Accelerating the realization of IP Utopia: Story Protocol explained

Author: 100y Source: mirror Translation: Shan Ouba, Golden Finance

Story What can be solved and what cannot be solved

"In 2035, AGI is born and human society falls into chaos. Contrary to the bold claims of AI researchers in the past that AGI can be fully controlled, AGI models have now surpassed human supervision. These models ignore laws and regulations and autonomously learn from all available data in the physical and digital worlds, rapidly moving towards super intelligence.

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 to use blockchain to combat AGI's excesses, it seems almost impossible to prevent unauthorized data learning now that AGI has escaped human control.

1. Story Protocol Can't Solve All Problems

Recently, Story Protocol's core contributor PIP Labs 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 at this point. Since blockchain is essentially a transparent and fair system, some people believe that combining blockchain with intellectual property rights may solve real-world problems, such as the frequent problem of unauthorized use of intellectual property rights. As the scale of the artificial intelligence industry expands, people are increasingly suspicious of AI companies using data without permission. Since Story uses artificial intelligence as one of its main propaganda points, many people think it can solve these problems.

The fact is that Story cannot 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. Story The 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:

1. Complex licensing process: When an individual wants 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.

2. Disputes over revenue allocation: Despite royalties being stipulated in licensing agreements, disputes are still common due to various factors. For example, misunderstandings about how royalties are calculated can lead to disagreements over gross revenue, net profit, discounts, freight costs, and tariffs. Companies may also manipulate accounting to reduce the amount of royalties paid.

3. 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.

4. Cross-border complexity: IP laws and regulations vary from country to country. To handle international IP issues, multiple legal requirements in different countries must be met, 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 remains constrained by legacy systems. Story aims to address these challenges and make the IP market more efficient by tokenizing IP on the blockchain.

2.2 Integration 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:

1. Borderless Platform: Blockchain is inherently borderless. Anyone in the world can easily tokenize their IP on the Story Network, and registered IP can be effectively utilized and monetized globally, creating value without geographical restrictions.

2. Smart Contract Enforcement of 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.

3. 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.

4. 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 potential disadvantages into relative advantages.

3. But... what to do?

Now that we have explored what problems Story Protocol can solve in the IP industry through blockchain, how exactly does it achieve this goal? Let's dive into 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. The following 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 NFTs 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 Accounts: 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.

• Modules: IP accounts can execute smart contracts with various functions. Key modules created by the Story team include licensing modules, copyright modules, and dispute modules.

• Licensing Module: Handles licensing-related tasks such as generating license terms from a license template, attaching them to an IP asset, minting license tokens, and registering derivative IP.

• License Template: Encoded legal framework containing 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: Variants created from a license template. For example, even if two terms are based on the same PIL, one may have a 5% royalty while another may have a 10% royalty.

• License Tokens: When an IP owner attaches license 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 the parent IP and the derivative IP. The parent IP has two sources of revenue: license fees and royalties from the derivative IP.

• Flow Absolute Percentage (LAP): A default royalty policy that defines the minimum royalty that a parent IP should receive from its derivative IP.

• Dispute Module: Manages disputes involving malicious IP assets.

• Registry: IP Accounts manage data specific to IP assets, while Registries manage broader states in the Story Protocol. The main registries include the IP Asset Registry, the License Registry, and the Module Registry.

• IP Asset Registry: manages IPs registered on the protocol and deploys IP accounts when registering IPs.

• License Registry: manages license-related operations, such as registering license templates, attaching license terms to IP assets, and registering derivative IPs.

• Module Registry: maintains a global list of modules and hooks.

By understanding these terms and their interactions, you can grasp how Story Protocol solves existing IP market challenges through blockchain technology.

3.2 Example

To better understand how the aforementioned elements interact and play a role, let's take a look at a simple example. Please note that this is a hypothetical scenario, not a real case. 1. A company like Marvel registers their Marvel Comics as an IP asset on the Story Network. During registration, they can set up licensing terms using one of the licensing templates, such as 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 deploys 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.

Registering Derivative IP

4. Walt Disney decided to make a Thor movie based on the Marvel Comics IP. To do this, Walt Disney pays a fee (or zero fee) to mint the License NFT.

5. Walt Disney can then burn the license NFT to register the derivative IP and specify the royalty rate.

6. Since Marvel set a 10% royalty on 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 get 10% of any revenue generated by the derivative IP2.

7. Derivatives of derivative IPs can also be registered.

Revenue Structure

8. Each IP asset can claim royalty tokens from the derivative IP according to the set royalty percentage, thereby obtaining a share of the revenue generated. This follows the revenue structure of Story's default (and only) royalty policy LAP (Liquid Absolute Percentage).

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.

Disputes

10. Unauthorized IPs may sometimes be registered on Story. For example, suppose that the derivative IP2 is not registered by Walt Disney but by a similar-sounding entity "WalfDisney", which raises concerns about plagiarism. In this case, anyone can set a label and file a dispute without permission.

11. Whitelist arbitrators review the dispute and make a decision. As mentioned earlier, legal disputes involving IP are real-world issues and therefore need to be adjudicated by the appropriate entities.

12. If an IP is found to be illegitimate, it is labeled (e.g., labeled "plagiarism" in the figure), thereby stopping its revenue generation. The same label can be applied to any related derivative IP.

13. If an IP previously deemed illegitimate resolves its legal issues, the dispute initiator can remove the label.

4. Ecosystem

Story Protocol not only makes IP registration and use simpler, more efficient, and more 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 works as IP on Story.

• Sekai: A platform that enables writers to incorporate illustrations, audio, and music generated by generative AI into their stories. Creators can register IP created on Sekai on Story to monetize and further exploit it.

• ABLO: A platform for creators to design clothing in collaboration with major brands using generative AI. Because it is based on Story, the processes of IP registration, copyright allocation, IP investment, etc. are seamless.

• Color: A marketplace for trading various IPs and licenses within the Story ecosystem.

4.2 DeFi/IPFi

• Unleash: An IPFi platform that allows IP licensing and subdivision, 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 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 creates images using generative AI, allowing creators to easily remix content by modifying prompts. AI model owners can earn income by providing models, and Story's infrastructure is particularly 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: Protect users' internet usage data and monetize 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 propose for the $IP token:

• PoS security

• Gas fees

• Derivative IP payment licensing fee incentive: reward creators who register derivative IPs and pay licensing fees

• Copyright payment incentive: reward creators who pay copyright fees to parent IP

• Outstanding parent IP incentive: reward parent IP creators who create significant value through derivative IP

• Native income from licensing fees and royalties: distribute part of the income generated by Story to $IP stakers

By paying royalties to parent IP in various ways By providing $IP incentives to creators of IP and derivative IPs, 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 stakers, then sustainability can be achieved.

However, there are also some points to consider when designing the practicality of tokens. It is necessary to avoid rewarding false activities designed to earn token rewards, such as simply creating IP or registering meaningless derivative IPs that do not contribute to value creation. 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 false transactions.

5.2 Core IP

The core of Story is to introduce core IPs. If existing core IPs join, it will attract a large number of derivative IPs, create huge value, and generate a flywheel effect to attract 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, artificial intelligence is also an important part of Story's storytelling. 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 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 use. Therefore, if malicious activity is detected, a sound legal dispute process should be established, both on-chain and in real life.

6. Final Thoughts

With the advancement of artificial intelligence technology and the continuous advancement of the world's digitalization, the intellectual property industry will continue to grow. By integrating blockchain into the intellectual property industry, Story can become a key infrastructure to make the intellectual property 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.