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Exploring the Future of IPFi
Bu Fan, Weilei Yu, Benjamin Ebner
14 October 2024
In the evolving world of Web3, a new frontier is emerging: Intellectual Property Finance (IPFi). For creators, innovators, and developers, IPFi represents the tools and infrastructure enabling intellectual property (IP) to integrate seamlessly into the decentralized ecosystem. Here’s how IPFi is taking shape and why it holds the key to transforming how we manage, value, and leverage IP.
What is IPFi?
IP is already a multi-trillion asset class, and it is possible to make it even many times bigger by enabling higher transparency (cheaper to price), accessibility (ease of funding) and composability of IP assets (larger franchises than ever before). To increase the capacity for IP to create more financial value, many layers of financial infrastructure will be needed. This very financial infrastructure is what's referred to as IPFi.
IPFi should be able to support the creation, transaction, and financialization of trillions of dollars of IP assets. Further down the road, IPFi must, among other things:
- Be mature enough to facilitate capital formation of hundreds of millions of dollars for any individual mega-scale IP project while providing clear attribution to each single party involved and easily track the numerous derivative IP.
- Facilitate deep liquidity and low-slippage trading of IP assets created by both individual small-time creators and leading global media franchises. New generation AMMs will be born on Story to bridge the liquidity fragmentation of distinct IP assets.
- Enable IP as an institutional-grade asset class on par with Bitcoin, equities, debt, and other financial derivatives, attracting institutional-scale capital to invest in IP.
These mechanisms must also be open and permissionless, in line with the Web3 ethos of decentralized and permissionless access, while respecting what IP creators define in their license terms on Story. This will allow not just established IP creators to participate in IPFi markets but also up-and-coming IP builders. Who will be the next J. K. Rowling or George R. R. Martin?
Laying the Foundations with Core DeFi
To achieve this vision, Story IPFi will be built in steps, starting from the basic building blocks of core DeFi, which focuses on the existing trading, money markets, liquid staking, and launchpad features common in DeFi. While this DeFi infrastructure may not uniquely serve IP, core DeFi infrastructure has been battle-tested and is flexible enough to meet many existing demands on IP financialization.
Many existing IP projects and users will use these existing DeFi infrastructure, and existing token formats to capture value. Users will also still need to use existing DeFi infrastructure to leverage their capital for different IP financial plays. Many DeFi teams are already building these functionalities on Story and we expect this layer to be the first to go live on Story.
Exploring Structured IPFi
After core DeFi, we can build Structured IPFi infrastructure on top of it. These IPFi rails will gradually tackle the trillions of IP assets yet to come onchain or are, for the first time, coming onchain from Web2. Structured IPFi refers to a more nuanced and purpose-specific financial infrastructure that serves more established IP projects with sophisticated needs. Some ideas worth thinking about are:
- IP Collateral: Can successful IP creators leverage their characters and franchises as collateral to expand their work with debt financing/CDPs instead of having to sign their IP away to large distributors in Web2?
- Onchain RWAs: Can royalty-bearing, Web2 IP be tokenized into RWAs onchain and provide enticing yield?
- IP Asset Bundling: If individual IPs are highly risky and unpredictable, can retail investors access bundled opportunities to make IP investment safer and more predictable?
Experimental IPFi: Pushing the Boundaries
There are also some novel issues that do not have existing solutions within crypto or DeFi. For Experimental IPFi, there are exciting novel problems which can be solved by aspirational and creative builders. Some of these that come to mind are:
- Price Oracles: How do we build an oracle to discover the price of royalty-bearing IP assets, given that their ongoing royalties mean that they're always financially valuable?
- Authenticity Providers: If Story is an open system which enables IP registrations by anyone, how do we enable financial mechanisms which promote authentic and valuable IP registrations, and deprioritize malicious or accidental bad registrations in a broad manner?
- Onchain Disputes: Can we build a robust onchain arbitration/judicial system in which we can arbitrate IP disputes effectively and quickly without resorting to offchain legal settlement, incentivizing good disputes and penalizing malicious actors?
Many seasoned teams are already building solutions to tackle some of these new challenges and opportunities as we speak.
Supporting IPFi Infrastructure
Additionally, we also need better infrastructure to support IPFi. In order to onboard and unlock trillions worth of IP assets onchain, some of these infrastructures need to be iterated on:
- A better on/offramp suite of products that allows IP creators to operate onchain without needing to understand too much about blockchain technology.
- Better price oracles for both web2 and web3 IP assets, such that web2 IPs can successfully “assetize” onchain and become composable with DeFi infrastructure.
- Connections with web2-oriented distribution channels (e.g., Youtube, Netflix) for IP which meet where the existing users are.
The Future of IPFi
As platforms like Story open up permissionless, tokenized IP registration, new needs will arise. The questions posed here only scratch the surface of the challenges and opportunities that lie ahead. IPFi is a vast and untapped space with immense potential, and it’s going to take innovative minds and ambitious builders to unlock it.
Are you a developer or part of a team interested in contributing to the future of IPFi? Check out Story Academy, a builder program designed to support, mentor, and accelerate promising entrepreneurs and innovative projects building on Story.
