Author: 100y.eth

Compiled by: J1N, Techub News

In August, according to The Block, the blockchain project Story, focusing on intellectual property (IP), announced the completion of an $80 million Series B financing round led by a16z Crypto, with participation from Polychain Capital. Individual investors include Scott Trowbridge, Senior Vice President of Stability AI and board member, Adrian Cheng, founder and billionaire of K11, and digital art collector Cozomo de' Medici. Currently, Story has raised a total of $140 million, and the developer behind Story, PIP Labs, is valued at $22.5 billion after the financing. Its mainnet is expected to be launched later this year.

Next, we will detail the specific problems that Story Protocol can solve, such as its advantages in intellectual property (IP) management and the limitations in certain aspects, in order to help readers better understand the functionality and restrictions of the protocol.

First, let me tell a prophecy about the future:

"In 2035, after the invention of Artificial General Intelligence (AGI), AGI brought huge disasters to human society. Past AI researchers boldly claimed that AGI could be fully controlled by humans, but it turned out not to be the case. The current AGI models have surpassed human control, disregarding the laws and regulations of human society, autonomously learning all data in the physical and digital worlds, and rapidly evolving into superintelligence.

Today, the main value of human existence is to provide a continuous 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.

Despite human attempts to use technologies such as blockchain to counter AGI's unauthorized activities 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 unauthorized learning and using data."

Story Protocol Cannot Solve All Problems

The goal of Story Protocol is to convert intellectual property (IP) into tokens and use blockchain technology to address real-world issues related to intellectual property.

Some people mistakenly believe that blockchain is a transparent and fair system, so combining blockchain with intellectual property (IP) can solve real-world intellectual property infringement issues. With the expansion of the AI industry, more and more people are questioning the unauthorized use of data by AI companies. Because Story Protocol promotes AI as a major selling point, many people mistakenly believe that it can solve these infringement issues.

Although Story Protocol attempts to address intellectual property (IP) issues through blockchain technology, it cannot prevent unauthorized use of IP, as this is a real-world issue that requires legal resolution. Even if IP is securely recorded on the blockchain, the blockchain itself cannot enforce sanctions against malicious use. Story Protocol also acknowledges this, and its purpose is not to eliminate IP infringement, but to improve IP management through the use of blockchain technology.

Problems Story Protocol Can Solve

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

• Complex authorization processes: When individuals want to create new content based on existing IP, the authorization process can be very complex. They need to contact the owners of the IP and negotiate various terms such as types of licenses, scope of use, territorial restrictions, royalty rates, and related fees. For well-funded large enterprises, these steps may be relatively easy to handle, but for most individual creators, these cumbersome negotiation processes undoubtedly set a high barrier and increase the difficulty of creation.
• Income distribution disputes: Although license agreements usually specify the royalties to be paid, disputes still occur frequently for various reasons. For example, there may be misunderstandings between the parties regarding the calculation of royalties, leading to disputes over total revenue, net profits, discounts, shipping costs, and tariffs. In addition, companies may manipulate financial statements to reduce the amount of royalties they need to pay. This means that even with clear agreements, disputes over royalty calculation and payment may still arise in practice.
• Legal obstacles: The laws and regulations governing the registration, protection, and use of IP are very complex and involve high costs, which may make it impossible for individuals to afford, thereby limiting their development in the fields of creation and innovation.
• Cross-border complexity: Due to the different IP laws and regulations in various countries, when dealing with IP issues on an international scale, compliance with the legal requirements of multiple countries increases the complexity of legal procedures.

As the global digitization process accelerates, the number of IPs is rapidly increasing, but due to the limitations of traditional management systems, the IP industry still faces many challenges. Story Protocol hopes to address these issues by tokenizing IP assets and introducing blockchain technology to improve the efficiency and transparency of the IP market.

Integration of Blockchain and IP

Just as blockchain makes currency programmable and improves efficiency, Story also aims to make IP programmable, thereby expanding its potential. Here are the advantages of Story Protocol:

• Borderless platform: Since blockchain technology is essentially without geographical restrictions, anyone worldwide can tokenize their IP assets on Story. As a result, registered IPs can be efficiently used and monetized globally, and creators' works are no longer limited by geographical location. This borderless platform enables IP to create value in the global market, enhancing the efficiency and returns of IP.
• Smart contract enforcement of royalties: The protocol enforces royalty policies using smart contracts, automatically allocating royalties generated from IP use, making the distribution process more transparent and fairer than traditional systems.
• Convenient onboarding process: Although this is not a unique advantage of blockchain itself, Story provides a comprehensive legal framework and a software development kit (SDK), making it easier for IP owners, creators, and developers to join the platform. This allows users, even without professional technical or legal backgrounds, to easily register, manage, and utilize their IP, reducing the barriers to 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, unable to handle a large number of frequent transactions, this is a major issue for payment and financial projects. However, for the IP industry, transaction frequency and speed are not the most important concerns. Therefore, the scalability limitations of blockchain in the IP industry are not significant and will not be a major obstacle. On the contrary, blockchain can provide advantages such as security and transparency, transforming this potential drawback into an advantage, and scalability is no longer a major issue.

How is it Achieved?

Now that we have discussed how Story Protocol addresses issues in the IP industry through blockchain, how does it actually achieve this goal? Let's delve into the basic concepts and architectural design of Story.

Terminology

Story Protocol contains many terms that may confuse new users and developers. Understanding these terms and their interrelationships is crucial for grasping the overall concept. 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 the Cosmos SDK and compatible with EVM.
• IP Assets: IP registered on the Story Network exists in the form of ERC-721 NFTs, following metadata standards specifically designed for IP, including information such as the author, relationships with other works, and attributes.
• IPFi: DeFi applications based on various IP assets within the Story ecosystem.
• IP Account: After the registration of IP assets, an ERC-6551 Token Bound Account, uniquely bound to the IP asset, is deployed by the IP asset registry. It stores IP-related data (such as metadata, ownership information, royalty tokens) and executes modules.
• Module: A collection of various functionalities in smart contracts that can be executed by IP accounts. Key modules created by the Story team include the authorization module, royalty module, and dispute module.
• Authorization Module: Handles tasks related to authorization, such as generating authorization terms from authorization templates, attaching them to IP assets, minting authorization tokens, and registering derivative IPs.
• Authorization Template: Contains legal framework code with terms such as commercial usage licenses, transferability, and royalty percentages.
• Programmable IP License (PIL): The first example of an authorization template created by the Story Protocol.
• Authorization Terms: Different variants generated based on authorization templates. For example, even if two terms are based on the same PIL, one may have a 5% royalty, while the other may have 10%.
• Authorization Tokens: ERC-721 NFTs that anyone can mint when the IP owner attaches authorization terms to the IP asset. These tokens can be burned to register derivative IPs.
• Derivative IP: IP assets derived from a parent IP asset. For example, a comic created based on a specific BAYC NFT can be registered as a derivative IP of that BAYC.
• Royalty Module: Determines the income flow between parent IP and derivative IP. The parent IP has two sources of income: fees for authorization minting and royalties from derivative IPs.
• Lowest Absolute Percentage (LAP): A default royalty policy that defines the minimum royalty the parent IP should receive from its derivative IPs.
• Dispute Module: Manages disputes involving malicious IP assets.
• Registry: The IP account manages the data of specific IP assets, while the registry manages the broader state of the Story Protocol. The main registries include the IP asset registry, authorization registry, and module registry.
• IP Asset Registry: Manages the IPs registered on the protocol and deploys IP accounts upon IP registration.
• Authorization Registry: Manages operations related to authorization, such as registering authorization templates, attaching authorization terms to IP assets, and registering derivative IPs.
• Module Registry: Maintains a list of global modules and hooks.

Understanding these terms and their interactions can provide a better understanding of how the protocol utilizes blockchain technology to address current challenges in the IP market.

Examples

To better understand how the elements mentioned earlier interact and function, we will illustrate through a few simple examples. Please note that these are hypothetical scenarios and not real cases.

Registering Original IP

First, companies like Marvel can register their comics as intellectual property (IP) assets on Story. During the registration process, they can choose an authorization template (such as PIL) to set the usage terms for the IP. In this example, they choose to allow commercial usage of the IP by others and specify a 10% royalty to be paid each time it is used. After registration, the system creates an exclusive account for the IP, and each IP asset will have 100 million royalty tokens for calculating the proportion of income it receives from derivative works (e.g., movies or merchandise based on the comic).

Registering Derivative IP

Next, Walt Disney decides to create a "Thor" movie based on Marvel's comic IP. For this, Walt Disney pays a fee (or zero fees) to mint an authorization NFT. Then, Walt Disney can burn this authorization NFT to register a derivative IP and specify the royalty percentage. Since Marvel set a 10% royalty for the parent IP1, it will receive 10% from the 100 million IP2 tokens, and it will also receive 10% of the income generated by derivative IP2. It's worth noting that derivative works of the derivative IP can also be registered.

Income Structure

Each IP asset receives royalty tokens from derivative IPs based on the set royalty percentage, representing a portion of its income. This mechanism follows Story's default royalty policy, LAP (Lowest Absolute Percentage). In this example, IP1 has a 10% royalty percentage, and IP2 has 5%. This means that IP1 can receive 10% of the royalty tokens from IP2 and IP3, while IP2 can receive 5% of the royalty tokens from IP3. These tokens represent the share of income that IP assets can receive from their derivative works.

Disputes

On the Story platform, unauthorized IPs may be registered, for example, an entity named "WalfDisney" registers a derivative IP2 related to Disney, which may raise concerns about plagiarism. In this case, anyone can tag the IP and raise a dispute, and arbitrators from the whitelist will review the dispute and make a ruling. Since legal issues of IPs belong to the real world and need to be resolved by relevant institutions, if an IP is deemed illegal, it will be marked as plagiarized, cease to receive income, and the label will also apply to any related derivative IPs. If the illegal IP later resolves the legal issues, the disputant can remove the label.

Current Ecosystem

Story Protocol not only makes IP registration and usage easier, 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.

Creator Platform

Magma is a collaborative art platform where creators can register their works as IP on Story; Sekai allows writers to integrate illustrations, audio, and music into their stories using generative AI and register the generated IP on Story for monetization; ABLO is a platform for creators to collaborate with major brands in designing clothing using generative AI, seamlessly integrating IP registration, royalty distribution, and IP investment through Story; Color is a marketplace within the Story ecosystem for trading various IP and licenses.

DeFi / IPFi

Unleash is an IPFi platform offering IP authorization issuance, splitting, IP launchpad 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, with specific details yet to be announced; Verio supports the re-staking of PoS tokens on Story and promotes vIP tokens as certified IP assets.

Artificial Intelligence

Mahojin is a platform for creating images using generative AI, where creators can earn income by modifying keywords to blend content, which is favorable within Story's infrastructure; MyShell allows the registration of AI applications and chatbots as IP assets on Story; RingFence protects users' internet usage data and monetizes it by selling the data for AI model training.

Challenges Faced by Story and Potential Solutions

Token Economics

Story's native token IP is currently mainly used for PoS staking and paying gas fees, similar to other tokens. However, the real value of Story lies in registering derivative IPs and paying royalties. To better drive the network's development, IP token rewards should be provided to users participating in these core activities, promoting early network adoption and long-term sustainability.

Although the token economic model for IP has not been publicly disclosed, it can be speculated based on the project description. IP tokens will not only be used for securing the PoS network and paying gas fees but also rewarding creators who register derivative IPs and pay licensing fees, as well as creators who pay royalties to the parent IP. Additionally, creators who generate value through derivative IPs for the parent IP will also be rewarded. Furthermore, a portion of the licensing fees and royalty income generated by the Story network will be distributed to IP token stakers.

By providing IP token rewards to creators of parent and derivative IPs, Story can attract high-quality IP and diverse derivative IPs. However, as the future IP token rewards decrease, it is crucial to establish stable revenue sources in advance to ensure substantial returns for token stakers and achieve the network's sustainable development. Additionally, in designing the token mechanism, measures should be taken to prevent fraudulent activities, such as creating valueless IPs or registering meaningless derivative IPs solely for the purpose of obtaining rewards. Furthermore, rewards should clearly distinguish between genuine income generation and fabricated activities.

Introduction of IP

The inclusion of well-known IPs could lead to a large number of derivative IPs, creating more value and forming a virtuous cycle, further attracting more IPs. However, since companies owning mainstream IPs may not fully understand the advantages of blockchain, the Story team needs to effectively persuade them. Additionally, the Story Foundation may provide financial support to attract these well-known IPs, but careful consideration is needed to avoid adverse effects on other token holders.

Applications of AI

AI plays an essential role in Story, allowing creators to use generative AI to create new content more easily in combination with IPs registered on Story. However, AI models may need to protect the data they learn from to prevent leaks before payment. Therefore, a feature should be provided when data is first registered on Story to maintain its confidentiality, allowing access only to those who have paid the licensing fee.

Integration of Legal and Regulatory Aspects

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-world legal means to effectively address disputes and protect intellectual property when malicious behavior is detected.

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