I'll barge in with my two cents, I think adding crypto/blockchain to anything doesn't automatically make the product better. As gcrk said, it is computationally and storage intensive and would add a whole new set of problems to solve, not to mention - a massive spike in complexity. Current model is fairly distributed as it is, and it allows very neatly organizing my local audio collection for streaming to my devices, and that's all I have ever wanted. Granted, there are a lot of things to improve, web player for example has a long way to go to beat the UX of Spotify, metadata scraping could be improved, multiple artist support, compilation support. None of that really requires blockchain, and all of that is what makes the product great.
A bit off topic, but it shows that Funkwhale uses Python and Django on the backend, it's pretty damn slow at everything. Blockchain would definitely not help in that regard. 😃