What specific problems can Story Protocol solve?
Written by: 100y.eth
Compiled by: J1N, Techub News
In August, The Block reported that Story, a blockchain focused on intellectual property (IP), announced the completion of a $80 million Series B financing led by a16z Crypto. Investors included Polychain Capital, and individual investors included Scott Trowbridge, senior vice president and board member of Stability AI, Adrian Cheng, founder and billionaire of K11, and Cozomo de' Medici, a digital art collector. Currently, Story's total financing has reached $140 million, and the developer behind Story, PIP Labs, is valued at $2.25 billion after financing. Its mainnet is expected to be launched later this year.
Next, we will explain in detail what specific problems Story Protocol can solve, such as its advantages in intellectual property (IP) management, and where it has limitations and cannot effectively solve certain problems, so as to help readers better understand the functions and limitations of the protocol.
First let me tell you a prophetic story about the future:
“In 2035, after the invention of artificial general intelligence (AGI), AGI brought great disaster to human society. In the past, AI researchers boldly claimed that AGI could be completely controlled by humans, but this has proven to be not the case. The current AGI model is beyond human control, ignores the laws and regulations in human society, autonomously learns all data in the physical and digital world, and rapidly evolves into super intelligence.
Today, the main value of human existence is to provide a steady stream of data for AGI models. Some AGI models will reward humans for actively providing data, while most AGI models can obtain data without human permission.
Although humans have tried various methods to use technologies such as blockchain to counter AGI's behavior of ignoring human permission and restrict its unauthorized activities, the fact is that AGI is no longer under human control. Therefore, it is almost impossible to prevent AGI from learning and using data without authorization. "
Story Protocol is not a solution to all problems
Story Protocol aims to solve real-world problems related to intellectual property (IP) by converting it into tokens and leveraging blockchain technology.
Some people mistakenly believe that blockchain is a transparent and fair system, so combining blockchain with intellectual property (IP) can solve IP infringement problems in the real world. As the AI industry expands, more and more people are questioning AI companies for using data without permission. Because Story Protocol uses AI as a major promotional point, many people mistakenly believe that it can solve these infringement problems.
Although Story Protocol attempts to solve the problem of intellectual property (IP) through blockchain technology, it cannot actually prevent unauthorized use of IP, as this is a real problem that requires legal resolution. Even if the IP is securely recorded on the blockchain, the blockchain itself cannot enforce sanctions if someone uses it maliciously. Story Protocol also recognizes this, and its purpose is not to eliminate IP infringement, but to improve the management of IP by utilizing blockchain technology.
Problems Story Protocol can solve
So, what problems can Story Protocol solve in the IP market? The current IP market faces the following challenges:
Complex licensing process: When individuals want to create new content based on someone else's existing IP, the licensing process can be very complicated. They need to contact the owner of the IP and negotiate various terms such as license type, usage scope and geographical restrictions, royalty ratios, and related fees. For large companies with sufficient funds and resources, these steps may be easier to handle, but for most individual creators, these cumbersome negotiation processes undoubtedly set a high threshold and increase the difficulty of creation.
Disputes over revenue distribution: Although licensing agreements usually clearly state the royalties to be paid, disputes still frequently arise for a variety of reasons. For example, there may be misunderstandings between the parties on how the royalties are calculated, leading to disputes over gross revenue, net profit, discounts, freight and tariffs, etc. In addition, companies may manipulate financial statements to reduce the amount of royalties they need to pay. This means that even with a clear agreement, disputes over royalty calculation and payment may still arise in practice.
Legal barriers: The laws and regulations governing the registration, protection and use of IP are complex and involve high costs that may be unaffordable for individuals, limiting their ability to develop creativity and innovation.
Cross-border complexity: Since IP laws and regulations vary from country to country, when dealing with IP issues internationally, you must comply with the legal requirements of multiple countries, which increases the complexity of the legal process.
As the global digitalization process accelerates, the number of IPs is growing rapidly, but the IP industry still faces many challenges due to the limitations of traditional management systems. Story Protocol hopes to solve these problems by tokenizing IP assets and introducing blockchain technology to improve the efficiency and transparency of the IP market.
The combination of blockchain and IP
Just as blockchain makes money programmable and improves efficiency, Story also hopes to make IP programmable to expand its potential. Here are the advantages of Story Protocol:
Borderless platform: Since blockchain technology is essentially borderless, anyone in the world can tokenize their IP assets on Story. In this way, registered IP can be efficiently used and monetized globally, and creators' works are no longer restricted by geographical location. This borderless platform enables IP to create value in the global market and improves the efficiency and benefits of IP utilization.
Smart Contract Enforced Royalties: The protocol enforces royalty policies through the use of smart contracts, leveraging code to automatically distribute royalties resulting from IP usage, making the distribution process more transparent and fair than traditional systems.
Convenient onboarding process: Although this is not a unique advantage of blockchain itself, Story provides a sound legal framework and software development kit (SDK) to make it easier for IP owners, creators, and developers to join the platform. In this way, even if users do not have professional technical or legal backgrounds, they can easily register, manage, and utilize their IP, lowering the threshold for participation and promoting more people to participate in the tokenization of IP and the blockchain ecosystem.
Scalability is no longer a major issue: Although blockchain technology is often criticized for its low scalability and inability to handle large and frequent transactions, which is a major problem for payment and financial projects, for the IP industry, transaction frequency and speed are not the most important concerns. Therefore, the scalability limitations of blockchain are not obvious in the IP industry and will not become a major obstacle. On the contrary, blockchain can also provide advantages such as security and transparency, making its application in the IP industry turn this potential disadvantage into an advantage, and scalability is no longer a major issue.
How to achieve it?
Now that we’ve explored how Story Protocol solves problems in the IP industry through blockchain, how exactly does it achieve this? Let’s take a deeper look at Story’s basic concepts and architectural design.
the term
Story Protocol contains many terms that may be confusing to new users and developers. Understanding these terms and how they relate to each other 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 on Story Network exists in the form of ERC-721 NFT and follows metadata standards designed specifically for IP, including information such as the author, relationship with other works, and attributes.
IPFi: DeFi applications based on various IP assets in the Story ecosystem.
IP Account: When an IP asset is registered, the ERC-6551 (Token Bound Account) deployed by the IP asset registry is uniquely bound to the IP asset. It stores IP-related data (such as metadata, ownership information, royalty tokens) and executes modules.
Module: A collection of various functions in a smart contract that an IP account can perform. Key modules created by the Story team include the licensing module, the royalty module, and the dispute module.
Licensing module: handles licensing-related tasks such as generating licensing terms from a licensing template, attaching them to IP assets, minting licensing tokens, and registering derivative IP.
License template: A legal framework code that contains terms such as commercial use license, transferability, royalty percentage, etc.
Programmable IP License (PIL): The first example of a licensing template created by Story Protocol.
License terms: Different variations generated based on 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: ERC-721 NFTs that can be minted by anyone when the IP owner attaches licensing terms to the IP asset. These tokens can be burned to register derivative IP.
Derivative IP: A derivative IP with a parent IP asset. For example, a comic based on a specific BAYC NFT can be registered as a derivative IP of that BAYC.
Royalty Module: Determines the revenue flow between parent IP and derivative IP. Parent IP has two sources of revenue: fees from authorized minting 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.
Registry: IP accounts manage data for specific IP assets, while registries manage broader states in Story Protocol. The main registries include the IP Asset Registry, the Authorization Registry, and the Module Registry.
IP Asset Registry: Manages IPs registered on the protocol and deploys IP accounts when IPs are registered.
Grant Registry: Manage grant-related operations such as registering grant templates, attaching grant terms to IP assets, and registering derivative IP.
Module registry: Maintains a list of global modules and hooks.
By understanding these terms and how they interact, one can better understand how the protocol can leverage blockchain technology to address current IP market challenges.
Example
To better understand how the aforementioned elements interact and function, let's look at a few simple examples. Please note that these are hypothetical scenarios and not real cases.
Register original IP
First, companies like Marvel can register their comics as intellectual property (IP) assets on Story. During the registration process, they can choose a licensing template (such as PIL) to set the terms of use of the IP. In this example, they choose to allow others to use the IP commercially and stipulate that a 10% royalty is required for each use. Once registered, a dedicated account will be created for the IP, and each IP asset will also have 100 million royalty tokens, which are used to calculate the proportion of revenue that the IP receives from its derivative works (such as movies or peripheral products adapted from the comics).
Registering Derivative IP
Next, the Walt Disney Company decided to make a Thor movie based on Marvel's comic book IP. To do this, Walt Disney paid a fee (or zero fee) to mint a licensed NFT. Walt Disney can then destroy the licensed NFT to register a derivative IP and specify the royalty ratio. Since Marvel set a 10% royalty ratio for parent IP1, it will receive 10% of the 100 million royalty tokens for derivative IP2, that is, 10 million IP2 tokens. In addition, Marvel can obtain 10% of the revenue generated by derivative IP2. It is worth noting that derivatives of derivative IPs can also be registered.
Income structure
Each IP asset receives corresponding royalty tokens from the derivative IP as part of the revenue it generates according to the set royalty ratio. This mechanism follows Story's default royalty policy, which is LAP (Liquid Absolute Percentage). In this example, IP1's royalty ratio is 10% and IP2's is 5%. This means that IP1 can get 10% of the royalty tokens from IP2 and IP3, while IP2 can get 5% of the royalty tokens from IP3. These tokens represent the share of revenue that an IP asset can obtain from its derivative works.
dispute
On the Story platform, unauthorized IPs may be registered. For example, an entity called "WalfDisney" registered a derivative IP2 related to Disney, which may raise concerns about plagiarism. In this case, anyone can set a label for the IP and raise a dispute, and the arbitrators in the whitelist will review the dispute and make a ruling. Since the legal issues of IP are real-world issues, they need to be resolved by relevant institutions. If an IP is deemed illegal, it will be marked as plagiarism and stop earning income, and the label will also be applied to any related derivative IPs. If the illegal IP later resolves the legal issue, the dispute initiator can remove the label.
Current Ecosystem
Story Protocol not only makes IP registration and use easier, more efficient, and more transparent, but as an EVM-compatible blockchain, it also allows various applications to interact with IP. Let’s take a look at some of the key applications in the Story ecosystem.
Creator Platform
Magma is a collaborative art platform where creators can register their works as IP on Story; Sekai allows writers to use generative AI to incorporate illustrations, audio, and music into their stories, and register the generated IP on Story for monetization; ABLO is a platform for creators to collaborate with major brands to design clothing, using generative AI to complete their creations, and seamlessly connect IP registration, royalty distribution, and IP investment through Story; Color is a marketplace within the Story ecosystem for trading various IPs and licenses.
DeFi / IPFi
Unleash is an IPFi platform that provides IP licensing, splitting, IP launch platform services and lending protocols; PIPERX is a decentralized exchange on Story for trading ERC-20 tokens; Ethena's USDe is expected to become a stablecoin on Story, and specific details have not yet been announced; Verio supports Story's PoS token re-staking and promotes liquid vIP tokens as certification of IP assets.
AI
Mahojin is a platform that uses generative AI to create images. Creators can remix content by modifying keywords, and owners of AI models can earn income during the content remixing process. Story's infrastructure is very conducive to this. AI applications and chatbots that can be created on MyShell are registered on Story as IP assets. RingFence protects users' Internet usage data and monetizes it by selling their data for AI model training.
Dilemmas and challenges faced by Story
Token Economics
Story's native token IP is currently mainly used for PoS staking and paying gas fees, which are similar to other tokens. However, the real value of Story lies in registering derivative IPs and paying royalties. Therefore, in order to better promote the development of the network, IP token rewards should be provided to users who participate in these core activities, which can promote the early launch and long-term sustainable development of the network.
Although the token economics model of IP has not yet been announced, its application scenarios can be speculated based on its project introduction: In addition to protecting the security of the PoS network and paying gas fees, IP tokens will also reward creators who register derivative IPs and pay licensing fees, as well as creators who pay royalties to the parent IP. In addition, those parent IP creators who create value through derivative IPs will also be rewarded. At the same time, part of the licensing fees and royalty income generated by the Story network will also be distributed to the pledgers of IP tokens.
By providing IP token rewards to creators of parent IPs and derivative IPs, Story can attract high-quality IPs and diversified derivative IPs. However, as IP token rewards decrease in the future, a solid source of income must be established in advance to ensure that stakers can obtain substantial returns and achieve sustainable development of the network. At the same time, when designing the token mechanism, it is necessary to prevent false activities, such as creating IPs with no real value or registering meaningless derivative IPs in order to obtain rewards. In addition, it is also necessary to clearly distinguish whether the rewards are generated by real income or forged.
However, there are also issues to consider when designing token utility. It is important to avoid sham activities for the sake of token rewards, such as simply creating IP or registering meaningless derivative IP that does not bring real value. In addition, even when providing rewards for value-creating activities, it is important to carefully distinguish whether the income generated is real or just a form of wash trading.
Introduction of IP
If some well-known IPs can join, it will bring a large number of derivative IPs, thereby creating more value and forming a virtuous circle, further attracting more IPs. However, since companies with mainstream IPs may not understand the advantages of blockchain, the Story team needs to effectively convince them. At the same time, the Story Foundation may provide financial support to attract these well-known IPs, but if the selection and amount of funding are not careful enough, it may have an adverse impact on other token holders, so it needs to be handled with caution.
AI Application Scenarios
AI plays an indispensable role in Story, and creators can use generative AI combined with IP registered on Story to more easily create new content. However, when AI models learn data, they may need to protect the data to prevent it from being leaked before payment. Therefore, when data is first registered to Story, a function should be provided to keep it confidential, and only those who have paid the license fee can access the data.
Legal and regulatory integration
The Story platform cannot directly prevent unauthorized use of IP, so a comprehensive legal dispute resolution process needs to be established. This process should cover both on-chain and real-life legal means to effectively resolve disputes and protect intellectual property rights when malicious behavior is discovered.
