I love meeting other writers, and this week I had the pleasure of speaking with Noah Edelman, a freshman at Northwestern University and co-author of Shift, a newsletter focused on the 101 of Web 3. Noah is impressive, and if you’re brand new to Web 3, Shift is an approachable place to start.
This week, we’re back talking about NFTs.
The topic…open source IP. Creations whose creators intentionally put them in the public domain for mass consumption, but more importantly, mass ownership. It’s counterintuitive in a world that places so much value on scarcity, and where artists and brands vigilantly protect their IP with armies of lawyers. Yet somehow in Web 3 this feels…natural. Creating something, giving it away, and seeing what others do with it is just part of the culture.
To no one’s surprise, passionate ecosystems are developing around open source assets, leading to a wave of decentralized brands that have community at the center, not licensing.
It’s a new model where IP becomes the platform, and it will shake up media, entertainment and fashion.
Let’s zoom in…
The Status Quo
When you create something new, you are entitled to certain rights as the creator. Your idea, and the manifestation of your idea into something consumable (art, music, book) is an asset and worthy of protection.
There are massive legal structures in place today to protect intellectual property rights, because as a society, we want to encourage and incentivize creation. No protection, no incentive. Copyrights, trademarks, and patents are the vehicles for protecting our novel ideas and creation, and there are government offices like the USPTO dedicated to registering these rights.
IP rights are coveted, coveted assets, particular in media and entertainment, and the large IP holders (i.e. movie studios and fashion/apparel brands) employ massive legal teams to protect and enforce their rights around the world.
If you start selling knock off Air Jordan’s online, expect a cease and desist from Nike within a month. From Nike’s perspective, you are destroying their brand’s value.
This model where IP ownership is centrally controlled impacts how these businesses operate. They control their innovation, design, manufacturing/production, distribution, and to some extent, retail. When they want to expand the reach beyond their four walls, they license certain rights to third parties in exchange for a fee.
Another way to think about protected intellectual property is a permissioned asset. You can consume/use with the creator’s permission. For the creator, this helps maintain a price point to maximize earnings.
Early NFT collections like Cryptokitties and Cryptopunks are a chip off the old block from an IP ownership standpoint. They were released under licenses designed to protect the creator’s IP rights. Under the NFT License (actual name), the NFT owner has complete ownership over the token, and the right to (i) display the image, and (ii) commercialize the image up to $100,000 each year. Everything else remains with the creator. The $100k commercialization threshold translates to “for hobby purposes only”. No one is motivated to put $100k+ into an idea when revenue is capped at $100k/yr.
This model can be successful, and has been successful, for creator. Like media and fashion brands, NFT value is largely based on scarcity. They have it, and you are willing to pay for permission/access. It works.
But in an ecosystem predisposed to decentralization and community-managed projects, it’s intellectually boring and culturally dated.
In the last year, we’ve seen a departure from creator-friendly licenses in favor of collector and community-friendly licenses.
Bored Ape Yacht Club famously assigned the IP rights of each ape to the owner of the NFT. More noteworthy though is the movement around open-source IP placed in the public domain the moment it is created.
Nouns is the poster-child of the open source IP movement. Nouns NFTs are issued under the Creative Commons “No Rights Reserved” license, or CC0. Anything released under a CC0 license is in the public domain.
Nouns bucks conventional wisdom by allowing anyone to be a brand steward.
I’m fascinated by the impact an underlying license has on a brand’s ability to cultivate community.
The question I’ve been asking myself this week is “do BAYC and Nouns have stronger communities because of more permissive licensing?”
It certainly creates stronger incentives. There are 6,400 owners of Bored Apes, each with the ability and incentive to infinitely commercialize their asset, compared to one corporate owner of Cryptokitties, for example. And because Nouns are public domain, technically there are 7.9 billion potential owners, though thousands is more realistic.
The answer to the above question seems to be “yes”.
The most interesting aspect of open source IP though is what’s underneath the community.
When IP becomes a Platform
Platforms need to be flexible. The don’t dictate what is built on top, they leave that up to the community.
CC0 projects like Nouns have become creative platforms for their communities. There are currently 127 derivative or extension projects based on Nouns. There are websites dedicated to the Noun ecosystem, derivative NFT projects, and multiple online stores selling Nouns-inspired merchandise.
The most powerful thing about this is that a lot of the people starting “spin off” projects don’t own Nouns. They don’t need to. They can participate/add value in the community without owning an original Noun NFT.
My prediction is decentralized brands that become successful platforms will be formidable competitors to traditional, centralized brands for the simple reason that they incentivize a larger group of people to contribute. Better community always wins.
If you’re interested in reading more about NFTs and open source IP, here are a few suggestions:
NFTs and CC0 by William Peaster (The Bankless Metaversal Newsletter)
After Copyright: Pwning NFTs in a Clout Economy by Professor Brian Frye
Thanks for reading,
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