E145: Story Protocol Founder: How Crypto Could Finally Unlock an $80 Trillion Asset Class

0:00We talk about unlocking the$80 trillion IP asset class. Intellectual property is a massive asset class. Everything from workers like Pudgy Penguin to a great Justin Bieber song. It's like owning a Manhattan real estate because it's just going to keep pumping out yields. With AI race, I think IP is going to get more and more important. Can you give me a concrete example of IP assets that are not unlocked today, but should and will be? So to give you an example. Sung Yoon Lee, the CEO and co-founder of Story. A blockchain platform redefining intellectual property in the AI era. Previously, he co-founded Radish Fiction, later acquired by Kakao for$440 million.

0:35What's the absolute hardest thing that you had to do? The hardest moment was when I was promised by a big investor. I thought the money was coming and I basically hired and executed in the business. By the time money was supposed to come in, the money didn't come in. You guys launched a billion dollar protocol. There was some criticism about the revenue. At the moment, we're incentivizing to build on top of story. Without taking free that much. We have a bigger transaction volume than Mantle. but we have 20th of the revenue mantle. We'll have a much mega, mega bigger volume. So we want to show that apps and IPs are making a ton of money in store.

1:06But something that's not possible yet. One of the things that we need to figure out is crypto is very used to like 100x, 1000x. But these IP assets are not necessarily that kind of assets. How do you bring the right liquidity and premium volume? That's one thing that we have to grapple with. From zero to$440 million. But then you said, I need an exit and I need to do something much bigger, which means that almost half a billion dollars is not big enough. where does this fire in the belly come from? Um, first of all...

1:36Hi everyone! This is the little bit that I know none of you like that can help us make a huge difference for this show and we want to take it next. 71 % of the people who regularly watch When Shift Happens have not subscribed and so all I'd ask you if you want to make a huge difference is the following. If you've seen this show before and you like it, help me, help my team, Hit the subscribe button and we'll continue to build this show for you. Thank you. Crypto, but also your previous life where you did some pretty amazing things. Thank you. How are you doing? Good. I mean, I've been going at like 200 miles per hour, you know, since, because of KBW, because we had a massive event in KBW, Origin Summit, because of that.

2:23With Blockworks, right? That just sucked a lot of energy out. And then I had to go to Thailand for a day. I stopped by Hong Kong to come here with Justin's son. I was in the chat. I saw actually. Yeah, it's hilarious. So that just took a lot of time. It's just like, you know, last two months, just preparing for the summit. A bunch of announcements along with it. And then, again, Tokuntu 049. So I need some. And also because preparing for that kind of massive event or one moment also takes a toll on your business because there are a lot of other things to do besides just focusing on that one moment, right?

3:06So you need to have a plan around the company after that summit. So next week we have a leadership offsite like all the people, right? So I think after next week I can have some downtime, but until next week it's just like very busy. What do you do in your downtime? time i like just actually watch podcasts listen to podcasts i like going to nature yeah nature but i like mountains i think sea ocean sometimes disturbs me the sound is actually disturbing whereas like if you're in the in trees or mountains you i think it's more introspective whereas like sea is more dispersing yeah sea ocean is more dispersing whereas like mountain is much more introspective and focusing and uh resting from my perspective from from my experience so i like going to mountains and just hike and it's i mean also it's not hot so you just you know hike for hours in trees it's really good what are the best mountains in the word best hikes for you i love switzerland yeah i love where did you go in switzerland i was there a couple of weeks ago i love lake lucerne i was there exactly there i was in grindelwald and then lake lucerne i mean i'm swiss right but when i was younger i didn't really care about all this stuff now i go there but i don't live there anymore but i go then i'm like holy shit this is so good it's so good it's so good it's so good i mean i love borgenstock uh staying there uh or japan's good their place in korea called jeju island this is great love canada as well yeah whistle area so you're originally from switz yeah i'm swiss yeah we're in swiss Bern Canton Bern from a small village 5 ,000 people I think Kim Jong-un went there exactly boarding school boarding school in Bern yeah yeah yeah I know that there's a lot of rich kids that go to Swiss boarding school which is very interesting because Swiss people don't go to boarding school it's only like international people who come there I didn't even know there was these boarding schools to be honest and then I learned that when I actually went to poor people are like oh yeah I went to boarding school and what the fuck is boarding school like we all go to public school it's very good it's very cheap and yeah so makes sense yeah if you had to explain what it is you do oh have we started we're on yeah oh I didn't know we started we started okay so what the hell it's a dumbiness it's a it's organic conversation we'll talk about we'll talk about anything if you had to explain what it is you do and why you do it what would you say what i do i'm an entrepreneur right i try to i start new things and try to shake or uh shake industries or solve problems right but especially in the intersection of tech and intellectual property.

6:29That's what I've been doing for actually the last 12 years. So I came out of university in 2014. And the first business I started was at the intersection of journalism, actually, and technology. And at the time, what was happening was that all these media companies, especially in the newspaper industry were just getting crushed by ad model being sucked in by Facebook to Google so they don't have any more ad revenue. So you need to find a new business model. I was trying to solve that with some kind of crowdfunding and substitution model. It's like a pre-substack, substack. That was what I was working on but it didn't scale in the way that I wanted to.

7:20I've done something with writers. I've done something with trying to monetize content. and I want to build a platform, but journalism, I failed. How do I pivot? So I started in Korea and China and Japan. Everyone reads Webtoon and web novels on the phone, online literature on the phone. All the top series and movies you see on Netflix and so on and so forth, they're all from these serials on the phone. right so i saw that happening in the u.s there was everything from you know 50 shades of gray to the martian was written online serially but there's no like a real monetization model around it there was no dedicated mobile app around it so i started an online mobile serialized fiction app where it's kind of a it's like mobile serialized storytelling meets um micro payment uh candy crush style micro payments if you wait the next chapter is free if you don't want to wait you have to start buying currencies with in-app currency and then use that currency to read the next chapter.

8:30So, you know, and basically I was trying to innovate publishing in the Asian mobile, right? So that was the last company. And I, yeah, it was a lot of ups and downs. I was a first time entrepreneur out of college. I didn't have any work experience. Then 2019, I started working out. So it was an overnight success in like two dozen days, right? It took a lot of time. It took a lot of time. Seven years, right? Overall? Overall. Beginning till the end? 2014 to, I don't even know when I sold my last company, but like 2020 or something, I think. So, yeah, that was a long, long grind, but was able to, the company ended up scaling to tens of millions of revenue, million payers, so on and so forth.

9:23And sold that company to a Korean big tech company called Kakao. And I serve as chief strategy officer for their entertainment division, Kakao Entertainment. And then, yeah. And then basically, I thought there was so much stuff that blockchain can solve for the world of IP. And I wanted to do more structural things. I want to change the rules of IP creation, IP licensing, IP fundraising, every single stack of what makes IP IP. And I had that exit. So the next business I wanted to do, I wanted to start something much more ambitious and structural on an infrastructure level. Because otherwise it's just not worth it.

10:18because I didn't want to start another mobile app. I wanted to start something that really changes the underpinnings of IP industry. And that became story. And story, what I see, there are two mega problems in intellectual property, like how I've seen it when I was running a journalism company, a journalism platform company, with the collapse of advertising because of the big tech companies, or what I've seen with publishing industry with the collapse of their traditional model with this mobile coming in. So in the same way, I see a huge amount of structural problems in the intellectual property space, just to give you a two example.

11:13One is that, you know, do you know how much like Squid Game writer made? It's very, very small. It's very like, you know, at most a few million, two million dollars. But it brought in billions of dollars of revenue for Netflix. And it could be in a more long-term manner because they brought in so many subscribers. If you calculate the LTV, that's even higher. And all the intellectual property belongs to Netflix. So all these creators now, a lot of the IP is now held by these big streaming platforms. They have nowhere to go besides these big streaming platforms. So how do you figure out a way for these great big creators, big IP holders, big IP creators to actually protect their IP and actually own their IP, right?

12:16So that's a big question. How do you actually bring liquidity into this IP beyond just actually relying on big streaming platforms and big studios and so on and so forth, right? Secondly, if you look at the world of AI, right? How do you actually get all these amazing things from Sora? How do you get all these amazing things from ChatGPT? There's a source of that. there's an input of that they must have trained on something the brain can function as it is because the brain was educated on all the materials human you know human materials in the same way right so the the lifeblood of ai is very very valuable original data original creative data made by humans but the economics of that isn't completely broken right so because it's just taken without compensating them.

13:09So I think it's very hard to compensate for billions of inputs that went into it. What is the correlation between that one billionth input and the output? It may be hard, but when you see things like Studio Ghibli remix that's coming out of ChatGPT, there were days where everyone was making Studio Ghibli style profile picture. Or it's very clear that they used a Studio Ghibli style, but Studio Ghibli, studio owners are not making any money from that. Or there are a lot of cases where, I don't know if you watched this YouTube video called Harry Potter Balenciaga. So there's a Balenciaga commercial being done by Harry Potter actors.

14:00And it's getting tens of millions of views. It's very clear they've used a Harry Potter IP. it's very clear they used to have Balenciaga brand but if you basically what what's going to happen is you know humans love remixing humans love getting inspired by the things human loves actually recreating from other folks uh right but but you know and then with ai you used to just do it you used to you just used to do fan art and fan fiction right now with ai you can now you can make a fan movie fan games you can make the best spin-off of Star Wars best spin-off game of StarCraft or World of Warcraft it's now coming to a moment where any human can create a studio level spin-off or remix or the next version of things of original IP and that's just going to continue and continue and propagate but the IP holders are not getting any upside.

14:59But there's, and basically we try to solve these two issues by tokenizing IP and programming the IP. And I can go a little bit more into that. Yeah.

15:13Week one. I want to thank our partners who help us make this show possible. I'd like to thank our friends at Dripiter, the most used decentralized trading platform on Solana and the largest DAO in the world. Thank you to our friends at Paradex, It's official Perp's Dex season and we've teamed up with Paradex, the leading perpetual decentralized exchange with zero fees, deep liquidity and privacy. Their season 2 runs through the end of January, so you do not want to miss that one. In addition, their flagship NFT collection drops in Q4 this year and we're giving you a chance to get one. Supply is limited, so hurry up and use the link below to get on the waiting list.

15:50And last but not least, thank you to Mantle, a pioneering on-chain economy dedicated to revolutionizing the future of finance and blockchain scalability, and that seamlessly bridges traditional finance and decentralized finance. Before we go into that, tokenizing the IP and programming the IP, you said something before. You said you had this 2 ,000 days or 2 ,000 nights, overnight success, right? Yeah. from zero to 440 million dollars but then you said i didn't exit and i need to do something much bigger which means that almost half a billion dollar is not big enough where does this fire in the belly come from um first of all i think it's it's it may be when you're an entrepreneur and when you're especially 20 21 or 22 when you start right out of college i almost first of all like i've never thought about thought that much about money right at the start right uh so so for me i just wanted to just achieve great things and make a great impact that was the thing right I didn't want to be another lawyer another doctor another you know I because my in my family there's a lot of lawyer doctor this professional okay like study hard get into Oxford get into this kind of banking job law job whatever so that that really didn't motivate me so for me I wanted to just achieve great things and so on and so forth and so when I

17:33I I you know I read history you know I read history books I read I just wanted to be I just wanted to just make a great impact a huge impact and for me I studied politics philosophy economics at Oxford and before that I was always interested in history books political matters socioeconomic matters so for me media right it's where you consume all this information and how you actually make judgments around the world. So I wanted to actually, okay, how that's monetized, how that's created, I really wanted to make an impact. It was like the other side of what actually forms opinions around all these political to socioeconomic matters.

18:23So for me, that was very, very, I don't know. I was very interested and excited by that. So that's how I started the business. And also I just thought, okay, I don't want to be like my friends. I want to do something special. It was 2014. It was not like, I mean, startup was getting popular, but especially from where I was in Korea or Oxford, everyone was just going to very traditional path. right so so so yeah i i think i don't know i think there's that little bit of okay i want to make a great impact i want to i want to achieve something great i don't want to be just a normal you know just you know worker of this like big you know big companies right there was that but and and i was just genuinely interested in media and content and how that's created the structural kind of structures around that.

19:24So that's how I started. And once I exited, right? Once I exited. It's very weird as an entrepreneur. I think if you're a banker, if you're a lawyer, you gradually go up. So for six or seven years, I literally didn't have, as a CEO, you get the least salary for your company, right? and you just and you know i didn't have any i didn't have like real estate i didn't have any house you know just you're just kind of uh and also i was jumping around between solo and new york america so i was a kind of a little bit nomad so you know always you're on the edge of collapse i don't know whether whether you're going to be uh you know being able to pay your employees in three four months right so i suddenly one day uh you you have a lot of money in the bank account but ultimately I don't know it's weird because I didn't I was never trained to enjoy money or something like this so it was for seven years I was just looking for that kind of big moment where things work out so once I got that okay you can do something you can get good meals, you can party or you can go travel blah blah blah but ultimately because that was not something that you were working towards it's not as enjoyable right so and then ultimately the dopamine that you get from like just big breakout it's just so much greater than anything you can enjoy from money right so so and like and as an entrepreneur you just keep yarning for the mode so so i was like okay i i it was really really really really rewarding and it was really really fun it was super exciting you had you were you were also it's like a lot you had this dopamine effect right you want to have that again and so you start another company it's addictive yeah it's that that's that's it it's all these small wins and these highs that you get from entrepreneurship and the money is kind of like a consequence of it that shows you that you're doing the right thing.

21:43Right. But, but, but actually that's it. And, and, and if, if, if that's the only goal, the happiness is not going to last long for a true entrepreneur. Also, if you're very successful, you, you probably don't have that much time to enjoy the money. Yeah, for sure. Number one, number two. Also, also, I think it's just a means to really save your time massively. Very true. Right, yeah, so that you can do whatever you want and focus on what you want to do, yeah. Quick one. I want to thank our partners who help us make this show possible. Thank you, Trezor. My favorite cold wallet to store my crypto and make sure I sleep well at night.

22:23If you want to order a Trezor wallet and sleep well at night too, you can use my promo code WSH10 to get a 10 % discount. Big thank you to Bitwise Asset Management for backing today's conversation. Bitwise is a crypto specialist asset manager with more than$15 billion in client assets across 30 plus crypto solutions, including ETFs, index funds, alpha strategies, staking, and more. However you like to invest in crypto, Bitwise has something for you. Thank you to our friends at SWE for supporting this show. SWE is a scalable layer one blockchain that's fast, secure, and affordable, built by previous Facebook developers, and that delivers the benefits of Web3 with the ease of Web2.

23:04Thank you to Story Protocol, the IP layer of the internet, for supporting today's conversation. Story is building an open system for creators to register, manage, and grow their IP on-chain. Whether you're building words, stories, or characters, Story Protocol gives you the tools to protect and expand your creative universe. To support this show, please check the sponsor links in the description down below.

23:29What's the absolute hardest thing that you had to do to make that first company work? I think the hardest thing that I had to do was, I think the hardest moment was, there was this moment when I was promised funding by a big investor. And I was naive. As an entrepreneur, when I meet fellow entrepreneurs, I said, until it hits the bank, it's not the money. don't be excited by someone promising you money someone even signing the agreement there's still a chance that it's not going to be wired especially it's not a known player or it's like a big family office or some venture capital you met for the first time and their new venture capital not like a long not a long term famous venture capital like Andreessen Horwich or something so I was naive it's my fault but I thought the money was coming and I basically hired and executed in the business as if the money was coming and then the money actually by the time the money was supposed to come in the money didn't come in and I had three months of cash runway left and it went to one month of cash runway so I had a year of running the company where I had about a month of cash runway when I had to raise about 220 convertible notes 20 safe notes to keep the company alive right right right until until i get to a point where i got a bulk of funding that i could have a one and a half or two years of runway so that was that was like the toughest time in my in my time because you know it's it's really hard when you have all these employees yeah you pretend the money's there and i think people knew because i was like fundraising all the time right but but but i just didn't just didn't have them i just just the money just didn't come in yeah a similar story i mean probably much lower scale but one of the sponsors of this podcast a year ago a bit more one of our first sponsors they started to sponsor and they planned the biggest tg and all that stuff but they started to spend as if they would raise the amount of money that they had targeted to raise at tg so they spent millions of dollars and there were basically millions of dollars in the hole right and they're like it's in his mind which for a normal entrepreneur, I think it just makes no sense.

26:13Right. But he was like, we'll get the money that date. Right. And then the launch went, turned out to go bad. And there was some problems and basically they raised pretty much no money. And then the whole thing went to shit and we never got paid. But you know, like when you, when you, when you anticipate, it's not exactly the same, but it's kind of similar. You anticipate your, I think as an entrepreneur, you have this thing where you kind of, especially maybe in the beginning, you can be in denial like you're so overly optimistic yeah yeah no no so this is the hardest psychology especially when i meet a young entrepreneur and that's that it's that optimism energy that actually makes them start the company right but but the truly successful entrepreneurs what happens is i i say they're long-term overly optimistic short-term extremely pessimistic midterm even more pessimistic So what I tell is when I see this 23-year-old, 24-year-old, 27-year-old entrepreneur, or even my friends, they come in.

27:19I worked at this big McKinsey whatever firm. I want to start this company. I saw this working in America. I want to copy and paste this into Korea. And I say, OK, this is all good. But you're 35, right? It's going to go well when you're 42 or 43. I just tell them very, very seriously because it's just no business If it goes well at all If it goes well at all But if I tell this pessimistic story over and over in the seventh time they still want to do it then, okay, do it So that's how I actually do it That's so interesting A bunch of my friends wanted to start businesses and they're like, Kevin, what do you think?

28:02And I'm the one, super pessimistic too because I've been doing business since 10 years right but i want them to start but i'm like and i don't want to be the party pooper but i'm like whoa whoa whoa right and then they're like they almost they go to all the other friends who basically never started a business and everybody's like yeah it's the best thing go for it go for it and i'm like the one who is like pretty pessimistic and then they take it personally and they're like yeah kevin think he's too good or and and that my thing is shit and i'm like no first of all i'm never gonna judge you because uh i think it's dunning kruger effect right like you can be very good at something, but very bad at something else.

28:38Right. So I'm not going to be better at your thing than you, you know, right. So I cannot also tell you if it's good or not, because you know, it's from your guts, but also I know all the shit that comes with it and you better be prepared. And that's why I'm basically not that optimistic. It doesn't mean I'm pessimistic, but like, it means like I'm realistic. Yeah. Yeah. No, no, just, just, I, I, you need, you need long-term optimism to be, to have the grid and stay on and just keep fighting. But I think everyone needs to know it's going to take a long time. And actually, especially in crypto.

29:11And in Web2, it's just very usual for it to take 10 to 20 years until liquidity. And then here, everyone sees all him teaching, that teaching within two or three years. So I think the talents I see here, they're so short-term. but ultimately it will take five to ten years at least yeah you talk about unlocking the 80 trillion dollar ip asset class yes can you explain so intellectual property is a massive asset class everything from like characters like pudgy penguin to to uh you know you know mickey mouse to a music catalog, which gives you 7 % to 15 % yields, like real estate, a great Justin Bieber song.

30:08It's like voting a Manhattan real estate because it's just going to keep pumping out yields. And also as more streamers come in, the value of the catalog will go because there's more streamers coming in from India and Africa and so on and so forth. And it's all these great IPs. games, what have you. Plus biomedical patents, all these patents are also great IPs, brands. Also, I think we only focus in compute for AI, right? And I don't know if you watch this company just get access recently, Scale AI. Basically, it's an admission. And now Mark Hor became a$10 billion valuation company within a year and a half of launch of its product.

31:03Because data is the gold. Data IP is the gold of AI. So models is very commoditized. Compute is just table stakes, NVIDIA, NVIDIA chips. But what's actually going to make this robotics model better than that robotics model, or this pharmaceutical model, better than that model. It's all going to depend on data. And data, every single data piece is a great IP, right? Great IP, right? So with AI race, I think IP is going to get more and more important. And this is basically, this figure is coming from World Intellectual Property Office, right? So that it shows the size of IP. And it's usually that IP asset class, it's very, there's no liquid market around it.

31:52And also, so there's two things, economic rights around it, like owning it. There's no liquid market. Secondly, the usage of those IPs. There's so many red tips. If I want to use, you know, if I want to use, for instance, this character, Hello Kitty character, to create a game. If I want to use these data sets to train my AI model, you have to talk to a lawyer, you have to talk to an agent, You don't know who owns what. It's so unclear. So it's a very opaque market. Lots of friction on top of that illiquidity. Can you give me two examples? I mean, talk about LOKT character or data model. Maybe some examples, concrete example.

32:39That's the beginning of an example, but concrete example of IP assets that are not unlocked today, but should and will be. So to give you an example, I'll start with my

32:55what story is story tokenizes IP so that IP is liquid like a stock like a crypto token second is story programs the IP so IP turns into a Lego piece where anyone can use it without any middleman disintermediating any middleman around usage of IP so the first First, we have a protocol called ARIA protocol on top of story. Think of it as almost like Ondo for intellectual property, RWE protocol for IP. The first assets that they went after are music assets. And they've acquired everything from Justin Bieber's song to Blackpink's song or BTS song. Each of these IP gives you 7 % to 12 % yields. how because every stream that people play for justin bieber's song justin bieber uh you get revenue from this ip so it's a very great cash flow generating asset like real estate and the value of that ip oftentimes some of the great masterpieces iconic songs go up as more streamers enter the market you said they acquired this ip so it means they go to justin bieber's team and say hey, can we buy this?

34:17How does it work? It could be Justin Bieber's team directly, or it could be music composers, producers. The IP is owned by, there's an IP cap table. There are actually different people who own the IP partial rights. Is this even clear in the web tool or music world? Is there some database or something where each part of a song is owned by different people? How does it work? Even that IP registry, that's one of the things that we can work on. But it's now a very active financial market. So firms like KKR, Blackstone, Apollo, they have a multi-billion dollar music catalog. And they exit to sometimes UMG, where they flip it.

35:07But this IP is like owning lots of buildings in Manhattan because it gives you out yields. And also the value goes up as more streamers come in. over time in developing countries. So basically they brought a bunch of partial rights from all these music assets. And not only that, because we kind of follow the Web3 ethos, not only we give them cash yields of this IP, we also gave them some IP tokens for participating early in this investment. So a lot of people, if they held onto IP tokens plus this yield, they're getting like 20 to 70 % yields on these intellectual property assets. So that's an example of music assets.

35:55Or secondly, let me give you an example. I've been talking to a lot of Korean IP holders, and Korea is now the Hollywood of the globe. I think it's a real Hollywood. Because if you think about it, number one Netflix movie, K-pop Demon Hunter, number one Netflix series in history, Squid Game number one boy band in the last 10 years BTS number one girl band Blackpink all these biggest IPs are coming out of Korea right and if I talk to these creators I talk to one of the these top creators who was not who were number one on Netflix they they really desperately won for their next IP they want to be able to own like how George Lucas owned Star Wars or Walt Disney owns Mickey Mouse.

36:46So is there a way I can go directly to the fans and raise the funding, right? I'm going to also bet myself on this IP with some production studios, but can the fans also participate? And we get independent financing. I'll sign Netflix. And then can I license it to Netflix later down the line once I've actually built out the IP myself, right? Yeah, so that kind of thing, you can actually solve your tokenization. How is that different from social tokens or NFTs or what they could have been? Because a couple of years ago, 2021, I was talking with Raul Pal, and he was talking about the social tokens.

37:31And for example, you tokenize yourself, tokenize your band. Imagine you're Coldplay, but in the very beginning, and you want to raise some funds, and then you launch the Coldplay token for people who believe in you and all that kind of stuff, which is kind of similar. So I'm trying to understand if there is a difference here or if it's just that the social token never really happened. It's actually really tied to the underlying intellectual property as opposed to... A person. Okay, so it's more granular, basically. It's more tied to the real world. It's a real world asset. It's RWA. It's an actual IP that actually, with legal backing, so on and so forth.