How do you think it works currently when artists who make highly edited music perform live? And I guess if Gorillaz and Hatsune Miku can do concerts, this isn't really a problem.

I’d say it is highly dependent on the style of music. I mainly go to metal and jazz festivals. I just can’t imagine someone on stage lip syncing to music, some holo/avatar, or whatever.

Holograms is one solution that is already being used, see also:

https://en.wikipedia.org/wiki/Virtual_concert

Example:

https://en.wikipedia.org/wiki/ABBA_Voyage

It’s pretty standard for electronic / sample based music acts to have live bands assembled for touring after the completely sequenced studio album takes off. It’s a hit or miss depending on how well the musicians can reinterpret the source material.

It is also pretty standard for a DJ to move knobs and sliders as performance art even when the knobs/sliders are doing nothing. It adds to the performance much more than just standing there.

We’re probably already at the point where we can create covers of your favourite song by your favourite band but from a different genre!