Author: 100y Source: mirror Translation: Shan Ouba, Jinse Finance
What Story can and cannot solve
“In 2035, AGI is born and human society is thrown into chaos. Contrary to the bold claims of past AI researchers that AGI can be fully controlled, AGI models have now surpassed human supervision. Ignoring laws and regulations, these models autonomously learn from all available data in the physical and digital worlds, rapidly moving towards superintelligence.
Humans no longer have any productive role. While some AGI models reward humans for providing data, most models learn from data without permission. Although humans have tried using blockchain to combat AGI excesses, it seems nearly impossible to prevent unauthorized data learning now that AGI is free of human control.
1. Story Protocol can’t solve all problems
Recently, PIP Labs, a core contributor to Story Protocol, raised $80 million in a Series B round led by a16z, which attracted widespread attention. Story Protocol aims to solve various problems of existing IP assets by tokenizing IP and incorporating it into the blockchain.
There is a common misunderstanding on this point. Since blockchain is essentially a transparent and fair system, some people think that combining blockchain with intellectual property rights may solve real-world problems, such as the frequent problem of unauthorized use of intellectual property. As the scale of the artificial intelligence industry expands, people are increasingly suspicious of artificial intelligence companies using data without permission. Since Story uses artificial intelligence as one of its main promotional points, many people think it can solve these problems.
The truth is, Story can’t solve these problems. The problem of unauthorized use of IP is a real problem, and no matter how securely the IP is registered on the blockchain, if someone uses it maliciously without permission, the blockchain itself cannot enforce it. This is a problem for the law to solve. The Story protocol also recognizes this reality - it is not a tool to prevent dystopia, but a protocol to accelerate utopia.
2. Accelerate the realization of intellectual property utopia
2.1 What problems can Story solve?
So, what problems can Story Protocol solve in the IP market? The current IP market faces several challenges:
Complex licensing process: When individuals want to create new content based on the intellectual property of others, the process can be very complicated. To use the intellectual property of others, you need to contact the owner and negotiate various terms, such as the type of license, the scope and area of use, royalties, and fees. While this may be easier for large companies with resources, it sets a high barrier to entry for most individuals.
Revenue allocation disputes: Despite the fact that royalties are stipulated in the licensing agreement, disputes are still common due to various factors. For example, misunderstandings on how royalties are calculated can lead to disagreements on gross revenue, net profit, discounts, freight costs, and tariffs. Companies may also manipulate accounting to reduce the amount of royalties paid.
Legal barriers: The laws and regulations surrounding the registration, protection, and use of intellectual property are complex and costly. These legal barriers can be significant obstacles, especially for many individuals.
Cross-border complexity: IP laws and regulations vary from country to country. When dealing with international IP issues, you must meet multiple legal requirements in different countries, which adds to the complexity.
As the world continues to become more digital, the number of digital IPs is also growing. However, the IP industry is still limited by traditional systems. Story aims to solve these challenges by tokenizing IP on the blockchain and make the IP market more efficient.
2.2 Combination of blockchain and intellectual property
Just as blockchain makes currency programmable and more efficient, Story seeks to make IP programmable and expand its potential. Here are the benefits of using blockchain in Story Protocol:
Borderless Platform: Blockchain is inherently borderless. Anyone in the world can easily mark their IP on Story Network, and registered IP can be effectively utilized and monetized globally, creating value without geographical restrictions.
Smart Contract Enforced Royalties: The protocol can enforce policies through code. By using smart contracts, Story ensures that royalties generated by IP usage are distributed more transparently and fairly than traditional systems.
Easy to join: While this is not a unique advantage of blockchain itself, Story provides a legal framework and SDK that makes it easy for IP owners, creators, and developers to join.
Scalability is no longer an issue: One of the most common criticisms of blockchain is its low scalability compared to traditional systems. While scalability is critical for payment and financial projects involving frequent transactions, it is less important for IP. Since speed is not a major concern in the IP industry, the adoption of blockchain does not highlight the limitations of scalability, turning a potential disadvantage into a relative advantage.
3. But...what to do?
Now that we’ve explored what problems in the IP industry Story Protocol can solve through blockchain, how exactly does it achieve this? Let’s take a deeper look at Story’s basic concepts and architectural design.
3.1 Terminology
Story Protocol contains a variety of terms that can be confusing for new users and developers. Understanding these terms and their relationships is critical to grasping the big picture. Here is an initial overview of these terms, and we will further explore how they interact with each other:
Story Network: Story's core blockchain, built on the Cosmos SDK and compatible with EVM.
IP assets: IP registered as ERC-721 NFT on Story Network, following metadata standards tailored for IP, including author, relationship to other works, attributes, etc.
IPFi: Applications based on various IP assets within the Story ecosystem.
IP Account: Once an IP asset is registered, it can be deployed from the IP Asset Registry, which is an ERC-6551 (token-bound account) uniquely associated with the IP asset. It stores data related to the IP (e.g. metadata, ownership details, royalty tokens) and executes modules.
Module: An IP account can execute smart contracts with various functions. The key modules created by the Story team include the licensing module, copyright module, and dispute module.
Licensing Module: Handles licensing-related tasks such as generating license terms from a licensing template, attaching them to IP assets, minting license tokens, and registering derivative IP.
License template: A legal framework for coding, including terms such as commercial use permission, transferability, royalty percentages, etc.
Programmable IP License (PIL): The first example of a license template created by Story Protocol.
License terms: variations created from a license template. For example, even if both terms are based on the same PIL, one term might have a 5% royalty while another might have a 10% royalty.
License Tokens: When an IP owner attaches licensing terms to an IP asset, anyone can mint an ERC-721 NFT. These tokens can be burned to register derivative IP.
Derivative IP: A derivative IP with a parent IP asset. For example, a comic book created based on a specific BAYC NFT can be registered as a derivative IP under that BAYC.
Royalty Module: Determines how revenue flows between parent IP and derivative IP. Parent IP has two sources of revenue: license fees and royalties from derivative IP.
Flowing Absolute Percentage (LAP): A default royalty policy that defines the minimum royalty a parent IP should receive from its derivative IPs.
Dispute Module: Manage disputes involving malicious IP assets.
Registries: While IP Accounts manage data specific to IP assets, Registries manage the broader state of the Story Protocol. The main registries include the IP Asset Registry, the License Registry, and the Module Registry.
IP Asset Registration: Manage IPs registered on the protocol and deploy IP accounts when registering IPs.
License Registration: Manage license-related operations such as registering license templates, attaching licensing terms to IP assets, and registering derivative IP.
Module Registry: Maintains a global list of modules and hooks.
By understanding these terms and how they interact, you can grasp how Story Protocol solves existing IP market challenges through blockchain technology.
3.2 Examples
To better understand how the previously mentioned elements interact and function, let's look at a simple example. Please note that this is a hypothetical scenario and not a real case.
Register original IP
1. A company like Marvel registers its Marvel Comics as an IP asset on the Story Network. During registration, they can set up licensing terms using one of the licensing templates (e.g. PIL). In this case, they choose licensing terms that allow commercial use and set a 10% royalty, and attach those terms to the IP asset when registering it.
2. Once an IP asset is registered, the IP Asset Registry will deploy an IP account associated with it.
3. Each IP asset comes with 100 million royalty tokens, which determine the proportion of revenue that can be obtained from that IP.
Register derivative IP
4. Walt Disney decided to make a Thor movie based on the Marvel Comics IP. To do this, Walt Disney paid a certain fee (or no fee) to mint the License NFT.
5. Walt Disney can then burn a license NFT to register the derivative IP and specify the royalty rate.
6. Since Marvel has set a 10% royalty for the parent IP1, it will receive 10% of the 100 million royalty tokens from the derivative IP2, equivalent to 10 million IP2 tokens. In addition, Marvel can also receive 10% of any revenue generated by the derivative IP2.
7. Derivatives of derived IP can also be registered.
Income structure
8. Each IP asset can claim royalty tokens from derivative IPs based on a set royalty percentage, thereby receiving a share of the revenue generated. This follows Story’s default (and only) royalty policy LAP (Liquid Absolute Percentage) revenue structure.
9. In the example, IP1's royalty rate is 10% and IP2's royalty rate is 5%. Therefore, IP1 holds 10% of the royalty tokens from IP2 and IP3, while IP2 holds 5% of the royalty tokens from IP3.
dispute
10. Unauthorized IP may sometimes be registered on Story. For example, suppose derivative IP2 is not registered by Walt Disney but by a similar-sounding entity "WalfDisney", which raises concerns of plagiarism. In this case, anyone can set the label and file a dispute without permission.
11. Whitelisted arbitrators review the dispute and render a decision. As mentioned earlier, legal disputes involving IP are real-world issues and therefore need to be adjudicated by the appropriate entity.
12. If an IP is found to be illegal, it will be labeled (e.g., labeled as "plagiarized" in the figure), thereby stopping it from generating revenue. The same label can be applied to any related derivative IP.
13. If an IP that was previously deemed illegal resolves its legal issues, the initiator of the dispute can remove the label.
4. Ecosystem
Story Protocol not only makes IP registration and use simpler, more efficient and transparent, but as an EVM-compatible blockchain, it also allows a variety of applications to interact with IP. Let's take a look at some of the key applications in the Story ecosystem.
4.1 Creator Platform
Magma: A collaborative art platform where creators can register their work as IP on Story.
Sekai: A platform that enables writers to incorporate generative AI-generated illustrations, audio, and music into their stories. Creators can register the IP created on Sekai on Story to monetize and further exploit it.
ABLO: A platform where creators use generative AI to collaborate with major brands to design clothing. Because it is based on Story, the processes of IP registration, copyright allocation, and IP investment are seamlessly connected.
Color: A marketplace for trading various IPs and licenses within the Story ecosystem.
4.2 DeFi/IPFi
Unleash: An IPFi platform that allows for IP licensing and segmentation, IP launchpad services, and lending protocols within the Story ecosystem.
PIPERX: A decentralized exchange for trading ERC-20 tokens on Story Network.
Ethena: Although details have not yet been made public, it is expected that Ethena’s USDe will be used as a stablecoin on the Story Network.
Verio: Supports re-staking of Story Network’s PoS tokens and facilitates the use of liquid vIP tokens as proof of IP assets.
4.3 Artificial Intelligence
Mahojin: A platform that uses generative AI to create images, allowing creators to easily remix content by modifying prompts. AI model owners can earn income by providing models, and Story’s infrastructure is especially beneficial when other creators’ content is involved in the remix process.
Ritual, MyShell: MyShell allows users to easily create AI applications and chatbots. This collaboration enables AI applications created on MyShell using AI models hosted by Ritual to be registered as IP assets on Story.
RingFence: Protects users’ internet usage data and monetizes it by selling it for AI model training.
5. Future Challenges
5.1 Token Economics
The token should help achieve the goals of the protocol more efficiently. Although the detailed token economics have not been disclosed, Story has a native token called IP. The $IP token acts as a PoS token and is also used for gas fees on the Story Network.
However, if $IP is used only for staking and gas fees, its token economics will not be much different from other L1 networks. Value creation in Story Network comes from registering derivative IP and paying royalties. Therefore, providing $IP incentives to users who participate in these activities can greatly help the initial bootstrapping process and support long-term sustainability.
Here are the practical functions I proposed for the $IP token:
PoS Security
Gas Fees
Derivative IP licensing fee incentive: reward creators who register derivative IP and pay licensing fees
Royalty Payment Incentives: Reward creators who pay royalties to the parent IP
Outstanding Parent IP Incentive: Reward the creators of parent IPs who create significant value through derivative IPs
Native revenue from licensing fees and royalties: a portion of the revenue generated by Story is distributed to $IP stakers
By providing $IP incentives to creators of parent IPs and derivative IPs in various ways, Story can absorb high-quality IPs and various remix IPs. Considering that $IP incentives will decrease in the future, sufficient sources of income must be established in advance. If part of this income can bring considerable returns to $IP pledgers, then sustainability can be achieved.
However, there are also some points to consider when designing the utility of tokens. Rewarding fake activities designed to earn token rewards, such as simply creating IP or registering meaningless derivative IP that does not contribute to value creation, must be avoided. In addition, even if rewards are given for value-creating activities, it is necessary to carefully distinguish whether the income generated is real or just a form of fake transactions.
5.2 Core IP
The core of Story is to introduce core IP. If the existing core IP is added, it will attract a large number of derivative IPs, create huge value, and produce a flywheel effect, attracting more IPs to join.
Companies with major IP may not have a strong reason to use blockchain. Therefore, the Story team needs to effectively convince these companies of the benefits of adopting blockchain technology.
The Story Foundation may provide grants to bring in well-known IP. While this is not necessarily a redundant action, if the selection and size of these grants are arbitrary, it may be disadvantageous to other token holders, so caution is needed.
5.3 Artificial Intelligence Use Cases
In addition to intellectual property, AI is also an important part of Story narratives. For creators, recombining intellectual property registered on Story using genAI can make it easier to create new content. However, AI models that learn from data may require additional features. For example, the data used for training should not be made public until payment is received. Therefore, when data is first registered on Story, there should be a function to keep it confidential and only make it available to entities that have paid the licensing fee.
5.4 Legal and regulatory integration
As emphasized in this document, Story cannot take any action against unauthorized IP usage. Therefore, if malicious activity is detected, a full-fledged legal dispute process should be established, both on-chain and in real life.
6. Final Thoughts
As AI technology advances and the world continues to digitize, the IP industry will continue to grow. By integrating blockchain into the IP industry, Story can become a critical infrastructure to make the IP industry more efficient and transparent.
Story cannot prevent dystopia, it can only accelerate the arrival of utopia. However, the closer the IP industry is to utopia, the further it is from dystopia.
