Introducing the402 protocol and platform
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June 19th, 2022

TL;DR of the402 protocol:

The402 lets creators monetize their content through 1) sales, 2) consumption. We’re the only protocol that enables each piece of cryptomedia to have its own built-in micro-economy and fan graph.

How it works:

  • Creators can set their own monetization terms within the NFT which they can dynamically adjust at any point in time: ie price per stream/view or pay once & stream forever
    • They can let content be consumed for free (just like a traditional NFT), but for the first time, they can also charge for experiencing their content
  • Collectors can share in the upside of the streaming revenue & can consume that content for free always
  • Creators and collectors get paid instantly as content is streamed with no take rates (no protocol fees)
  • Platforms can only surface that content if they comply with the terms set in the smart contract
  • Creators can also set their own royalties for secondary sales

TL;DR of the402 platform:

The402 platform is an NFT marketplace focused on music and video content with streaming built-in

Creators can upload content, setting their own terms with no-code

  • Consumers can stream content minted using our protocol and also from other NFT marketplaces
  • Collectors can mint, buy, and sell content on our marketplace & secondaries pages (or on traditional NFT Marketplaces)

In this article we will outline:

  1. Key problems with web2 streaming platforms
  2. A deep dive into how our protocol and platform work
  3. How our protocol and platform address the deficiencies of web2 platforms
  4. Hyperstructures and the “threat of the fee” applied to cryptomedia
  5. Why we need crypto to solve these problems
  6. What else our protocol unlocks for the creator economy
  7. Details on our launch

The problems:

In web2, creators are largely at the whim of large platforms leading to:

  1. High take rates
    1. Spotify: 30%; Youtube: 45%; Twitch: 50%; Udemy: 60%; etc.
  2. No pricing power for creators
  3. Slow / opaque payouts
  4. No way to capture the upside off of virality
  5. No ownership over your fan graph

The result

  • Creatives ironically make money off of anything but their actual content
    • Relying on ancillary revenue streams to make the bulk of their income (touring, merch, endorsement deals) rather than their actual art
  • Significant value flows back to the platforms
    • Value transfer is from fan <-> platform  <-> creator instead of directly from fan <-> creator
  • Have risks of being de-platformed and losing their fan graph

Web3 allows creators to flip traditional models around and lets them and their community capture the majority of the value while establishing a direct fan-to-creator relationship.

NFTs have created a new way for fans to show direct patronage to their favorite creators, but they can do a lot more.

In particular, they can enable an entirely new ecosystem. One in which monetization is determined by the creators rather than the platforms & enforced through smart contracts; One in which creators can own their entire fan-graph

Introducing the402 protocol

  • Where you can not only monetize your content through NFT sales, but also capture value on consumption. Collectors can share in the upside with instant and transparent payments
  • Creators can know exactly who is consuming their content
  • Each piece of content can have its own built-in micro-economy

How it Works:

  • Creators set:
    • Minting price
    • Number of editions
    • A custom streaming fee - this can be changed in the future & can also be 0
    • Whether users can pay the streaming fee once and be able to stream forever (similar to buying a song on iTunes)
    • A % of the streaming revenue they want to give back to the NFT holders
    • Royalty for secondary sales of their NFT content
  • Creators can publish content by simply uploading their media, adding a cover photo, and setting their desired parameters. No coding is needed.
  • Once published, content is encrypted using threshold cryptography and only becomes decrypted once payment is received
  • If the creator chooses to set a streaming fee for their content, the creator and NFT holder get streamed income in real-time instantly as people view or listen to the content
  • If the creator prefers listeners to purchase a song and be able to stream forever, the collector would also participate in that upside and the consumer would only need to pay once
  • The protocol logs the wallet address of who streams the content each time a piece of media is streamed
  • Creators also get royalties on NFT sales

Example:

  • Creator “XYZ” publishes one of her songs as an NFT
  • XYZ sets a streaming fee of $1.00 per stream and decides to share 10% of that income to the NFT holder
  • It gets 1,000 streams
  • XYZ would make $900 in revenue and the NFT holders would collectively make $100
  • No take rates or protocol fees

It’s important to note that the price the creator wants to charge per stream can be $0 and that this can also be changed at a future date. Our protocol gives that choice to the creators.

Made possible through Threshold Cryptography:

All of this is being powered by threshold cryptography. It’s what allows content to be stored in an immutable and publicly accessible storage system like IPFS while also being gated to just users that have paid the necessary micropayment: the content is stored in an encrypted format, and is only able to be decrypted if the appropriate on-chain authorization is present, namely one of the following conditions

  1. Content is priced as free to stream
  2. User is the creator themselves
  3. User is an NFT holder
  4. User has paid the streaming fee
  5. User has paid the streaming fee previously and content is pay once, access forever

What we’ve built:

Music and Video NFT Marketplace with secondary sales included for content utilizing our protocol
Music and Video NFT Marketplace with secondary sales included for content utilizing our protocol
Minting Page + Dedicated Page for a song
Minting Page + Dedicated Page for a song
Minting Page + Dedicated Page for a video
Minting Page + Dedicated Page for a video
Easy upload flows
Easy upload flows
Stream music and videos
Stream music and videos

How our protocol and platform address the 5 key problems in the web2 streaming space:

  1. High platform take rates => Monetization is directly between fan & creator with no protocol fees
  2. No pricing power for creators => Creators can choose how much to charge per stream
  3. Slow / opaque payouts => Instant payouts that can be verified on-chain
  4. No way to capture the upside off of virality => The ability to dynamically price your content based on demand
  5. No ownership over your fan graph => Access to the wallet addresses of each person who consumes your content

Hyperstructures and the “threat of the fee” for cryptomedia

Hyperstructures

“Crypto protocols that can run for free and forever, without maintenance, interruption or intermediaries”

Jacob Horne defines the term hyperstructure as something that can “simultaneously be free to use and also extremely valuable to own and govern.” He describes the Zora Protocol as a hyperstructure. The protocol has no protocol fees, but has a switch that can turn a fee on across the protocol. “This creates a dynamic called the "threat of the fee". This means that owners of the Hyperstructure have the right to turn that fee on across the protocol at the base level at any time”.

Similarly, content minted using the402 protocol enables this “threat of the fee” to be built into each piece of cryptomedia. Creators can turn on fees for their content at any point in time if they like. However, owning a piece of the creator’s work guarantees that content consumed by the collector will be free forever. The402 protocol makes the NFT even more valuable to own.

Cool, so why crypto?

Crypto allows creators to:

  • Set their own terms through smart contracts rather than lawyers
  • Have complete transparency on where funds are coming from
  • Get paid out instantly
  • Bypass middlemen
  • Allow superfans/collectors to share in the upside

What else does this unlock?

  • The ability to price your first streams extremely high for the super fan
    • Ex. can charge someone $1,000 to be the first person ever (verified on-chain) to listen to your song and in return issue a Soulbound Token
  • The ability to have a group of fans with a direct incentive to share your content
  • Digital versions of concepts such as Wu-Tang Clan’s limited edition album

More applications are discussed here

Launch Details:

The first-ever launch using this protocol will be on June 20th

We’re excited to announce that the first artist to drop on our platform will be TK who will be debuting his unreleased song “Too Much” using this first-of-its-kind primitive.

How to follow our journey:

You can join our backdrop community here for insider updates or can follow us on our twitter to stay in the loop

**UPDATE our first drop sold out:

Arweave TX
3J5z_cEE0i-ApjLYri7rEglZc-8JQw2JrhfX2AC7gCU
Ethereum Address
0x5bd70C712D7499BaBACFdfFBc5EB73C88a23aeaE
Content Digest
nMVsZbjNb-vmkhEaYVgFyZqGsN1lgPOvhd9C1TsebHA