In November 2011, Trivium guitarist and vocalist Matt Heafy received a royalty check for $1. 31 cents. This was apparently matt payment for the album the band had released a few months earlier, one which had sold over 20,000 copies in its first week, topping billboards across the United States. This is an experience that many musicians are familiar with, and it’s one that has become more common now that streaming giants like Spotify have become the main middlemen between musicians and fans.

AUDIUS is a cryptocurrency project that’s looking to cut all the middlemen out of the music industry and replace them with its decentralized AUDIO hosting and streaming protocol. Since its launch, AUDIUS has managed to onboard over 100,000 artists, 5 million monthly users, and just recently integrated with TikTok.

The AUDIO token has also seen some serious growth over the last year, and this has many wondering whether AUDIUS has the potential to become the next Spotify. Today I’m going to tell you everything you need to know about AUDIU. Where it came from, how it works, and where the AUDIO token is headed next.

Disclaimer: After getting the whole permissions, all the content converted from Coin Bureau’s “Audius: AUDIO Worth It?? Complete Overview!” video.

What Is Audius?

AUDIUS was founded by Roneil Rumburg and Forrest Browning. Both are decent computer scientists with ivy league degrees under their belts, and they’ve been dabbling in crypto since 2011.

By dabbling, I mean, they mined a bunch of Bitcoin, sold it near the top of the 2013 bull run, and subsequently went on to start their own VC firms and make early investments into crypto companies like Lightning Labs, which develops Bitcoin’s Lightning Network.

That is one hell of a hat trick if ever I’ve seen one. Both Roneil and Forrest were huge fans of electronic music, and most of the artists they followed were on Soundcloud. Back in 2014, Soundcloud was all the rage, so much so that it’s signed a licensing deal with a warner music group in November that year.

As is the case with all monopolistic business practices, the crackdown on competition Julie began. In the months that followed, many of Roneil and Forrests favorite musicians and tracks were wiped from Soundcloud, including some of their musician friends.

Much of this censorship was justified in the name of loosely defined copyright infringement and other problematic policy changes that came in the wake of Soundcloud’s deal with warner.

Although Soundcloud had no subscription service or royalties up until that point, the low barrier to entry for musicians and the randomized streaming algorithm for listeners made it easy for up-and-coming artists to get noticed. This allowed them to make money by playing live and selling merch at their shows.

That was touring is actually how most musicians make most of their money, even those that are signed to a record label. This is because the number of middlemen involved in music production and distribution means the musicians themselves only get pennies on $3 for every song that sold.

Roneil and Forrest realized that cryptocurrency could offer a solution to these problems, but the technology didn’t exist at the time. There was no Ethereum for smart contracts between musicians and fans. Nor an operational decentralized storage system to store all the content.

By the end of 2017, however, it was clear that the foundations for a decentralized streaming protocol were there.

Ethereum had proven itself to be a functional smart contract cryptocurrency protocol lab the company behind IPFS adjust raised a record 257 million bucks with its Filecoin (FIL) ICO.

In early 2018, Roneil and Forrest got to work building AUDIUS with the goal of giving musicians a censorship-resistant platform and a much bigger piece of the profit pie.

In the summer, AUDIUS raised 5.5 million dollars from various venture capital firms to expand its operations and supercharged moment.

In September 2019, AUDIUS was complete, and in October 2020, the AUDIO token began trading on top-tier cryptocurrency exchanges. I’ll get back to AUDIO in a moment, first. Let’s see what AUDIUS has going on under the hood.

How Does Audius Work?

The AUDIUS protocol consists of three layers; the App Layer, the Node Layer, and the Blockchain Layer.

The App Layer includes the AUDIUS website and the AUDIUS app for Android and Apple devices. If you’ve ever used either of these, you’ll note that it doesn’t feel like you’re using a decentralized application at all.

This is primarily because of a special non-custodial browser wallet created by AUDIUS called Hedgehog, which is embedded into AUDIUS’s otherwise standard user login process.

Hedgehog works by automatically storing the private key of your wallet in your browser in the background, and it automatically completes any transactions you make without a prompt, unlike other browser wallets.

The seed phrase to your browser wallet is sent to you via e-mail when you sign up, which is why it instructs you to save that e-mail and not share it with anyone. To the untrained eye, this just looks like another important e-mail that speaks volumes about just how user-friendly Hedgehog is. Obviously, keeping your wallet seed phrase in your e-mail is not very safe, which is why AUDIUS advises keeping only a small amount of crypto on the wallet at any given time.

Fun fact AUDIUS named it Hedgehog because of the philosophical contrast it has with the fox, which is, of course, Metamask’s logo.

Hedgehogs tend to be simple-minded, whereas foxes are more nuanced in their thinking, apparently. To my understanding, Hedgehog is not fully functional yet, and this has to do with the recent changes AUDIUS made to the Node Layer of its tech stack.

The architecture of AUDIUS is Node Layer is almost the same as Polygons. Like Polygon, AUDIUS’s node layer is a layer to blockchain that is used for improved scaling i..e speed while remaining compatible with Ethereum.

AUDIUS is in the process of swapping out its own permissioned Layer-2 blockchain with Solana, something which began earlier this year.

In other words, AUDIUS is using Solana as a Layer 2 for Ethereum, and I’ll get into why that is a bit later on.

As some of you may recall, Polygon’s checkpoint nodes submit snapshots of the state of the plasma chain running Polygon’s smart contracts to Ethereum. This makes it possible for users to recover their tokens from Ethereum using the last snapshot on Ethereum if Polygon ever goes down.

Similarly, AUDIUS is notes submit snapshots of the state of the AUDIUS protocol to Ethereum, specifically the section of the interplanetary file system or IPFS, where AUDIUS artists store their music. This makes it possible for AUDIUS artists to retrieve their music and content from IPFS using the last snapshot on Ethereum if AUDIO’s ever goes down.

AUDIUS actually uses a custom-made extension to IPFS called or odds to ensure that music can be quickly stored by musicians and retrieve by artists. If you don’t know what the IPFS is or how it works, I recommend checking out my post about Filecoin.

Audius Staking

There are two kinds of AUDIUS nodes involved in the storage and retrieval process. Content Nodes and Discovery Nodes, respectively.

To ensure the content nodes and discovery nodes do their job, they must stake AUDIO tokens on the Ethereum blockchain, which is the third layer in AUDIUS’s architecture.

At present, content nodes and discovery notes must take a minimum of 200,000 AUDIO to take on the role and earned fees from the AUDIUS protocol.

That’s well over 300,000 dollars at today’s prices, which makes for a very high barrier to entry. Luckily, it is possible to delegate AUDIO to content nodes and discovery nodes, and this can be done using the AUDIUS protocol dashboard in conjunction with Metamask.

The minimum stake for delegation is 100 AUDIO, and the rewards you earn are very on the commission fee set by each node. Note that all AUDIO state is subject to a seven-day cooldown aka unlock period.

AUDIUS does/misbehaving nodes though this is something that is done manually via community governance and not via blockchain code. AUDIO staking rewards are around 23% per year, and this is partially due to AUDIOs annual inflation, which AUDIUS nodes also earn. This conveniently brings me to AUDIOs tokenomics.

AUDIO Tokenomics

AUDIO is an ERC20 token on the Ethereum blockchain which began circulating in October last year. It’s used for staking, governance, and to unlock rewards on AUDIUS.

AUDIO has an initial supply of 1 billion, and just 5% of it was airdrop to AUDIUS’s most active artists and listeners. That said, 18% of AUDIO’s initial supply was allocated to the community treasury, while 40% went to the AUDIUS team and its advisers, who include famous musicians, and the remaining 36% went to AUDIUSs investors, which later included Binance Labs and Coinbase Ventures.

These tokens are subject to is vesting schedules which you can see here.

Notice that the overwhelming majority of AUDIO supply at any given time is held by the AUDIUS team and its investors. The orange bar you see is AUDIOs annual inflation rate of 7%, which will be distributed to the most active users of AUDIUS, but for the time being, these newly minted AUDIO tokens are going to take.

It’s worth pointing out that the AUDIOs effective inflation rate is much higher because of the vesting schedule I just mentioned.

Case in point, AUDIUS’s initial circulating supply in October was just 120 million. It’s been about 10 months, and AUDIO circulating supply is now over 400 million, that’s more than 3x.

AUDIO Price Analysis

AUDIO’s aggressive, effective inflation is probably why the token hadn’t performed as well as it otherwise could have. When AUDIO was first listed, it was trading for about 50 cents before crashing down to just 7 cents.

AUDIO then had a massive move in March, and this is likely because AUDIUS announced a flurry of new features for its platform, notably AUDIO Badges, which give users additional perks force taking various amounts of AUDIO. It is possible that AUDIOs price was manipulated prior to the first vesting live in April, which tripled its circulating supply. It wouldn’t be hard to do since 50 percent of the AUDIO supply is held by a single wallet.

Now to be fair, this could be the wallet containing the tokens vesting to AUDIUS’s team advisers and investors, but the fact that it’s not a smart contract means those tokens can go anywhere at any time.

In any case, that price pump in March conveniently cushioned the enormous amount of sell pressure that came in April. AUDIO’s collapse on April 23rd corresponds to the exact day tokens began vesting.

AUDIO Julie got wrecked with the rest of the crypto market in mid-May and continue trading sideways until very recently. Given that AUDIUS is now part of Solana’s ecosystem, AUDIO has been riding the wave soul sore because of its ridiculous degenerate Apes NFTS.

If you want my most recent take on the nft market, you can get it below the Medium post.

AUDIUS also recently integrated with TikTok, making it possible to use music from AUDIUS in TikTok videos. This is the cause of the recent pump, which saw AUDIO double in price overnight just a few days ago.

In terms of how high AUDIO could go, I’ll start by saying it’s now or never. AUDIO has another vesting cliff coming in October, and this could suppress its price the same way it has in the past.

Between now and then, though, I could see AUDIO hitting 5 dollars again. The reason why I don’t see AUDIO going much higher than that has to do with the fact that it is out of reach to traders in the United States, which is where AUDIUS is headquartered.

As per the pop-up which comes up when you first visit the AUDIUS company website quote, “AUDIO has not been registered under the U.S. securities act of 1933.” In plain English, AUDIO is too similar to being a stock in a company, specifically AUDIUS, and as such, it cannot be listed on cryptocurrency exchanges in the United States without passing a lot of red tapes.

As I mentioned in my recent post about the topic, the SEC has recently been very vocal in singling out cryptocurrencies, which it believes to be securities. So, I imagine it’s in AUDIO’s interests to lay low. Even, so AUDIUS has got a lot on the go.

Audius Roadmap

Although AUDIUS does not have a concrete road map, recent interviews with its founders shed some light on what’s on the horizon. You’ll hopefully recall that AUDIUS decided to swap out its own permissioned Layer-2 blockchain with Solana in October last year.

This is because AUDIUSs reported user base is growing so quickly that it needs an even more scalable solution for its final development hurdle, which is the implementation of stable coin payments.

To put things into perspective, AUDIUS has reportedly grown from 500,000 monthly users to over 5 million monthly users in less than a year.

This growth is likely to continue, and Solana is currently the only cryptocurrency on the market that can support the equally exponential amount of stable coin transactions coming from AUDIUS’s users.

For those who don’t know, AUDIUS is currently free, and all the artists on there and making their money from AUDIO token incentives and stuff like Solana’s has recently announced Creator Fund.

When AUDIUS finally introduces monetization, this could be insanely bullish for AUDIO. What’s interesting is that AUDIUS co-founder? Roneil Rumburg mentioned back in May that AUDIUS will not have a monthly subscription model like other music streaming platforms.

Instead, AUDIUS will give artists complete control over how their content is monetized. Roneil noted that one artist is thinking of making his music possible to listen to above a certain altitude, meaning you only be able to listen to it when traveling on planes or hiking in high mountains.

Other possibilities include giving exclusive content to any fans who purchase specific NFTs like those AUDIO Badges I mentioned earlier or even require a one-time payment of $1,000 to access all current and future music.

The possibilities here are endless, and AUDIUS hopes that the competition between different subscription and revenue models between artists will result in the best ones being developed not just for AUDIO but the entire music industry.

This is similar to what we see now in cryptocurrency when it comes to governance, and AUDIUS is one of the projects involved in this race for the optimal debate space.

AUDIUS’s governance dashboard is where you can go to get a sense of any other developments coming down the pipe. So far, most of these have been technical.

Each of these proposals must be voted on by at least 5% of all stake AUDIO, and 50% of this 5% must vote in favor for the proposal to pass.

Once passed, funds are taken from the community treasury to pay for the project in question, and this can be vetoed by six of nine AUDIUS community members who hold keys to the treasury wallet. This all sounds pretty legit, but it’s worth pointing out that AUDIUS’s a master plan that assumes that stable coins don’t get rekt by regulators, which is a possibility. This is, unfortunately, just one of the many concerns I have about AUDIUS.

Audius Concerns

It seems that AUDIUS has quite a few skeletons in his closet, and one of them is a man named Ranidu Lankage, a Sri Lankan pop singer who is apparently one of the co-founders and former CEO of AUDIUS.

Even though there are a few interviews with Ranidu on YouTube about AUDIUS, neither of the other two AUDIUS co-founders ever mentioned in any of their interviews that Ranidu was involved.

I also did find a trace of Ranidu’s name anywhere on the AUDIUS website nor its blog posts, which brings me to my second concern.

There are huge, and I mean huge, gaps in AUDIUS’s timeline. There are no blog posts made by AUDIUS between September 2018 and May 2019 and again between August 2019 and July 2020.

While I’m not sure what happened with the second gap, I suspect that the first gap was related to some sort of fallout that has since been scrubbed from AUDIUS’s online presence.

Thankfully, there is a nifty internet tool called the Wayback Machine, which you see what websites looked like in earlier times.

AUDIUS’s final blog post in September 2018 was about the release of its white paper. If you go there today, you’ll find the same white paper it released in October 2020. If you go back in time, you find a completely different white paper with different authors.

This white paper details a completely different architecture for AUDIUS as well as another token called loud which would serve as the platform stable coin.

The LOUD token was actually mentioned in a Coindesk article that came out around that time.

There are even bigger questions around AUDIUS’s operations today. According to the AUDIUS dashboard, it has over 5.3 million active users. However, all the metrics for AUDIUS’s social media channels, app downloads, and even the song lessons on its platform are a fraction of that number. The dead giveaway for me airdrop of the AUDIO token, which only went to 10,000 of AUDIUS’s most active users. Even though AUDIUS claims to have over 700,000 users at the time.

In an interview earlier this year, AUDIUS co-founder Roneil Rumburg said that most of the tokens allocated for the airdrop went unclaimed and were consequently allocated to the community treasury. Now, I don’t know about you, but I reckon I’d claim free crypto if someone offered it to me, especially when it was being been dropped at a time when the crypto market was going ballistic.

These facts suggest that AUDIUS’s actual user count is somewhere in the tens of thousands at best, and when you combine these huge discrepancies with AUDIUS’s patchy and secretive history and its general lack of transparency, you end up with a crypto project that warrants some caution. That said, that TikTok integration is pretty damn bullish, though.