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Funkwhale might be the most overlooked Fediverse project
(raphael.lullis.net)
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Uber got $1.6m in VC funding after showing their app at a conference.
The way the fediverse works it would require each instance to raise their own money.
The thing you suggested as legal is most likely not just grey area, but actively goes against the intent of copyright. A company would be better at fighting that than individuals.
It's not fear to act wisely in the face of reality.
$1.6m is nothing
Or, if push comes to shove, to operate in jurisdictions where people are not persecuted for disobeying draconian laws.
I don't think you will find that any jurisdiction will allow you to stream your music collection to your friends without them also purchasing that music first.
But if you do find a jurisdiction that allows that, then host it there for certain!
Not what I said.
What I am saying is that there are jurisdictions where people can operate and will you not be persecuted (i.e, chased/harassed) even if some lawyer can find an IP address tied to "illegal" activity. Anyone that has looked into how to run a seedbox will quickly find out that there are plenty of providers catering to this market.
Then host it there if that's what you want to do.
You are still better off knowing whether or not you are breaking the law when you do so.