Story Protocol helps creators survive AI attacks through ‘programmable IP’ encryption.

Jason Zhao was working as a product manager at DeepMind, Google’s cutting-edge AI division, when he realized there was a serious problem with generative AI, which remixes existing content into new content.

He has since been proven right. AI is now reading and regurgitating news articles without paying for them from services like Perplexity, threatening the business model of journalism. AI is also being used to replicate artists’ vocals, like Drake and The Weeknd on their viral track “Heart on My Sleeve.”

The track came out shortly before Recording Academy CEO Harvey Mason Jr. was nominated for a Grammy Award before he realized that the music industry couldn’t survive if neither artists nor labels got paid.

“I think we’re at a point where we can no longer ignore these questions about what the New York Times’ business model is.” Story Protocol founder Zhao asks a question by phone from Palo Alto.

“There are these amazing creative tools, but there is no sustainable business model if you are an IP holder, a platform, or an individual creator.”

Zhao added that he personally thought Drake and the Weeknd’s tracks were “really cool,” and the AI-generated viral video for Harry Potter was also styled with a shoot for luxury fashion house Balenciaga, but neither had a sustainable business model. For intellectual property owners or creators using unlicensed material.

“JK Rowling doesn’t win, and the people and communities who make the videos don’t win. So this lose/lose, hostile situation arises. The New York Times sues OpenAI.”

“So this is where blockchain comes in and where the story comes in.”

Zhao says copyright law was created in the 15th century with the advent of the Gutenberg printing press, but has not kept up with changes in technology.

“We still use a legal system that’s basically pen and paper to figure out how IP should proliferate and monetize on social media, but now that’s not working because AI is creating new content and remixing things like never before. .” he says

“It doesn’t work for AI model companies. It doesn’t work with IP catalogs. It doesn’t work for anyone.”

What is Story Protocol?

Story Protocol’s answer is to make IP programmable, similar to how Ethereum made money programmable. This is an open marketplace for IP, where rights holders can register their songs, patents, articles or even Pink Floyd’s back catalog and then program the terms and payments required for others to use them. These fees will be paid via cryptocurrency, but targeting standards will allow creators and rights holders to be paid in their local currency.

“It’s actually very seamless for developers. You can accept payments and credit cards, and even pay creators in fiat currency. So you can think of the blockchain layer as something abstracted.”

Notable backers include Polychain Capital, Hashed, Paris Hilton’s 11:11 Media and Samsung Next, with a16z leading in a $29.3 million seed funding round in May 2023 and a $25 million Series A round in September 2023. I am an investor. In August 2024, Story raised an additional $80 million in Series B.

Also read: 5 Amazing Use Cases for Based Agents and Near AI Assistant

The association with a16z became even more important this week when incoming U.S. President Donald Trump appointed the VC firm’s general partner Sriram Krishnan as senior AI policy advisor. Krishnan wrote a lengthy essay for The New York Times last year about restoring democracy to the Internet through decentralization and calling for “radically different mechanisms for websites to exchange value with AI assistants.”

Currently undergoing beta testing on Ethereum’s Sepolia test network, Story Protcol’s mainnet is expected to launch in Q1 2025.

Why does OpenAI agree to pay IP creators?

Why would AI model creators want to license and pay for IP when they are currently collecting massive amounts of online content for free?

Zhao points out that in some cases, that has already happened. OpenAI has signed a $60 million deal with Reddit and a $250 million deal with News Corp, publisher of The Wall Street Journal and The Times. We also have an extensive agreement with stock photo library Shutterstock.

“Our argument is that ultimately it is very important for these model companies to have their own moat and be able to access their IP in a clean and simple way. “The last thing you want to think about is if I’m going to get sued and disappear from existence.”

Zhao likens Story Protocol’s ability to simplify IP licensing to the way Spotify and Netflix put a stop to most illegal downloads by making legal access to music and TV so cheap and convenient.

“Spotify has solved this problem by making it so convenient to have access to a library of global IPs that it doesn’t really make sense for anyone to go and try to pirate it unless they have a specific reason,” he explains.

“It’s the same with stories. You don’t necessarily have to say, ‘We’ve created software that makes sure no one can copy someone else’s IP unless they’re using Story.’ But in reality, if you’re OpenAI, we’ve created a system where you can access a very large repository of IPs from a variety of sources and all of the terms are set up very transparently. You should worry about that. It’s actually more convenient to do the right thing.”

Provide incentives to humans to prevent AI model collapse

Another compelling reason for AI model companies to pay for IP is to avoid running out of training data.

Research shows that AI models trained on the output of other AI models begin to produce increasingly worse content, in a process called “model decay.” So AI companies can scrape content for free for a while, but eventually they will have to provide incentives for the creation of new content.

Also read: AI agents trading cryptocurrencies are hot news, but beware of rookie mistakes

“The Web2 social contract is that if I’m a travel blogger and I’m decent, I can get some eyeballs, run ads and make money,” he explains.

But he points out that someone could ask Perplexity, “What should I do in Seoul?” And if your travel blog is mentioned again as part of the response, no one will click on it and you won’t advertise.

“There is no reason to create this blog because no one is reading it anymore. I can’t monetize it. “There is absolutely no reason to continue,” he says.

“In the long term, we’re going to have a tragedy of the commons where things are taken and taken away from this open data and IP space. But there is no incentive to keep replacing them. So, I think we need some kind of win/win framework to monetize content and IP that are valuable in the long term.”

How did Jason Zhao discover blockchain and AI??

The 25-year-old entrepreneur mined Dogecoin a few years ago and bought a few ICOs in 2017, but “didn’t take blockchain seriously until around DeFi Summer” in 2020.

As a graduate of Stanford with a degree in philosophy and computer science, he was impressed by how different political philosophies, from Bitcoin’s libertarian individualism to the DAO’s more collaborative governance, could map onto and coexist in cryptocurrencies.

Another attraction was the lightning-fast timescale of cryptocurrency compared to the glacially slow progress of turning research into usable products at DeepMind. “The white paper basically goes into production two or two months after the research, and now we have about 10 million users using it,” he says. “So that was really interesting to me.”

He wasn’t keen on starting another DeFi project, so he and co-founder Seungyoon “SY” Lee “started thinking about ideas about how to build a blockchain that wasn’t focused on money.”

“We wanted to think about how blockchain could become an asset ledger and create a marketplace for things that aren’t money. And this is where we started thinking in the direction of IP.”

How does it work internally?

“IP Assets” are recorded as non-fungible tokens, but these tokens use a modified version of the ERC-6551 Ethereum standard. This transforms NFTs into smart accounts that can control other assets, make transactions, and interact with smart contracts and DApps.

This allows Story Protocol to automate licensing and allows users to include upfront fees, royalty rates, and usage restrictions.

Programmable IP Licenses (PILs) link legal contracts to smart contracts, making rights legally enforceable and executable on-chain. It complies with the Bern Convention and is therefore applicable to most markets around the world.

“We are actually realizing Lawrence Lessig’s vision of turning code into law and law into code.”

It seems very technical. Please give me an example.

Zhao gives the example of an artist creating a character and registering it in a story. Apps built on top of the protocol can give users the ability to drag and drop their characters into comics.

“Now your character is being used in a comic book. If the comic allows for microtransactions, you are entitled to a share of the royalties or profits that you set as terms.”

Of the 50 or so apps built on the protocol so far, the most popular is called Magma, with 2.5 million users. This allows teams of up to 50 people to create and collaborate on digital art simultaneously.

“Artists can actually take assets that are in Story, including those registered on Magma, and use them in their own artwork and actually track when that IP has been used.”

When multiple IP assets are used, sorting out who gets paid can be tricky. Character creators can set their own terms or let the application or AI determine a reasonable payment. Zhao is happy to let the market decide this.

“We’re building tools that allow developers to build apps around IP, so we’re not explicitly concerned with how IP should be priced and valued at the product level, at the protocol.”

Utilize AI agents

Given that this is a hot topic of the year, Story Protocol is turning its attention to AI. Last week, we unveiled the Agent Control Protocol for IP (ATCP/IP), which allows AI agents to trade complex agreements and contracts around IP, as well as training data, investment strategies, and creative works.

Earlier this year, we announced a partnership with Ritual to allow users to publish AI models they create to the protocol, tracking their text, image, and voice output. The platform, called MyShell, allows users to build AI apps and characters, host them on Ritual, and register them with Stories.

Another potential use case for Stories could be authenticating content. This makes it easy for users to see if an article is from The New York Times or just pretending to be AI-generated nonsense.

Zhao said an identity verification system is in the works.

“This is an important part of the metadata associated with any identity,” he says. “This is something we expect to see live before we go to mainnet.”

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Andrew Fenton

Andrew Fenton, based in Melbourne, is a journalist and editor covering cryptocurrency and blockchain. He has worked as a national entertainment writer for News Corp Australia, a film journalist for SA Weekend and The Melbourne Weekly.

Follow the author @andrewfenton