting Community Governance Rights

3.3 Core Role of Tokens Three: Participating in the Platform's Economic System

3.4 Token Distribution

4. Business Model

4.1 Missing Commercialization Strategies

4.2 Future Commercialization Possibilities

5. Project Opportunities and Risks

6. Team Background and Investment Situation

7. Product Summary

1. Product Features: Ultra-Low Barrier to Entry

The Audius app includes web, desktop, and mobile versions. Taking the desktop version as an example, users can browse trending singles and playlists and listen to music immediately before registering or logging in, making it very convenient.

After registering and logging in with an email, fans can like/share singles, follow creators, and create playlists (bottom left); as creators, they can upload their music, add tags like genre/emotion, and view it on their homepage (bottom right).

It is worth noting that all these features are completely free, and users can even download music for free (as long as the creator checks the downloadable option when uploading). There is no need to interact with a blockchain wallet throughout the process, and there are no ads on the platform, making it an excellent user experience even compared to traditional internet apps.

In addition to the above features, Audius also offers a unique wallet login mechanism called Hedgehog. After registering with an email and password, the system automatically assigns a $AUDIO token wallet address to the user (bottom left). Unlike common wallets, users only need an email and password to use this wallet, without needing to download Metamask in advance, providing a very smooth entry experience for traditional internet users.

Audius also incentivizes users with tokens; if a user's uploaded track or playlist becomes popular, they have the chance to earn $AUDIO rewards. The top 5 tracks and playlists each week can earn 100 $AUDIO, and rewards are automatically distributed to the system-assigned address (bottom right).

Additionally, holding different amounts of $AUDIO can grant corresponding special privileges, such as level badges and the ability to display NFTs from other wallets. However, overall, the $AUDIO token provides relatively weak incentive rights for end users, which will be discussed in the sections "Token Economic Model" and "Business Model."

From the perspective of product functionality, Audius places great emphasis on providing users with a barrier-free experience. Music upload and consumption features are free, the platform is ad-free, and there is no need to download a decentralized wallet, making it accessible to virtually any user.

2. Product Operations and Growth

2.1 Creator Onboarding: Incentivizing Influencers and Grassroots Creators with Tokens

The most important resource for a music platform is content, with influencer content being the most critical. Chain Tea House has compiled a list of some influencers on Audius, showing that the majority are electronic music artists, including leading figures in the electronic music scene, as well as crypto artist 3LAU.

Audius attracts influencer creators mainly through two methods.

The first is engaging influencers early in the project as advisors or early creators, providing incentives through token distribution. In the October 2020 token airdrop, about 80 advisors and team members collectively received 406 million AUDIO, averaging 5 million tokens per person, which at the time was worth approximately $1 million, a significant incentive (if they hadn't sold, it would now be nearly $8 million…).

Among the advisors are notable creators like deadmau5, 3LAU, and RAC. In return, these influencers also contribute back to the project; for example, 3LAU has given interviews alongside the project's Crypto Strategy, and deadmau5 has premiered exclusive content on the platform.

Additionally, some influencers were high-activity users during the project's early stages, including Brownies & Lemonade, Phuture Collective, and Good Society, who received an average of ~60,000 tokens, or ~12,000 dollars in incentives.

The second method is a more traditional approach, continuously inviting influencers to join the platform, such as Skrillex, who joined through this method, although Audius has not disclosed the specifics of the collaboration.

In addition to attracting influencers, Audius is also onboarding grassroots creators. In March of this year, Audius launched the $AUDIO incentive program, primarily targeting content creation and playlist-making activities, including: creators of the top 5 hottest tracks each week can earn 100 $AUDIO; creators of the top 5 hottest playlists each week can earn 100 $AUDIO; users who verify their Audius account via Twitter or Instagram and post a track can receive $AUDIO token rewards. However, these incentives are almost negligible compared to the early airdrop for attracting influencers.

2.2 Community Operations: A Music Community with Reduced Crypto Overtones

According to the official website, Audius recently has around 200,000 daily active users (as shown in the image below). Although this is still a niche platform in the music app field (Spotify had 381 million monthly active users in Q3), it represents a relatively large user base in the crypto app space.

The official website reports this month's daily active users. Additionally, the website shows approximately 6 million monthly active users this month, which is likely a cumulative figure over the past 30 days without deduplication, thus not very meaningful.

In a September 2021 interview, CEO Roneil Rumberg explained the user growth path: from the product's launch in 2019 to mid-2020, content was gradually accumulated, reaching about 800,000 to 1 million tracks. By August 2020, there was a sudden steep increase (the official website shows ~600,000 monthly active users in August 2020, which corresponds to ~20,000 daily active users). The CEO believes this was because the content volume was sufficient to reach a critical point for positive feedback loops.

The following image shows the monthly active user numbers over time, but Audius's statistical criteria are unclear, and the numbers here differ significantly from previously announced figures (for example, the September announcement claimed 6 million monthly active users, while this shows only 4 million), raising doubts about data credibility, so no further interpretation will be made.

In terms of the number of token-holding users, the scale is indeed continuously growing. According to data dashboards created by Chain Tea House based on Dune, since the token was released in October, the number of unique wallet addresses holding $AUDIO has been increasing. The number of holding addresses saw leaps in March, April, and August, September, likely due to the concentrated release of the $AUDIO incentive program (detailed in section 4.1) and token privilege features (detailed in section 5.1) during March and April, and the announcement of collaboration with TikTok in August and September, which correspond to the two peaks in token price (shown on the right).

It is noteworthy that Audius's user community primarily consists of music enthusiasts, with a weak crypto presence.

From the data, the current number of $AUDIO holding addresses is only ~25,000, about 15% of daily active users. The vast majority of Audius's users are still traditional internet users, with only a small number being crypto natives.

From the community atmosphere perspective, it indeed has a strong focus on music creation and sharing. Audius's Discord has a channel open only to $AUDIO holders, and discussions about token prices are prohibited in other channels; from the more active intro and general channels, most discussions are by music creators (as shown on the left and middle below, both are self-introductions by music creators).

This indicates that Audius's operations intentionally distinguish between traditional internet users and crypto users, and the product does not deliberately guide users to engage with the on-chain economic system. Based on the author's personal experience in the community, it is evident that more users come for music rather than cryptocurrency; however, on the other hand, Audius has also brought some traditional internet users into the crypto world, though the specific number is unknown (shown on the right).

3. Token Economic Model

3.1 Core Role of Tokens One: Incentivizing User Participation in Node Operations

The role of Audius's tokens is closely related to node operations. The core function of token staking is to ensure the operation of the node mechanism, maintaining the security and decentralization of file storage.

Audius's music files are stored on IPFS, and its operating nodes are divided into two categories: Content Nodes, which store user data, images, audio files, etc.; and Discovery Nodes, which index user, track, and playlist information.

Although node operations occur off-chain, Audius requires all node operators to stake their $AUDIO tokens to qualify for operation, thereby tightly binding node operations to the project and enhancing the project's control over node operations.

Content nodes require staking between 200,000 to 10 million $AUDIO, while discovery nodes require staking between 200,000 to 7 million $AUDIO. At the current price of approximately $1.50 per $AUDIO, the lower limit for operating nodes is around ~$300,000, which is quite high. CEO Roneil Rumberg stated that the high barrier is set partly due to the complexity of node operations, which require a certain level of expertise, and partly because future reliance on node operators may be needed to identify/manage pirated content.

For retail investors, they can choose to stake relatively small amounts of $AUDIO with different operators, with the staking threshold determined by the operators themselves. As of December 21, the staking threshold for retail investors ranges from 100 to 100,000 $AUDIO, providing significant participation space for retail investors.

According to the official Docs, Audius will issue 7% of the total $AUDIO supply annually to all stakers (including node operators and retail stakers), distributed weekly on-chain as staking incentives. In other words, if users do not stake, their $AUDIO will be diluted over the years.

The official data on staking by operators and delegators is as follows:

It can be seen that the top two operators and their delegators account for over 75% of the total staked amount, showing a clear "grouping" effect. However, the staking ratio of individual operators to the total staked amount is at most only 1.25%, indicating that node staking is indeed quite decentralized.

3.2 Core Role of Tokens Two: Granting Community Governance Rights

In addition to participating in node operations and enjoying corresponding staking incentives, token holders also have governance voting rights.

There are two ways to participate in Audius's community governance. The first is to initiate discussions on the forum, which anyone can participate in, but the conclusions do not have executive power and are merely contributions of ideas; the second requires formal proposals initiated by node operators, which token holders vote on. The standard for passing proposals is that at least 5% of staked $AUDIO must participate in the vote, with at least 50% of the votes in favor.

There are quite a few grassroots proposals on the forum, such as restoring a specific product page or returning stolen $AUDIO tokens from a wallet, but the number is not large, totaling only 21 discussions. Formal proposals initiated by node operators are mostly technical version updates, with almost no discussions on the forum.

The only case that was initiated on the forum and formally proposed and passed by a node operator is the "Audius Grants Committee" project proposed in April this year. It was initially proposed by a creator on Audius, suggesting the establishment of a dedicated committee, with approximately 110,000 $AUDIO drawn from the foundation treasury to provide to the committee, which would select several creators who contribute to the Audius platform and reward them with $AUDIO. The left shows the forum proposal, and the right shows the formal proposal.

The proposer, Matthew Chaim, has 268 fans on Audius and nearly 4,000 followers on Twitter, indicating he is a mid-tier creator familiar with cryptocurrency. The proposal provided a specific committee list, suggesting a reward of no more than 1,000 $AUDIO for each creator and requiring 250 $AUDIO per month for each committee member as an incentive.

Many responses were constructive, suggesting that the committee's composition was too focused on electronic music and should include creators from other genres. The overall sentiment was supportive, and the proposal was passed without objection. Three months later, community volunteers posted on the forum about the fund's allocation, revealing the list and amounts of all awarded creators. Whether this committee mechanism will continue to operate in the future is still under discussion and has yet to be determined.

This is currently the only case of community governance managing treasury assets in Audius, which may serve as a practical model for the future.

3.3 Core Role of Tokens Three: Participating in the Platform's Economic System

The project team emphasizes the third role of tokens, which is to serve as incentive tokens, allowing users to earn on the platform. However, currently, this aspect is very weak, and more designs are still in the conceptual stage.

Users can earn token incentives mainly by contributing content to the platform, with fixed incentives being: verifying Twitter and Instagram accounts and posting songs to receive certain rewards; weekly rewards for the top 5 tracks and top 5 playlists, with each creator earning 100 $AUDIO; temporary incentives, such as the aforementioned proposal to establish a committee to select creators, with a maximum reward of 1,000 $AUDIO, which are all relatively small amounts. These $AUDIO used for incentives come from the foundation treasury.

This may disappoint some: the distribution of tokens is not closely related to content contributions on the platform. Relatedly, the platform does not have a clear business model, and creators lack revenue-generating methods. This will be elaborated on in section 5.

3.4 Token Distribution

In October 2020, $AUDIO was launched, and the team disclosed the distribution details as follows:

Release Object Quantity / Million Percentage Final Unlock Deadline Team and Advisors 40640.60% 2026 Investors 36036% 2022 Foundation Treasury 17817.80% 2023 10,000 High-Activity Users Airdrop 555.50% / Total 999100%/

In addition, $AUDIO has an annual token issuance of 7% of the total supply to reward users who stake tokens. The following image estimates the circulation of tokens for the four types of holders by July 2026, assuming that all 7% of the newly issued tokens return to the community.

4. Business Model

4.1 Missing Commercialization Strategies

Audius provides services that are extremely friendly to grassroots users, allowing them to listen to any music completely free of charge and without ads, effectively subsidizing novice users. However, because of this, Audius has almost no commercialization strategies, and the creators on the platform lack effective revenue-generating methods.

The only feature with some commercialization aspect is the tiered privileges offered by Audius. Users who store a certain amount of $AUDIO in their Audius-assigned wallet can receive corresponding privilege services. The lowest Bronze tier requires holding 10+ $AUDIO, corresponding to website badges (similar to influencer verification) and Discord certification privileges; Silver and above require holding 100+ $AUDIO, which, in addition to Bronze privileges, allows users to display their NFTs from other wallet addresses on the website. Overall, these incentives are aimed at enhancing users' social identities but have low popularity. There are about 30 Bronze users and around 200 Silver users on Discord, with very few users at higher levels.

Although the official team mentioned future commercialization in a tweet back in March 2020, it has remained at the announcement stage. Regarding the lack of commercialization, CEO Roneil Rumberg stated in a September 2021 interview that he believes the primary goal of the product should be to build a meaningful community rather than to initiate commercialization. However, he also revealed that the next steps would include commercialization as one of the main tasks.

4.2 Future Commercialization Possibilities

Since 2020, Audius has gradually revealed some commercialization roadmaps, summarized as follows.

The underlying idea of Audius's business model is fascinating, centered on eliminating intermediaries, resulting in no revenue for the platform. An official tweet from March 2020 claimed: 90% of the revenue will go to creators, 10% to node operators, and Audius will take nothing. (as shown in the image below).

In an interview, CEO Roneil Rumberg explained the degree of centralization in the company's operations, which can serve as an annotation for this 90/10 ratio.

First, at the decentralized level of the app, Audius allows users to interact directly with operating nodes, eliminating its role as a "platform intermediary."

Second, at the company's decentralized level, the Audius project team will manage the Audius Foundation Treasury, overseeing 178 million $AUDIO to maintain project operations; all content resources within the project are open, and Audius encourages various third-party teams to build ecosystems based on project resources. The Audius App is just one application within the Audius ecosystem, and any team or individual can utilize Audius to create other applications. The Audius project team will not grow into a massive user operation company, currently consisting of only ~20 people, with user operations largely left to the community.

Therefore, the project team has opened data interfaces, allowing anyone to call project data to build their own apps. Currently, there are dozens of such apps, such as Music Racer, a Steam game where users navigate levels to the rhythm of music, with all music played sourced from the Audius project. Additionally, Audius has launched a third-party app incentive program, where the app creator with the most API calls each month can earn 500 $AUDIO rewards.

If this roadmap is followed, the Audius project team would become similar to the Ethereum Foundation, relying on the treasury to maintain funding without depending on specific apps for revenue. Audius is no longer a platform for specific users but a platform for various music applications.

The above describes the operational model of the Audius project team; regarding creators' revenue methods, Audius mentioned two ways in the white paper updated in October 2020.

The first is to allow the purchase of paid content through third-party stablecoins. In a November 2020 interview, Cooper Turley, who serves as Crypto Strategy at Audius, explained a relatively specific charging method. In the future, microtransactions may be based on each streaming play, with the play rate set by the creator who uploaded the music.

The actual user experience would involve storing a certain amount of stablecoins in the Audius wallet, with a portion of the fee automatically paid for each play, which would be automatically allocated to the creator in the backend. There may also be a certain transaction fee charged during stablecoin transactions, managed by $AUDIO holders.

The second is to support creators in issuing personal tokens. Creators must stake $AUDIO to issue personal tokens, and the distribution and usage methods can be customized by the creators, such as allowing fans to hold creator tokens to unlock specific content or participate in specific events.

In this process, the project team may also charge a certain amount of creator tokens, which would be governed by $AUDIO holders. Moreover, Audius will act as an aggregator for creator tokens, allowing creators to distribute personal tokens created on other platforms like Roll and Rally within Audius. The open creator token system will also provide Audius with more development possibilities within the DeFi ecosystem.

5. Project Opportunities and Risks

The strengths and weaknesses of Audius can be seen as a contradiction.

The obvious advantage is that the project has a strong spirit of decentralization and inclusivity, including providing a low-barrier experience for traditional internet users, allowing retail investors to participate in storage node operations, and opening APIs for third-party apps to call songs, all of which make music sharing extremely convenient and create a good atmosphere for music creation and sharing.

However, correspondingly, the efforts to develop in the direction of "shared openness" have also created obstacles for its "compliance" and "commercialization."

Firstly, in terms of content review, to ensure that users can upload music without restrictions, the project team cannot decide to remove any content; the official response indicates that a third-party arbitration mechanism will be introduced in the future, but there are currently no clear plans. Therefore, the project cannot avoid users uploading infringing content.

Secondly, since the music on Audius cannot obtain copyright certification and protection, there has not yet been a clear revenue plan for creators. In the context of the frequent emergence of music NFT platforms, how Audius ensures creators' revenue to maintain its attractiveness will be an important issue.

In summary, how to balance open sharing for all users with revenue needs for creators will be a long-term challenge for Audius. If the project follows the plans in the white paper to open stablecoin purchases for paid content, support creators in issuing personal tokens, and customize token distribution methods, the project must first address content compliance and copyright protection issues, while also educating existing non-crypto users about cryptocurrencies to prevent current users from leaving due to increased barriers to entry.

6. Team Background and Investment Situation

According to the financing history recorded by Crunchbase, since its establishment in 2018, the project has raised a total of $136 million. Among the investment institutions are prominent firms like Coinbase Ventures and Multicoin. The financing information is as follows:

The two co-founders of the team have high educational backgrounds and technical expertise. CEO and co-founder Roneil Rumburg studied Computer Science at Stanford and previously developed a Bitcoin payment application. CPO (Chief Product Officer) and co-founder Forrest Browning also comes from Stanford and has worked on enterprise data center management platforms.

7. Product Summary

Audius is a music application with a strong vision of decentralization. Its efforts in decentralization are reflected in returning control of music content and primary revenue to the creators themselves, eliminating intermediaries between creators and fans.

In terms of content control, the project does not have a centralized review mechanism, and creators have complete publishing rights (though a community arbitration mechanism will be introduced in the future); the project also makes all data public, allowing creators to access music data themselves. In terms of revenue distribution, it is expected that 90% of the revenue will go to creators, with the specific revenue distribution methods primarily determined by creators and the community, with the project team not holding absolute control.

Currently, Audius remains a cutting-edge niche app focused on electronic music and the crypto community, yet to reach a breakout point, but it has already accumulated a group of genuine users. The platform's completely free, ad-free, and no on-chain requirements provide an extremely low barrier to entry for novice users. In the early stages, the project attracted some influencers through token airdrops, bringing initial traffic, and the project team continues to operate the community, fostering a good atmosphere for music creation and sharing.

Currently, the project's token economic model is relatively simplistic, primarily used to incentivize the operation of decentralized storage nodes, and has not yet deeply integrated with content creation on the platform. Its business model is also essentially blank, and creators lack viable revenue-generating methods.