DJs Steve Aoki and 3LAU are still banking on NFTs to reshape music. Here’s why they believe their value will outlast the current bust

Steve Aoki and Justin Blau (3Lau) photographed at Aoki’s home in Las Vegas, NV on March 18, 2023. Photography by Saeed Rahbaran

Steve Aoki is riding his bike to New York City in a Sprinter van tour bus when the Zoom call comes in. The iconic DJ fumbles with his iPhone, brushes back his black hair and greets his younger friend and collaborator Justin Blau, aka 3LAU. The pair are eager to talk about a technology they say will transform music’s business model and redefine the relationship between artists and their fans. “The only option for fans used to be merch,” Blau says, becoming animated as he makes his case. The next opportunity, he says, is what he and Aoki are sure is the hot new thing for music: NFTs, or non-fungible tokens.

The term describes unique objects inscribed on a blockchain – most often works of art, but also other digital objects such as songs – which can include ownership of those objects. In 2021, NFTs became part of the cultural zeitgeist as celebrities plunked down millions to collect digital primates known as Bored Apes, and artist Beeple auctioned off an NFT piece for an eye-popping $69 million.

Today, most NFTs are worth a fraction of what they fetched during the previous mania, and trading volume is down more than 80% from its peak in early 2022. NFTs now often serve as a punch-line – a folly that illustrates the worst excesses of crypto. rather than a serious investment. But Aoki and Blau, like a growing number of artists, are convinced that NFTs are a transformative technology, and that the speculative frenzy of 2021 was a precursor to something much bigger.

Photography by Saeed Rahbaran

For Aoki, a Grammy-nominated DJ who’s also a writer and producer, NFTs offer an expansive new way to connect with fans. By distributing NFTs related to his work, he can identify the people most passionate about the music, and communicate and even collaborate with them through the digital world known as Web3.

“I’ve never felt a community like the community I felt in the Web3 space. I’ve never felt this energy in real life,” Aoki says.[NFTs] make room for things I never thought I’d do, like making a song with a fan.”

Aoki’s latest project involves creating music and art with Blau under the banner of PUNX, which the pair describes as an “audiovisual IRL meets metaverse supergroup.” Details were under wraps at press time, but the project is based on the duo’s CryptoPunk NFTs. These NFTs, like Bored Apes, are part of a limited collection owned by a studio called Yuga Labs, but which gives collectors wide latitude to develop intellectual property related to the brand – by, for example, customizing the images’ designs.

Blau, meanwhile, is using NFTs to create new copyright arrangements between musicians and fans. His company, Royal, is a platform where artists can create and sell NFTs that represent partial ownership of a song or album, allowing the buyer to collect a portion of the streaming royalties. The Royal NFTs usually offer extra benefits such as early access to new songs or opportunities to meet or chat online with the musician. The artists, meanwhile, get a new way to monetize their current work and raise funds for future projects.

Royal, which has raised $71 million from investors, offers what Blau sees as a fan club for the blockchain era — one that allows musicians to interact with the people who love their music best, while tapping into a revenue opportunity that doesn’t rely on middlemen who have changed artists in the past. So far, Royal remains a niche offering: The company says it has 11,000 users who have paid a total of $2.1 million to invest in 39 “drops” on the platform by artists including rapper Nas and Diplo, another top DJ. (Secondary sales have generated an additional $5.4 million.) Users have earned a total of about $140,000 in royalties. While the numbers are modest, Blau says they represent an opening act as NFT technology gains a wider foothold. “It’s only the first round of NFTs ever. The second round is going to be wild. Things are going to work a lot better,” he says.

He might be on to something. While NFTs remain a source of ridicule in mainstream culture, other creative types—from actor Seth Green to comics legend Todd McFarlane—embrace them as a way to bond with fans. And while the overall market is far from the 2021 highs, NFTs still generated over $700 million in monthly sales in February. The so-called floor price for items in the prominent Bored Apes collection, meanwhile, was over $100,000 in March. It is hard to shake the impression that NFTs are here to stay. Aoki certainly thinks so – and hopes a mainstream breakthrough is just around the corner: “What if Kendrick Lamar made a song and released it with the Web3 community? Or did Paul McCartney sell one to a Beatles fan?” NFTs, he says, “allow imagination and intuition to do things on the fly.”

This article appears in the April/May 2023 issue of Fortune headlined “Fans and funds: Why NFTs sound sweet to these musicians.”