A Way to 10x the IP Market: Why We Need IPFi

PiperX
5 min readJul 27, 2024

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When discussing IPFi, we’re essentially discussing a new way to finance and manage intellectual property (IP). To grasp why this is revolutionary, we need to understand the fundamental properties of any asset, including IP.

1. Understand Asset Triangle

The most crucial properties of any asset are liquidity, safety, and return. Imagine a triangle, with each corner representing one of the three crucial properties of an asset:

Liquidity: “Can I sell it to someone else easily?”

Think of this as the “cash-like” quality of an asset. Stocks are highly liquid because you can sell them quickly on the stock market. In contrast, traditional IP assets are not very liquid; it’s difficult to sell a patent or copyright quickly.

Safety: “Can someone else take the assets I own from me?”

This is about protecting your ownership rights. A house with a strong lock and legal deed is safe. Safety is often challenging for IP due to frequent copyright disputes and infringement issues, which can significantly diminish the investment value of IP assets.

Return: “Can I sell it at a higher price?”

This refers to the asset’s potential to grow in value over time. For example, real estate in a developing area is often appreciated. IP assets have a high potential for value appreciation, but this potential is often unrealized due to the lack of liquid markets.

While IP assets have a massive market cap ($3T), proving their potential for value appreciation, their safety and liquidity are quite bad.

Low on liquidity: Hard to sell quickly. I’d wager that 99.9% of people worldwide wouldn’t know how to sell, invest in, or purchase an IP asset (I am willing to organize a poll to get the actual number). There are many people creating IPs without even knowing they own and could sell their IP assets. The barriers to entry are simply too high for the average person.

Moderate on safety: Legal protections exist, but disputes are common. This significantly diminishes the investment value of IP assets. Imagine spending $10,000 to purchase a copyright, only to incur an additional $200,000 in legal fees to prove ownership, all for a potential return of just $50,000. It’s a scenario that deters many potential investors and creators.

High on value appreciation potential: Imagine you write a bestselling book that is later transformed into a Hollywood movie series. Owning the right IP could make you a millionaire one day. However, this potential is often unrealized due to a lack of proper market, low liquidity, and safety.

2. Why do we need to tokenize IP assets?

Blockchain technology emerges as the ideal solution to these challenges. For safety, what could be more reliable than blockchain for proving ownership? As for liquidity, tokenized assets become accessible to everyone, democratizing the IP market.

The impact of tokenizing IP assets through platforms like Story L1 could be even more significant than the tokenization of currency through Bitcoin or Ethereum.

While this statement might seem bold, what I mean is: that the Multiplier that Story L1 brings to IP assets is much greater than the Multiplier that Bitcoin brings to currency assets. Again, let’s analyze it from the perspectives of liquidity, safety, and return.

Liquidity: We all know that traditional currencies usually have decent liquidity, except for cross-border and large transfers. But IP assets? They’re notoriously tough to trade. Tokenizing IP assets can change that by simplifying transactions and boosting automation. This means more liquidity, making it easier for creators and investors to buy, sell, and trade IP assets smoothly and efficiently.

Safety: Traditional currencies face vulnerabilities within centralized systems, often being susceptible to fraud and mismanagement. But blockchain technology offers a game-changing solution. By providing unparalleled proof of ownership for IP assets, blockchain can greatly reduce disputes and enhance the value of these assets. The decentralized nature of blockchain ensures safe, transparent transactions, making IP assets safer and more valuable.

Tokenizing IP assets is a significant step toward enhancing their liquidity and safety.

While tokenization alone does not inherently increase returns on IP assets or create a flywheel effect, it sets the stage for a transformative development: IPFi.

3. Why we need IPFI — The Flywheel for IP asset

So, we’ve made IP assets more liquid and safer through tokenization. What’s next? Think of IP-Fi as the next big thing, similar to how DeFi followed the ICO bull market and transformed the crypto landscape. The impact could be monumental. Consider that after the DeFi summer, the crypto market cap increased by 10x, and transaction volumes lifted by 15x. IPFi could trigger a similar explosion in the IP market.

And the key inside is the “liquidity” and “incentive”. Imagine you can easily create an IP asset on-chain and tap into various IPFi projects. You could trade, leverage, lend, or even trade derivatives around your IP assets. Imagine creating a small AI-generated IP that drives thousands of trades and yields 100x returns. What would you do? Of course, you are going to create more! Therefore, the IP-FI incentivizes creators to create more organic IP assets, forming a flywheel for creativity and the IP market.

4. Summary

As a unique type of asset with low liquidity and safety but high return potential, IP assets would benefit a lot from tokenization. Additionally, IPFi, serving as a way to 10x the liquidity of tokenized IP assets, will create a flywheel effect that encourages creators to produce more IP assets, thereby expanding the IP market tenfold.

Contributors

We are grateful to the whole Story team who helped shape our ideas through conversations and Andrea who reviewed and provided comments on drafts of this article.

Links

Piper X/Twitter: https://x.com/piperxprotocol

PiperX Telegram: https://t.me/+skjXFbkXs_E0Njcx

Story L1 X/Twitter: https://x.com/StoryProtocol

Disclaimer

This post is provided for educational and informational purposes only. Nothing written in this post should be taken as financial advice or advice of any kind. The content of this post is the opinions of the authors and is not representative of other parties.

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PiperX

Beyond DEX, the first-ever IP-Fi infra built on Story L1