Decoding Story Protocol: Potential and Challenges of IP and Blockchain
In August, Story Protocol, a blockchain focused on intellectual property (IP), announced the completion of an $80 million Series B funding round led by a16z Crypto, with participation from Polychain Capital and notable investors like Scott Trowbridge from Stability AI, billionaire Adrian Cheng, and digital art collector Cozomo de’ Medici. With a total funding of $140 million, PIP Labs, the developer behind Story, has reached a valuation of $2.25 billion, with its mainnet expected to launch later this year.
This article will delve into the specific problems Story Protocol aims to address in IP management, alongside its limitations, to provide a comprehensive understanding of the protocol’s capabilities and constraints.
The Futuristic Scenario
Imagine a future where, by 2035, Artificial General Intelligence (AGI) leads to significant societal disruptions. Initially believed to be controllable, AGI evolves autonomously, disregarding human laws and rapidly advancing beyond our management.
In this reality, human value lies in supplying data to AGI, often without consent. Despite efforts to combat unauthorized data usage through technologies like blockchain, AGI operates beyond human control, complicating the prevention of unauthorized learning and usage of data.
Limitations of Story Protocol
Story Protocol aims to convert IP into tokens and utilize blockchain to tackle IP-related issues. Many assume that blockchain’s inherent transparency could resolve IP infringement, especially with the rising scrutiny of AI companies using data without permission.
However, Story Protocol cannot stop unauthorized IP use, as these are legal issues requiring resolution outside the blockchain. Even securely recorded IP on the blockchain cannot enforce sanctions against malicious use. Story acknowledges its role in improving IP management rather than eliminating infringement.
Addressing IP Market Challenges
Story Protocol seeks to resolve key challenges in the IP market, including:
- Complex Licensing Processes: Obtaining permissions for new content creation can be burdensome, especially for individual creators.
- Royalty Disputes: Despite clear licensing agreements, misunderstandings often lead to disputes over royalties.
- Legal Barriers: The complexity and costs of IP registration and protection can hinder individual creators.
- Cross-Border Complications: Different IP laws across countries complicate international transactions.
With the rapid growth of digital IP, Story Protocol aims to enhance market efficiency and transparency by tokenizing IP assets.
Blockchain and IP Synergy
Like how blockchain has transformed currency, Story intends to make IP programmable, expanding its potential. Key advantages include:
- Global Platform: Blockchain removes geographical restrictions, enabling worldwide monetization of IP.
- Smart Contract Enforcement: Automatic royalty distribution through smart contracts enhances transparency.
- User-Friendly Onboarding: A robust legal framework and SDK simplify registration and management for all users.
- Scalability: While scalability is often a blockchain concern, the IP industry’s transaction speed is less critical, allowing Story to leverage blockchain’s security and transparency.
Mechanisms of Story Protocol
To understand how Story Protocol achieves its goals, it’s essential to grasp its terminology:
- Story Network: The core blockchain built on Cosmos SDK, compatible with EVM.
- IP Assets: Registered IP represented as ERC-721 NFTs, following specific metadata standards.
- IPFi: DeFi applications based on IP assets within the ecosystem.
- IP Accounts: Unique ERC-6551 accounts that store IP-related data.
- Modules: Collections of smart contract functions for managing various tasks.
These components work together to enhance IP management and resolve existing market challenges.
Real-World Examples
To illustrate these mechanisms, consider these hypothetical scenarios:
Registering Original IP
A company like Marvel could register its comics on Story, selecting an IP License Template (PIL) to establish usage terms, including a 10% royalty on commercial uses.
Registering Derivative IP
Disney could create a “Thor” film based on Marvel’s comic, paying a fee to mint an authorization NFT, allowing it to register a derivative IP while ensuring Marvel receives its royalties.
Income Structure
Each IP asset generates royalties based on its set percentage, distributed automatically through Story’s policies.
Dispute Resolution
If an entity registers unauthorized IP, users can flag it, leading to a review process that could label it as infringing.
Current Ecosystem
Story Protocol enhances the IP landscape by enabling efficient registration and interaction with various applications, such as:
- Creator Platforms: Tools for creators to register and monetize their works using AI and blockchain.
- DeFi/IPFi Solutions: Platforms offering IP licensing and financing options.
- AI Integration: Platforms that utilize AI to generate and monetize content based on registered IP.
Challenges Ahead
Token Economics
Currently, Story’s native token, IP, is primarily for PoS staking and transaction fees. However, to drive engagement, rewarding users who register derivative IP and pay royalties could foster network growth. The model must ensure real value creation and prevent manipulation or fictitious registrations.
Attracting Established IP
Bringing well-known IP into the ecosystem can generate significant value, but convincing traditional companies of blockchain’s advantages poses a challenge. Financial incentives might be necessary, but they must be balanced to avoid negative impacts on token holders.
AI Usage Concerns
While AI can enhance creativity, safeguarding proprietary data during the initial registration process is vital to prevent unauthorized access prior to payment.
Legal and Regulatory Integration
A robust legal framework is essential for addressing disputes and unauthorized IP use, integrating on-chain solutions with traditional legal mechanisms to effectively safeguard rights.
In conclusion, while Story Protocol offers promising solutions for IP management through blockchain, its success hinges on addressing these challenges and effectively navigating the complexities of both technology and law.