Story Protocol - The L1 for Tokenizing IP: What You Need to Know
Proof-of-Creativity, Programmable IP-License, & More
Shifting from infrastructure to apps has been a sentiment echoed by many recently, almost to the point of beating a dead horse. Despite not having launched, Monad and Berachain have illustrated how massive ecosystems can be built beforehand, giving users plenty of applications to interact with upon launch, though this also illustrates how long it can take new blockchains to launch in the first place. We’ve seen more specialization in blockchains, whether it’s hyper-focused L1s like Pryzm prioritizing yield trading, or chains like real.io encompassing the much broader market of RWAs…
These are all viable ways to attract developers and users without just relying on a blockchain’s tech being slightly better than incumbents’. In today’s edition, we’ll be taking a look at Story, an L1 blockchain with a very interesting specialization; the Intellectual Property (IP) market.
Stay informed, stay alert ⬇
Background on Story
Story describes itself as the ‘World’s IP blockchain’, looking to effectively tokenize the world’s creativity. The team uses the term ‘IP-legos’ to describe its main innovation. Its architecture consists of a Cosmos-SDK L1 that is also EVM-compatible. The protocol introduces its Programmable IP-License (PIL), which can be thought of as giving individual IPs their own token standard. The thing that first comes to mind may be automated NFT royalties; the fall of Opensea to Blur was partially due to not having an enforceable way to enforce royalties, and Blur found its place among more ‘serious’ traders for excluding them by default. Story has the power to enforce royalties by having this function built in from the get-go.
The appeal of this initiative takes a pro-artist approach, perhaps comparable with Music DAOs, and of course, NFT royalties. This enables artists to publish their works and still be able to have ownership rights and be able to profit accordingly, rather than perhaps be duped into some contract that goes against their wishes, which is the picture that these decentralized music DAOs paint at least. More of the lion’s share of value can go to actual creators and artists as opposed to record labels, publishing firms, etc. which act as middlemen taking a massive cut of revenue while perhaps overinflating the value actually provided to the artist. This is a key selling point, artists losing the right to their name and likeness is a trope commonly explored in movies or TV shows, and something that can definitely be leveraged to attract users.
On top of this, the team introduces Proof-of-Creativity, which can be thought of as the bridge between traditional IP rights and the blockchain, helping with onramping or the actual tokenization of IP onchain. PIL goes the other way around ensuring that the proper steps are taken in the real world to reflect sales of IPs onchain when using the IP for traditional use cases. This is important as it makes sure what happens onchain actually aligns with what is legally happening. IP giants can set onchain terms for using their branding with set royalties to be paid, the and Story blockchain can actually ensure that these are paid.
Story’s Co-founder, S.Y. Lee, has pointed out the fact that the IP market is massive, spanning a multiple trillion-dollar industry in totality. Naturally, blockchain may be well suited to serve this area, by making the intangible tangible, or tokenized. Currently, a lot of RWA protocols focus on bringing real-world items into the onchain world or turning traditional financial instruments into onchain equivalents. This is all fine and well, but the area of RWAs that might first see the most adoption is things that aren’t tangible and whose value, fungibility, and ability to be traded are much more opaque. IP is everywhere after all, and certain brands can make or break products. From clothing brands to digital skins in video games, IP is a massive asset that can be hard to put a finger on compared to other things that are more commonly listed on a balance sheet like cash reserves, real estate, etc.
Few dispute the value of IP, even if it’s hard to draw up figures around how to actually value these assets. But something being valuable doesn’t justify putting it on the blockchain, or at least it creates a less compelling case to do so. IP is complex, with laws spanning various jurisdictions, with intricate company formation structures to account for. Tokenizing these assets can create a much more transparent marketplace for these assets and their use cases with much more visibility. Story can abstract away a lot of the legal complexities and IP lawyers that make this area hard to navigate and make it more accessible to individuals and small teams who don’t have to resources to pour over legal documentation.
The protocol has outlined some interesting key areas of focus, one being AI, unsurprisingly. AI spells all sorts of complications when it comes to IP for obvious reasons. We’ve all seen generative AI content depicting brands in a way that may not be complain with IP law. Alas, at the end of the day it’s very hard to enforce this kind of thing and what exactly will become the precedent in matters related to AI remains to be seen. AI will likely shake up IP as we know it, and generative AI specifically will draw new attention to ways to keep track of IP in this age. Besides AI, another advantage stressed by the Story team is being based in Seoul, with Co-founder S.Y. Lee having previously sold his previous business for $400M+ to Kakao, the dominant messaging app in Korea. Korea and Seoul specifically are important places for IP, being the epicenter of popular Korean culture, namely K-pop and K-dramas which have seen tremendous growth worldwide.
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