Interview with Story Protocol Co-founder: A Blockchain Renaissance of Programmable IP Assetization

TechFlow：Sunny and Min

Story Protocol：Jason Zhao, Co-founder

The crypto world is a game of asset issuance and trading, where everything from AI models to MEMEs can seemingly be tokenized, embarking on a journey of trade.

What about IP?

Leading this frontier is Story Protocol, which is building a programmable IP layer. This allows creators to combine, reconfigure, and monetize their works through on-chain rules, aiming to spearhead a blockchain renaissance.

In September 2023, Story Protocol announced the completion of a $25 million Series A funding round led by a16z crypto. Adding to the previous $29.3 million raised, Story Protocol's total funding exceeds $54 million. Other key investors include Hashed, Korea's largest blockchain fund; Endeavor, the agency behind Eileen Gu; Samsung Next, the investment arm of Samsung; and Alliance, the world's largest crypto accelerator.

Story Protocol boasts three co-founders with diverse backgrounds from Korea, the USA, and Chinese-American heritage, forming a unique "China-US-Korea" distribution.

S.Y. Lee, a graduate of Oxford University, previously founded the serial fiction platform Radish and served as a VC partner at Korea's largest crypto fund, Hashed. Jason Levy, a Stanford University graduate, was responsible for content and IP at Episode, a top storytelling platform on mobile devices. Jason Zhao, also a Stanford graduate, was a product manager at Google's DeepMind, focusing on commercializing the latest AI scientific achievements.

Curious about how Story Protocol is leading the blockchain renaissance, TechFlow interviewed co-founder Jason Zhao to gain insights into this innovative endeavor.

The Founding Story of Story Protocol and the Background of Its Founders

TechFlow：Could you start by telling us how Story Protocol came about and what inspired its creation?

Jason：

There are three cofounders of Story Protocol: S.Y., myself, and Jason Levy.

The inception of Story Protocol was driven by two main factors. S.Y. and Jason are seasoned entrepreneurs in the media space, with extensive experience in both the crypto and entertainment industries. Over the years, they’ve identified numerous shortcomings within the intellectual property system in the creative sectors. These issues have become more evident recently, with events like the Hollywood strikes, where both actors and writers protested the dysfunctional economic model of creativity.

Intellectual property as an asset is largely controlled by major studios such as Disney or Paramount, making it challenging for smaller entities to access and utilize IPs without substantial legal expertise and resources, which are costly and opaque.

My own background includes several years at DeepMind, an AI organization under Google, where I worked as a product lead. My role involved transforming AI research into innovative consumer products. I am deeply interested in leveraging cutting-edge technology to enhance accessibility and practicality for consumers. My interest in the crypto space grew due to its dynamic nature compared to AI. Crypto’s permissionless environment accelerates the transition from research to product implementation. Individuals can propose ideas through white papers and quickly execute them, creating protocols that involve vast amounts of transactions and user interaction in just weeks. This open and organic product development is starkly different from AI, where substantial computational power and data are prerequisites, limiting accessibility to a few large companies.

Furthermore, my university studies in philosophy, focusing on political theory, made the foundational ideologies of Bitcoin and Ethereum, particularly appealing. The discussions surrounding DAOs and their potential to implement governance models akin to cooperatives also caught my attention. These platforms mirror diverse political beliefs and enable users to partake in governance and ownership.

Overall, Story Protocol presents a significant opportunity to innovate within the intellectual property domain, which, while pivotal in decentralized finance and financial primitives, has not fully explored the creative and cultural industries. At Story Protocol, we are committed to addressing these existing challenges by utilizing state-of-the-art blockchain research to revolutionize the way intellectual properties are developed, managed, and monetized across various platforms.

Traditional Intellectual Property Vs. Programmable Intellectual Property

TechFlow：Can you explain the concept of programmable intellectual properties and how they differ from traditional intellectual properties?

Jason：

The best way to illustrate our vision is through an analogy with DeFi.

What DeFi achieved for money was making it programmable. Consider a physical dollar bill in my wallet; its use is limited. I might use it to buy a lollipop at a corner store, but it’s minimally traceable and its integration into the financial system is restricted.

In contrast, with DeFi, using a stablecoin like USDC or USDT, which still represents one dollar, you have an on-chain asset that can be integrated into platforms like Uniswap. You can exchange USDC on Uniswap, stake ETH via Lido to get stETH, and then lend that stETH on Compound to obtain compound stETH. This creates a vast financial ecosystem that is only limited by the creativity of developers and the capabilities of software, and it’s entirely permissionless.

Now, applying this to IP, we aim to do for IP what DeFi did for money by making IP programmable.

Currently, managing IP is heavily reliant on traditional, paper-based methods. Consider popular characters like Mickey Mouse or Pokémon; their IP protection involves extensive legal documentation. Entire legal teams are dedicated to safeguarding these IPs, and licensing usually involves expensive and complex negotiations between lawyers, which is not scalable. This results in many potential IP interactions not occurring due to high friction and costs.

At Story Protocol, we envision moving IP onto the blockchain and making it programmable by not only allowing media files to be on-chain, as NFTs have already done, but also by creating a layer of rights—an API for rights, if you will, for each media file. IP is more than just media; it encompasses media plus rights.

We aim to empower creators to upload their IP to Story Protocol and define the rules for how others can build, remix, and repurpose their creations.

This approach will unlock the full potential of composability, extending it from DeFi to the realm of creativity.

TechFlow：Can you describe the technical architecture of Story Protocol and how it manages intellectual properties using blockchain technology?

Jason：

The architecture of Story Protocol is comprised of two primary components: 'nouns' and 'verbs.'

The 'nouns' represent the core elements or the states that define IP. For instance, you can bring any existing or newly created NFT, such as a Bored Ape, or if you’re transitioning from Web 2.0, you might upload a character you've created. Upon upload, Story Protocol automatically mints an NFT for you with designated pointers. This process is similar to traditional NFTs but with a unique enhancement: we attach a token-bound account to each NFT. This token-bound account, akin to a smart contract wallet, serves as a gateway to extensive functionality including permissionless remixing, licensing, royalties, and attribution management.

The 'verbs' refer to the different actions or modules, such as licensing, that allow you to define how others can interact with and monetize your IP. This set of functionalities enables the dynamic and flexible use of the IP registered on our platform.

Together, these 'nouns' and 'verbs' form the foundational structure of Story Protocol, facilitating a robust and intuitive environment for managing and innovating with intellectual property on the blockchain.

IP on the Blockchain Falls Under RWA: Establishing a Legal Layer on the Blockchain Before Interoperating with DeFi

TechFlow：How does Story Protocol's programmable IP reach consensus with off-chain legal systems?

Jason ：

In terms of integrating with the off-chain legal system, our goal at Story Protocol isn't to replace existing legal frameworks but to enhance their efficiency.

We recognize copyright as a reliable source of authority and aim to bridge the gap between the traditional, paper-based legal system and the more autonomous, blockchain-based environment. To this end, we have collaborated with top legal teams to develop what we call the 'programmable IP license'. This license is legally binding and designed to cover a broad range of use cases, although some specific scenarios might not be fully encompassed.

It includes a set of legal terms—such as derivative rights, upfront fees, and royalty shares—which are directly mapped to on-chain logic, ensuring that the legal terms are programmatically enforced on the blockchain. This creates a crucial link between the legal and digital realms.

Regarding our go-to-market strategy, it involves two primary approaches.

Firstly, we aim to attract existing Web 2.0 creators, dedicating about 20 to 25% of our efforts towards bringing renowned creators from Hollywood and beyond to develop new intellectual properties on Story Protocol. This strategy is vital as it demonstrates the benefits of our platform to a mainstream audience, emphasizing how it enhances control for creators and engagement for fans, allowing them to participate in the creative process legally, akin to fan fiction but with official endorsement.

The remaining 75% of our focus is on the crypto-native segment, where there's already a strong understanding of and alignment with our vision. This includes integrating with existing Web 3.0 applications and encouraging crypto developers to create new apps and IP types that are native to the blockchain environment. Given that new media technologies often diverge significantly from their predecessors—much like the short-form content on TikTok compared to traditional movies—we believe there's a significant opportunity for a new class of crypto-native creators to innovate and craft unique types of content that were previously unfeasible.

Overall, our approach is balanced between introducing traditional creators to the advantages of blockchain technology and fostering a robust ecosystem of crypto-native innovation.

TechFlow：How does Story Protocol's work with intellectual property differ from putting other digital assets, like internet domain names, on the blockchain?

Jason ：

At Story Protocol, our approach is exceptionally open, and we are agnostic regarding the types of IP that can be registered. This flexibility stems from our core assumption that any NFT brought onto the protocol represents a media file. This file could be in various formats—music, audio, video, an MP3, an image, or written work. Essentially, any form of IP can be integrated into the protocol.

Our primary focus is to introduce a legal layer onto the blockchain, facilitating real, permissionless remixing. We aim to encapsulate the rights typically found in legal contracts into a format that can be represented and automatically enforced on-chain.

This goes beyond merely transferring a license or an image onto the blockchain, which NFTs have already achieved. Story Protocol's transformative aspect lies in also transferring the logic that allows a license to be self-executing and autonomous. This is where true innovation lies—creating a system where legal agreements are not only digital but also dynamic and capable of autonomous enforcement.

The real challenge, and our innovation, is in transcending the simple digitization of legal texts.

TechFlow：What was the first intellectual property registered on Story Protocol?

Jason：

At Story Protocol, we're currently operating on a testnet, which has become a hub for a wide variety of experimental IPs. Creators are actively exploring and registering diverse forms of art, ranging from organized projects to more spontaneous creations. Given the breadth of activity and the decentralized nature of our platform, it’s difficult to pinpoint a definitive 'first' IP. The array of content spans multiple mediums, quality levels, and creative intentions.

This vibrant testing ground is reminiscent of the early days of other blockchain innovations, where numerous experiments eventually shaped the standard uses of the technology. Just as it might be challenging to recall the first ERC-20 token associated with media, identifying the first IP on Story Protocol is similarly complex due to the ongoing influx of varied contributions by creators from around the world.

How Does Story Protocol Integrate with Traditional Internet Social Software and On-Chain Social Software?

TechFlow：How does the user experience created by Story Protocol differ from uploading creations on traditional social media?

Jason：

We're not envisioning just a brand-new app; we are actively integrating with existing Web3-powered social media platforms.

For instance, consider posting a drawing—unlike platforms like Instagram, where you post an image with no inherent IP protection, our integration allows for a transformative approach.

At the time of upload, users can permissionlessly attach specific rights to their IP directly within these platforms. For example, if a creator wants others to commercialize a character they've designed, they can set terms such as requiring an upfront payment of one ether and a share of the revenue. These terms are then stored and tracked on-chain via Story Protocol.

From the user's perspective, the interface remains familiar, but with significant enhancements. When scrolling through your feed, alongside the usual interaction buttons, there's an additional button that displays the rights associated with each asset. This feature enhances transparency and user control over IP.

The true innovation of our approach lies in its scalability and interoperability. Registering a character on Story Protocol through any app not only protects it on that platform but also makes the IP universally accessible. Just as on-chain data is available across multiple applications, so too is the IP managed through Story Protocol. This universal IP layer enables any app, whether it’s a licensing marketplace, a creator tool, or another social media platform, to leverage the same IP, ensuring seamless integration and widespread accessibility.

TechFlow：How does Story Protocol integrate with Web2 social media platforms for IP creation and management?

Jason ：

Magma allows multiple team members to log in and collaboratively create art, making it a popular choice among game and movie studios. They currently boast over two and a half million users.

We have integrated with Magma and recently launched a demo at Denver, which you can view on Twitter. Through this integration, once artists complete their artwork on Magma, they can easily register it on Story Protocol with a simple click. During registration, artists have the ability to set the rights directly, a process we’ve streamlined in collaboration with Magma. This integration leverages our SDK and APIs, but importantly, we’ve simplified the experience by abstracting away complexities such as wallet creation and gas fees. This ensures that Magma’s creators can enjoy a seamless user experience without needing to understand the underlying blockchain technology.

This partnership exemplifies our approach in the blockchain space—it’s not just about promoting the technology itself but emphasizing the tangible benefits it offers. For Magma, the focus isn’t on the blockchain; it’s on how the features we provide enhance their platform and user experience.

TechFlow：Why did you choose Magma?

Jason：

Interestingly, our collaboration with Magma wasn't initiated by us; rather, they approached Story Protocol with specific concerns they wanted to address. First and foremost, their writers needed a way to protect their IPs and ensure transparency and provenance, which blockchain technology naturally provides. This was their primary concern.

Secondly, Magma was introducing a feature for generative AI in their platform, allowing creators to incorporate AI-generated elements into their artwork. They sought to use Story Protocol to track the involvement of AI in the creation process. This capability is increasingly crucial as it helps verify whether a piece was AI-generated, addressing concerns from creators about authenticity and originality.

Thirdly, and most excitingly, once an IP is registered on Story Protocol—say, a stunning landscape created on Magma—it becomes accessible to other applications. This means that platforms like Lens, Forecaster, and various AI apps can connect to and utilize this IP. We refer to this as creating a universal IP database or IP liquidity, where there’s a network effect; every app that registers IP enables any other app to leverage it. This interconnectedness vastly enhances the utility and reach of registered IP.

Centralized Factors of Real-World Assets

TechFlow：What do you see as the main risk factors of Story Protocol?

Jason：

Embarking on a venture like Story Protocol, which aims to reimagine the IP system for creativity, inherently comes with numerous challenges. One of the primary hurdles is the complexity associated with the term 'licensing'. Typically, when people hear 'IP' or 'licensing,' they tend to disengage due to its perceived complexity. Recognizing this, we are dedicating significant effort to ensure that users of Story Protocol need not understand the intricacies of licensing to benefit from our platform.

A great analogy for what we aspire to achieve is Stripe, the payment processing company. Stripe brilliantly simplifies the complexities of the global banking system for developers. They don’t need to educate their users about the workings of financial systems or credit card transactions; instead, they provide a simple line of code that allows websites to accept payments effortlessly.

Similarly, at Story Protocol, our goal is not just to communicate effectively with creators but also with developers. We want them to know that they can use Story Protocol to remix or monetize IP without needing to become licensing experts. We handle the complexities so they can focus on creativity and innovation. However, this simplicity brings its own set of challenges, particularly in overcoming the deep-seated cultural apprehensions towards licensing due to its historical complexity. Our task is to break down these barriers and demonstrate that managing IP can be as straightforward as integrating a single line of code into an app.

How to Stay Competitive?

TechFlow：Could you share some of the innovative ideas and applications that Story Protocol is currently exploring or has already implemented?

Jason：

Some of the concepts we're exploring are akin to platforms like Getty Images or Shutterstock, but adapted for the Web 3.0 environment, particularly focusing on the monetization challenges associated with AI-generated images. This area is ripe for innovation as current solutions for monetizing such content are limited.

Additionally, we've already made strides with a Web 3.0 enabled social remixing platform, having integrated with platforms like Lens and Forecast. Another intriguing area, which has garnered substantial interest but is not yet widely explored, is what I refer to as 'IP finance' or 'IPFi.' Intellectual property is a valuable real-world asset class, regularly engaged with but seldom leveraged due to the lack of mechanisms to trade or create liquidity.

We are exploring possibilities such as using IP as collateral in lending protocols, or fractionalizing and tokenizing IP to unlock its value. These initiatives could transform IP into a more liquid asset class, facilitating new forms of financial interaction and investment. The interest we're seeing in developing these types of tools is significant and encouraging, highlighting the potential for innovative solutions in IP management on blockchain.

TechFlow：Given the various business models we've discussed, how does Story Protocol plan to generate profits from these protocol projects?

Jason：

Let’s consider Uniswap as a comparison. For a long time, Uniswap operated without imposing any protocol fees. It was only recently that their DAO voted to introduce fees at the protocol level. We see a similar path for Story Protocol. Just as Uniswap has built financial rails for the transaction of fungible tokens within the DeFi ecosystem, we are constructing the creative content or IP rails that enable programmable IP to circulate effectively across various platforms.

In terms of adoption, a protocol's worth is directly tied to its utilization; a standard only becomes meaningful when it is widely adopted. Currently, we are functioning as a public goods infrastructure, focusing purely on fostering widespread usage and integration.

Looking ahead, the introduction of protocol fees is a possibility we're open to, but it would be a community-driven decision. If the community opts to activate these fees, they would be structured to support the ongoing decentralization and sustainability of the protocol. This approach ensures that we prioritize broad adoption and utility over immediate revenue generation, laying a foundation for long-term value creation within the ecosystem.

TechFlow：Considering the possibility of future protocols similar to Story Protocol emerging, how do you foresee handling competition in this space?

Jason：

The question of what constitutes our moat is pivotal. For Story Protocol, our moat is distinctly the quality and quantity of IP hosted on our platform. While our smart contracts are publicly accessible on GitHub, and I encourage everyone to review them, the core of our defensibility lies in the IP itself.

Much like how Uniswap retains its liquidity despite the possibility of forks like SushiSwap, our strength resides in the exclusive, high-quality content we host. Even if another entity replicates our protocol’s logic and infrastructure, they cannot replicate the unique cultural assets and creative content—ranging from top-tier characters to compelling videos and stories—that we possess.

This creates a form of 'IP liquidity,' analogous to the liquidity in fungible tokens. Just as liquidity is crucial to the success of a decentralized exchange, the rich repository of IP on Story Protocol makes it invaluable. You can duplicate the technology, but the ecosystem of content and the community that values and contributes to it—this cannot be copied.

Citation:

https://www.storyprotocol.xyz/