Justin Blau is best known by his stage name 3LAU.
The world famous DJ produces dance music, tours the world and has been described by Forbes as ‘the DJ that turned down wall street’ to follow his passion.
In recent years, his attention has shifted towards cryptocurrencies after being introduced by the Winklevoss twins to the growing and exciting crypto-economy. Beginning with small investments, which soon progressed to successful ETH USD arbitrage, he is now Co-Founder of Our Music Festival (OMF), an ambitious and exciting project that aims to unite, inspire and give back to music fans around the world.
I spoke with Justin to discuss the OMF project, crypto regulation, arbitrage and much more.
How did you first get into cryptocurrencies and do you have any favourite cryptocurrencies?
I actually befriended the Winklevoss twins a long time ago, they were my first introduction to bitcoin in 2014 and at the time I really didn't know much. I just invested a little bit and held onto it over the years, and then last year when everything started to heat up in the market I started taking time to learn as much as I possibly could and I became fascinated with the technology and decentralization and I started diving deeper and learning everything I could about tokenomics, consensus methods...
You mentioned you took a greater look at cryptocurrencies in the 2017 bull market, do you have any opinion on the bull market in 2017 and the ensuing 2018 bear market and is that affecting the OMF project?
The bear market isn’t really affecting our project as our project is rooted in a real business. The bear market is actually nice for us in the sense that it buys us a lot of time to build what we want to build. I think that is the biggest issue, a lot of people want to incorporate blockchain technology with real world products, the question is what is the MVP which makes the most sense and can it access a wide base of consumers? That's the question we have been focused on for a year on this project.
Going back to the other part of the question, I think that last years bull market was founded on this idea that a lot of cryptocurrencies could potentially replace fiat money. When that was a global perception, and even though it was never going to happen quickly, the globe perceived that potentially all of this cash was going to move into this giant new market. A lot of people bought into this, but the reality is that everybody was incentivised to do so for money making purposes not for belief in the technology.
So we saw heavily inflated prices, which some of us benefited from but it didn’t really make sense, and any of us that lived through it would agree that in the moment everything felt like it was going to continue on this giant rise.
I have read that you turned down an internship at BlackRock to focus on music. Was that a tough decision to make or did you always want to focus on music over finance?
It actually was a tough decision, I had wanted to go into finance my whole life. But my true passion had always been music. At the time my career in music had really started to gain traction, really by accident I released some stuff on the internet which spread really quickly. I only had a limited window of giving music a shot once I left University in my third year, so I started touring and never looked back since.
Please could you tell us about the OMF project and the challenges you have faced?
We started building it in August 2017 and when we started building OMF my priority was actually regulatory compliance. We didn’t raise a dollar until we knew we could do it the right way. Which delayed the project by about 6 months because of the securities laws here in the US. I learned the law through the process which was costly but provided a great platform of knowledge which I can take to anything in the Blockchain space. That was our first big hurdle that we had to cross.
The next big hurdle was how do you model this economy we want to build? The OMF token has actually changed in its nature about 8 times, we landed on something really powerful. We modelled this out in a really interesting way, there is basically a token that represents your loyalty to the system, that is the OMF token. Then there is a stablecoin token that represents stability in the system, proof of purchasing power. We have been developing this dual token model, which we are hoping to build on. We are potentially working with one of the bigger cryptocurrencies in the space to build out this ecosystem.
Do you have any opinion on what stablecoins are best, the fiat backed vs the natively cryptographic stablecoins?
I think both have use cases. Fiat tethers have really strong use cases, for example when I was trading more actively last year, moving cash around was really difficult. Moving between exchanges meant transfering via a bank, with tether you can transact faster. I was trading arbitrage a lot last year which meant moving cash around was a pain in the ass especially at weekends.
There are a couple of currencies in development that I am extra excited about, im not sure any are announced yet but some of my buddies are working on them and I think that we are going to see a lot of movement towards stablecoins or asset backed tokens in the future.
You mentioned you were trading arbitrage, how was your experience and have you noticed the spreads closing?
Oh yeah. Its over! For a long time spreads on ETH could be between 3 and 10%, it was amazing! I have a finance background so that was one of the first ways I started to make money in the space, inter exchange arbitrage. The ETH arbitrage was my bread and butter, all of the spreads have closed.
Do you still draw on your finance background to trade in the crypto space?
I have given the trading a rest to focus on OMF. Trading requires a certain state of mind, very focused and very undistracted so ever since I started working on OMF in a greater capacity I left the crypto markets completely, that was in January. I did take profit in December and January which ended up being very beneficial without me knowing at the time, because I wanted to focus on OMF.
My previous learning and knowledge was really useful on structuring what we were doing. Any cryptocurrency can be analyzed by financial instruments and that knowledge and that path can be really useful in seeing where this space could go. For example when I first started learning about Byzantine Fault Tolerance, I was blown away that anyone could even have thought of this. Without my finance background I don’t think I would have picked up a lot of these concepts.
What have been the biggest regulatory hurdles that you have faced and is the US treating crypto regulation fairly?
The original idea for OMF is so simple but the regulation in the US prevents us from doing it in its full capacity. The original idea of OMf was to tokenize events and when you bought tickets to an event you earned a percentage of a security token that represented profit sharing in that event. The earlier you bought a ticket the more tokens you would receive that represented a share in the profits. The events would redistribute 50% of the profits back to token holders. Each event would be tokenized and we would develop and app that would allow the simple purchase and sale of these tokens. If they wanted to be transferred off the app and traded in a decentralised fashion they could be. We learned really quickly that we couldn't do that because of the regulatory environment. I think there is a lot of truth in the statement that ‘regulation prevents innovation’.
So we had to take it back to the drawing board and find a way we could make this work without being a security. We found this really difficult, we found ourselves trying to work around the regulatory environment, instead of trying to make something that made so much more sense, like earning cash flows from an event, so simple. Using blockchain technology transferring profit shares is super easy by sending to a smart contract that distributes to all the token holders. Something thats not easy to do with real fiat. We were so excited about that and the regulatory environment shut us down, that caused us to go back to the drawing board, that's what's taken so long with OMF.
Protecting us from the regulatory environment is my number one priority but also creating a token that has base value to a fan or artist who engages with our ecosystem, thats whats been super difficult.
Could blockchain be used in other areas of the music industry?
Absolutely, in our model we have an engagement and reward model for live music, the ticketing component is really important but my personal believe is that all ticketing will be NFTs (non-fungible tokens) in the future and a platform that issues and sells NFTs doesn't really require a native token.
On the streaming side, yes, im actually advising on a project called Audius who I think have the most advanced model of decentralised streaming and music distribution. They are backed by Pantera and some really reputable VC firms. The team has insane expertise and they are building a model that is similar to the OMF model, its a dual token model. I'm really excited about what they have built and I think it's the future of streaming it's just going to take a lot of time.
Where do you see OMF in 2-3 years?
My hope would be that we really achieve full integration with the actual festival experience. All these fans are using the app to earn our currency and to redeem our stablecoin for services and products at the festival. The two principles of OMF are, number one, ‘How do allow that value to accrue to all the participants of the festival when it succeeds?’ and number two ‘How do you gradually grant more governance to fans of the festival, could fans eventually pick a lineup to the festival?’.
We have a long way to get to those goals but I really believe that given the new team it is possible. We are now bringing on a superstar team of engineers to help us build what we want to build and model what we want to model. I do think it will take time but in the next three years hopefully fans are picking lineups and getting rewarded for the success of the events.
What, if any, ideology makes you believe in bitcoin and cryptocurrencies?
I think central points of failure in financial systems are really scary. In the UK and US we don’t have to worry too much but in countries like Venezuela or Egypt the economies are being controlled by a very small amount of people and there is no way for citizens to store value safely. When I first started learning about cryptocurrency that's what excited me the most, it globalised economies in a really interesting way. In the future we will see cryptocurrencies give smaller economies a real shot of growing because the individuals have the power to grow their economy vs the few people at the top making the decisions.