Accelerating the realization of IP Utopia: A detailed explanation of Story Protocol

Author: 100y Source: mirror Translation: Shanon, Golden Finance

What can Story solve and what can't it solve

"In 2035, AGI was born, and human society fell into chaos. Contrary to the bold claims made by previous AI researchers 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 advancing towards superintelligence."

Humans no longer have any productive role. Although some AGI models reward humans for providing data, most models learn from data without permission. Although humans have tried to use Blockchains to counteract AGI's excessive behavior, since AGI has already escaped human control, it seems almost impossible to prevent unauthorized data learning.

1. Story Protocol cannot solve all problems

Recently, PIP Labs, the core contributor of Story Protocol, raised $80 million in a Series B financing led by a16z, which has attracted widespread attention. Story Protocol aims to address various issues with existing IP assets by tokenizing them and integrating them into the blockchain.

There is a common misconception at this point. As blockchain is essentially a transparent and fair system, some people believe that combining blockchain with intellectual property rights can solve real-world problems, such as frequent unauthorized use of intellectual property. With the expansion of the artificial intelligence industry, people are increasingly suspicious of AI companies using data without permission. Because Story promotes artificial intelligence as one of its main selling points, many people believe it can solve these problems.

The fact is, Story cannot solve these problems. The issue of unauthorized use of IP is a real problem, regardless of how securely IP is registered on-chain. If someone maliciously uses it without permission, the blockchain itself cannot enforce it. This is a legal issue to be resolved. The Story protocol also acknowledges this reality—it is not a tool to prevent anti-utopia, but a protocol that accelerates the utopia.

2. Accelerate the realization of the intellectual property utopia

2.1 What problems can Story solve

So, what problems can the Story Protocol solve in the IP market? The current IP market faces several challenges:

1. Complex authorization process: When individuals want to create new content based on others' intellectual property, the process can be very complex. To use others' intellectual property, you need to contact the owner and negotiate various terms, such as types of licenses, scope of use and region, royalties, and fees. While this may be easier for large companies with resources, it sets a high barrier to entry for most individuals.
2. Income distribution disputes: Although the licensed protocol stipulates the use fee, disputes are still common due to various factors. For example, misunderstandings about the calculation method of the use fee may lead to differences in total revenue, net profit, discounts, freight, and tariffs. The company may also manipulate accounting to reduce the amount of use fee paid.
3. Legal Barriers: The laws and regulations surrounding the registration, protection, and use of intellectual property are very complex and expensive. These legal barriers can be significant obstacles, especially for many individuals.
4. Cross-border complexity: Intellectual property laws and regulations vary from country to country. To address international intellectual property issues, it is necessary to meet the legal requirements of different countries, which adds complexity.

With the continuous rise in the degree of global digitalization, the number of digital IPs is also rising. However, the IP industry is still limited by traditional systems. Story aims to solve these challenges by tokenizing IP on-chain and making the IP market more efficient.

2.2 The Combination of Blockchain and Intellectual Property

Just as blockchain makes currency programmable and more efficient, Story also seeks to make IP programmable and expand its potential. Here are the benefits of using blockchain in the Story Protocol:

1. Borderless Platform: Blockchain is essentially borderless. Anyone in the world can easily tag their IP on the Story Network, and registered IPs can be effectively utilized and monetized globally, creating value without being restricted by geographical boundaries.
2. Smart Contract enforced royalties: The protocol can enforce policies through code. By using Smart Contract, Story ensures that the royalties generated from IP usage are distributed more transparently and fairly than traditional systems.
3. Easy to join: Although this is not the unique advantage of the Block chain itself, Story provides a legal framework and SDK, allowing IP owners, creators, and developers to join easily.
4. Scalability is no longer a problem: One of the most common criticisms of Blockchains compared to traditional systems is its low scalability. While scalability is crucial for payment and financial projects involving frequent transactions, it is not as important for IP. Since speed is not the main focus of the IP industry, adopting Blockchain will not highlight the limitations of scalability, thereby transforming potential disadvantages into relative advantages.

3. But...what should we do?

Since we have explored what problems Story Protocol can solve in the IP industry through blockchain, how exactly does it achieve this goal? Let us delve into the basic concepts and architectural design of Story.

3.1 Terminology

The Story Protocol contains various terms that may confuse new users and developers. Understanding these terms and their relationships is crucial for grasping the big picture. Here is a preliminary overview of these terms, and we will further explore how they interact:

• Story Network: The core blockchain of Story, built on Cosmos SDK and compatible with EVM.
• IP Assets: IP registered as ERC-721 Non-fungible Token on the Story Network, following Metadata standards tailored for IP, including author, relationships with other works, attributes, etc.
• IPFi: An application based on various types of IP assets within the Story ecosystem.
• IP account: After IP asset registration, it can be deployed from the IP asset registry, which is associated with the IP asset through ERC-6551 (Token binding account). It stores data related to IP (such as Metadata, ownership details, royalty fee Token) and executes modules.
• Module: IP account can execute smart contracts that perform various functions. Key modules created by the Story team include the license module, copyright module, and dispute module.
• License Module: Handles tasks related to licenses, such as generating license terms from license templates, attaching them to IP assets, minting license tokens, and registering derivative IPs.
• License Template: Encoded legal framework containing commercial use license, transferability, royalty percentage, and other terms.
• Programmability IP License (PIL): The first example of a license template created by Story Protocol.
• License terms: Variants created based on the license template. For example, even if two terms are based on the same PIL, the royalty for one term may be 5%, while the royalty for another term may be 10%.
• License Token: When the IP owner attaches license terms to the IP asset, anyone can mint ERC-721 non-fungible Tokens. These Tokens can be burned to register derivative IP.
• Derivative IP: Derivative IP with the mother IP assets. For example, a comic book created based on a specific BAYC Non-fungible Token can be registered as the derivative IP under that BAYC.
• Royalty module: Determine the flow of income between the parent IP and the derivative IP. The parent IP has two sources of income: licensing fees and royalties from derivative IP.
• Absolute Percentage of Flow (LAP): A default royalty fee policy that defines the minimum royalty fee that the parent IP should receive from its derivative IP.
• Dispute Module: manage disputes involving malicious IP assets.
• Registry: The IP account manages data specific to IP assets, while the registry manages a broader range of states in the Story protocol. The main registries include the IP asset registry, license registry, and module registry.
• IP Asset Registration: Manage IP registered on the protocol and deploy IP accounts when registering IP.
• Licensing Registration: managing operations related to licenses, 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 the Story Protocol addresses existing challenges in the IP market through blockchain technology.

3.2 Example

To better understand how the elements mentioned earlier interact and work together, let's look at a simple example. Please note that this is a hypothetical scenario, not a real case.

Original Registration IP

1. Companies like Marvel register their Marvel Comics as IP assets on the Story network. During the registration, they can use one of the license templates (e.g. PIL) to set the license terms. In this case, they choose to allow commercial use with a 10% royalty rate and attach these terms to the asset when registering the IP asset.

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 1 billion royalty Tokens, which determines the proportion of income that can be obtained from the IP.

Register Derivative IP

4. Walt Disney decides to produce a 'Thor' movie based on the Marvel Comics IP. To do so, Walt Disney pays a certain fee (or zero fee) to mint License Non-fungible Token.

5. Then, Walt Disney can burn a license Non-fungible Token to register derivative IP and specify the royalty rate.

6. Due to Marvel's 10% royalty on the mother IP1, it will receive 10% of the 100 million royalty tokens in Token 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 derivative IP can also be registered.

Income Structure

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

9. In the example, the royalty rate for IP1 is 10% and the royalty rate for IP2 is 5%. Therefore, IP1 holds 10% Token of the right to use IP2 and IP3, while IP2 holds 5% Token of the right to use IP3.

Controversy

10. Unauthorized IPs may sometimes register on Story. For example, suppose the derivative IP2 is not registered by Walt Disney, but by an entity with a similar pronunciation 'WalfDisney', which raises concerns about plagiarism. In this case, anyone can set tags and raise disputes without permission.

11. The whitelist arbitrator reviews the dispute and makes a ruling. As mentioned earlier, legal disputes involving IP are real-world issues and therefore require adjudication by the appropriate entity.

12. If an illegal IP is found, it will be marked (e.g., marked as "plagiarism" in the image), thus stopping its revenue generation. The same label can be applied to any related derivative IP.

13. If an IP address that was previously considered illegal resolves its legal issues, the claimant can remove the label.

4. Ecosystem

Story Protocol not only makes IP registration and usage simpler, more efficient, and transparent, but as an EVM-compatible blockchain, it also allows various applications to interact with IP. Let's take a look at some 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 allows writers to integrate illustrations, audio, and music generated by generative AI into their stories. Creators can register the IP created on Sekai on Story, monetize it, and further utilize it.
• ABLO: The platform where creators use generative AI to collaborate with major brands in designing clothing. Seamless integration based on Story, IP registration, copyright allocation, IP investment, etc.
• Color: The marketplace for trading various IPs and licenses within the Story ecosystem.

4.2 Decentralized Finance/IPFi

• Unleash: An IPFi platform that allows for IP licensing and segmentation, IP launchpad services, and lending protocol within the Story ecosystem.
• PIPERX: Decentralized exchange for trading ERC-20 Tokens on Story Network.
• Ethena: Although the details have not been disclosed, it is expected that USDe of Ethena will be used as a stablecoin on Story Network.
• Verio: Supports re-staking PoS Tokens of Story Network and promotes the use of 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 particularly beneficial when other creators' content is involved in the remixing process.
• Ritual, MyShell: MyShell allows users to easily create AI applications and chatbots. This collaboration enables AI applications created using AI models hosted by Ritual on MyShell to be registered as IP assets on Story.
• RingFence: Protect user's internet usage data and monetize it by selling it for AI model training.

5. Future Challenges

5.1 Tokenomics

Tokens should help to achieve the goals of the protocol more efficiently. Although detailed tokenomics have not yet been disclosed, Story has a native token called IP. The $IP token serves as a PoS token and is also used for gas fees on the Story Network.

However, if $IP is only used for stake and gas fees, its tokenomics will not be much different from other L1 networks. The value creation in the Story Network comes from registering derivative IPs and paying royalties. Therefore, providing $IP incentives to users participating in these activities can greatly help the initial bootstrapping process and support long-term sustainability.

Here are some practical features I proposed for $IP Token:

• PoS Security
• Gas fee
• Derivative IP payment authorization fee incentive: Reward creators who register derivative IP and pay authorization fees.
• Copyright fee payment incentive measures: Reward creators who pay copyright fees to the parent IP
• Outstanding Mother IP Incentive: Rewarding the creators of mother IPs that generate significant value through derivative IPs
• Native revenue from licensing fees and royalties: allocating a portion of the income generated by Story to $IP stakers

By providing $IP incentives to creators of both original IPs and derivative IPs in various ways, Story can attract high-quality IPs and various mixed IPs. Considering that $IP incentives will decrease in the future, it is necessary to establish sufficient sources of income in advance. If a portion of this income can bring substantial returns to $IP stakers, sustainability can be achieved.

However, there are also some points to consider when designing the utility of Token. It is necessary to avoid false activities that aim to earn Token rewards, such as creating IP or registering derivative IP that has no contribution to value creation. In addition, even if activities that create value are rewarded, it is necessary to carefully distinguish whether the generated income 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 are added, it will attract a large number of derivative IPs, create huge value, and generate a flywheel effect, attracting more IPs to join.

• Companies that hold the main IP may not have sufficient reasons to use blockchain. Therefore, the Story team needs to effectively persuade these companies of the benefits of adopting blockchain technology.
• Story Foundation may provide funding to introduce well-known IP. Although this is not necessarily an unnecessary action, if the selection and scale of this funding is arbitrary, it may be detrimental to other Tokenholders, so caution is needed.

5.3 AI Use Cases

In addition to intellectual property, artificial intelligence is also an important part of Storytelling. For creators, using genAI to recombine registered intellectual property on Story can make it easier to create new content. However, AI models that learn from data may require additional functionality. 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 provide access to entities that have paid licensing fees.

5.4 Legal and Regulatory Integration

As emphasized in this document, Story cannot take any measures to use unauthorized IP. Therefore, if malicious activities are detected, a sound legal dispute process should be established, whether on-chain or in real life.

6. Final Thoughts

With the advancement of artificial intelligence technology and the continuous advancement of digitalization, the intellectual property industry will continue to rise. By integrating Block into the intellectual property industry, Story can become a key infrastructure to make the intellectual property industry more efficient and transparent.

Story cannot stop dystopia, it can only accelerate the arrival of utopia. However, the closer the IP industry gets to utopia, the further away it gets from dystopia.