Intellectual property is one of the largest asset classes in the world and also among the best equipped to expand through the internet. By allowing content to be shared freely and instantly around the world, the internet provides a perfect platform for all types of intellectual property to proliferate and be reused. 

Despite the fact that the internet has supercharged the growth of global intellectual property, many creators are unable to effectively capture the value they produce due to reliance on traditional legal systems to establish and enforce revenue sharing terms for IP. 

Story Protocol aims to solve this problem by bringing IP management on-chain. In doing so, Story aims to democratize access to the real world legal frameworks creators rely on to be fairly compensated while simultaneously allowing appropriate revenue sharing to be enforced in a digitally-native manner. 

What is Story Protocol?

Story Protocol is an EVM-compatible layer 1 purpose-built to bring IP on-chain. In addition to making numerous validator level optimizations to support scalable IP registration and revenue sharing, Story Protocol comes equipped with a set of enshrined smart contracts to provide a foundation for on-chain IP management. These smart contracts are collectively known as the Proof-of-Creativity protocol.

What is Proof-of-Creativity?

Proof-of-Creativity is an enshrined, smart-contract-based protocol for managing intellectual property on-chain. Critically, Proof-of-Creativity comes complete with a generalized legal contract that can be deployed on-chain and customized for each piece of intellectual property. This provides the necessary off-chain backstop to ensure that any violations of licensing agreements established on-chain also constitute a breach of contract law. From an architecture perspective, Proof-of-Creativity relies on two key component types: IP Assets and Modules. 

IP Assets

All tokenized IP on Story Protocol is tracked on-chain as an IP Asset. Each IP Asset is represented as an ERC-721 NFT and tracked in a Global IP Asset Registry. Every IP Asset also comes with an associated IP Account, a smart contract bound to the IP Asset that stores data required to interact with Modules in the Proof-of-Creativity protocol. 

Modules

IP accounts interact with the rest of the protocol via standalone smart contracts known as Modules. Story comes equipped with a set of default modules that enable common functionality that IP creators and any downstream users need to manage IP on-chain, including the Licensing Module, Royalty Module, and Dispute Module. 

Licensing Module

Story Protocol’s licensing module allows IP owners to create a real legal license from a template and attach it to their IP Assets. The terms the owner establishes in the license define a legally-enforceable framework around how others can use the IP, including rights for commercial use, remixing, and revenue sharing models. 

Users who want to use a piece of IP created by someone else can do so permissionlessly and compliantly by minting License Tokens from the original license, which grant the rights to use the IP under the terms established by the owner. These terms may include but are not limited to whether monetization of use is allowed, revenue sharing details for commercial use, and whether a license can be transferred to a third party. 

Royalty Module

While the Licensing model establishes the terms of use for a given piece of tokenized IP, the Royalty Module defines the specifics of how revenue flows between parent and child IP assets. A given IP asset may generate revenue either from direct payments or via fees associated with the minting of licenses. Story’s licensing module ensures that any asset in the Derivative Chain (illustrated below) is able to earn a share of the revenue generated by its descendants. 

The Royalty Module comes equipped with two royalty policies, Liquid Absolute Percentage, and Liquid Relative Percentage, but also allows the permissionless creation of external policies that stipulate their own revenue sharing rules. This provides flexibility for IP creators to more granularly define the ways they’d like revenue to be shared between assets in their Derivative Chain. As shown in the image below, IP Assets may spawn many different derivative chain structures, likely dependent on the nature of the parent IP. Custom royalty policies allow the original creator to determine exactly how revenue should be distributed across the derivative chain based on how they foresee their IP being used. 

℅ Story Protocol Documentation

Each IP Asset in the derivative chains illustrated above has its own IP Royalty Vault, which receives any revenue generated from commercial use payments or license minting. When an IP Asset is created, a corresponding Royalty Vault is also created along with a fixed supply of Royalty Tokens. These tokens entitle their holders to a pro-rata share of any revenue generated by that specific IP asset. 

Royalty tokens are initially distributed to the creator of an IP asset. If applicable, a portion of the royalty tokens will also be set aside for the owners of any ancestor assets with a claim to revenue generated by the IP asset in question. This model enforces revenue sharing for derivative assets by default and also conveniently packages the rights to IP Asset revenue in a highly-composable on-chain primitive.

Royalty Token holders may simply hold their tokens and periodically claim their share of the revenue generated by the IP Asset in question, but they could also liquidate all or a portion of their rights to the revenue if they see fit. Assuming a sufficiently liquid market and the appropriate on-chain lending venues are available, Royalty Token holders could even borrow against the current market value of their rights to future cash flows of an IP asset, further unlocking the value of on-chain IP. 

Dispute Module

Story’s Dispute Module enables users to raise and resolve disputes via an on-chain arbitration process. In the beta version, the Story protocol team will be in charge of arbitrating disputes but it is eventually expected that third parties will integrate with the protocol and provide arbitration as a service to users. 

When a dispute is raised, a user will specify a tag they propose to be applied to a given IP asset along with evidence of the alleged wrongdoing. For example, a creator that sees their IP registered under an unknown address could raise a dispute against the asset with a Plagiarism tag and verification of their identity to prove that the address raising the dispute is owned by the rightful owner of the IP. 

After a dispute is raised, a whitelisted address (controlled by the arbiter of the dispute) will pass a judgment. If judgment is passed in favor of the address that raised the dispute, the IP asset in question will be marked with the proposed tag. Once an asset has been tagged, any derivatives of that asset may also be marked with the same tag by any user in the protocol. Assets that have been tagged will not be able to mint licenses and its existing licenses will become unusable and be unable to link to any parents. 

℅ Story Protocol Documentation

The Story Protocol Ecosystem

Even though Story is not yet live on mainnet, there are already a number of applications building products that leverage Story’s IP infrastructure. Mahojin, an AI image generation platform, is using Story to track and appropriately reward contributors to the image generation pipeline. When an end-user pays to generate an image, every user who contributed (e.g., model creators, owners of IP used in model training, etc) will receive their portion of the revenue generated as specified on Story Protocol. Magma, a collaborative art platform, is leveraging Story Protocol’s IP graph to ensure that each contributor to a given piece of art receives the appropriate attribution and cut of revenue. 

Figment’s Involvement

Figment is actively engaged with Story Protocol. Currently live on Story’s Iliad testnet, Figment is set to support staking from day one of the mainnet launch. As an experienced validator, Figment will offer staking services, allowing token holders to participate in network security and earn rewards. 

Figment is also actively engaging with the community, inviting interested parties to connect with their team for information about staking opportunities on Story Protocol. This early and comprehensive support demonstrates Figment’s commitment to the success of Story’s innovative approach to on-chain intellectual property management. Interested in staking Story protocol? Connect with our team here.  

Conclusion 

Story Protocol represents a significant leap forward in the management of intellectual property in the digital age. By bringing IP on-chain, it offers a revolutionary solution to the longstanding challenges of fair compensation and rights management for creators in the internet era. The protocol’s innovative features – including the Proof-of-Creativity system, modular architecture, and on-chain dispute resolution – provide a robust framework for tokenizing, licensing, and monetizing intellectual property.

The ecosystem developing around Story Protocol, with applications like Mahojin and Magma already leveraging its infrastructure, demonstrates the real-world potential of this technology. It opens up new possibilities for collaborative creation, fair revenue sharing, and the democratization of IP management.

As Story Protocol moves towards its mainnet launch, with support from established players like Figment, it stands poised to transform how we think about and interact with intellectual property. For creators, investors, and tech enthusiasts alike, Story Protocol offers an exciting glimpse into a future where the value of creativity can be more efficiently captured, shared, and amplified through blockchain technology.