Royalty & Revenue in Story Protocol

Overview

Story Protocol's royalty module governs how revenue flows between parent and child IP assets through licensing and tipping mechanisms. The system supports multiple royalty policy types, enabling creators to define flexible compensation structures for their intellectual property.

Royalty Policy Types

Liquid Absolute Percentage (LAP)

Each parent IP asset sets a minimum royalty percentage that all downstream derivatives must share, even indirect ones. This policy ensures that original creators receive compensation regardless of how many layers of derivatives are built upon their work.

Liquid Relative Percentage (LRP)

Revenue sharing applies only to direct derivatives, not further descendants in the chain. This provides a simpler royalty structure where each IP asset only shares revenue with its immediate parent.

External Royalty Policies

Customizable, permissionless policies allowing users to define unique royalty distribution logic tailored to specific use cases. These external policies provide maximum flexibility for creators with specialized needs.

Key Mechanisms

License Minting Fees

One-time payments required when creating derivative IP assets, distributed according to the governing royalty policy. These fees serve as an upfront compensation mechanism for original creators.

Ongoing Royalty Payments

Revenue generated by derivative assets through direct tipping or sales is shared with parents via the payRoyaltyOnBehalf function. This enables continuous revenue flows throughout the IP asset lifecycle.

Derivative Configuration

IP assets can have up to 1024 ancestors and 8 parents, with total royalty percentages capped at 100%. This configuration supports complex IP lineage trees while maintaining economic viability for derivative creators.

IP Royalty Vault

Each IP asset has an associated vault holding an ERC-20 royalty token. The vault serves as the central mechanism for receiving, tracking, and distributing royalty payments.

The process works as follows:

1. Incoming payments are marked as "pending" in the vault.
2. A snapshot function records token holder percentages at a given point in time.
3. The snapshot determines the revenue distribution proportions.
4. Token holders claim their shares through specific claiming functions.

This module ensures creators receive fair compensation throughout their IP assets' lifecycles within a decentralized framework. The vault mechanism provides transparency and trustless distribution of royalty revenue.

Conclusion

Story Protocol's royalty module provides a comprehensive framework for automated revenue distribution across IP asset hierarchies. The combination of LAP for deep lineage protection, LRP for simple direct derivatives, and external policies for custom use cases creates a flexible system that can accommodate a wide range of creator needs. As the IP ecosystem grows, these royalty mechanisms will be crucial for ensuring fair and transparent compensation.