The Future of Licensing is Embedded in the Asset

Creator royalties on NFT marketplaces are optional and easily bypassed, leading to ~80%+ non-compliance on secondary sales. This breaks the fundamental economic model for artists and IP holders.

• Market Fragmentation: Each platform implements its own, often weak, enforcement.
• Zero On-Chain Enforcement: Royalties are a social contract, not a technical one.

EIP-5218 (Adjuncts) proposes a standard for non-consensual transfers, allowing assets to embed logic that can block, tax, or modify unauthorized sales. This makes licensing a first-class citizen of the token.

• On-Chain Enforcement: Royalty logic is executed at the protocol level, not the marketplace level.
• Composability: Works across any EIP-5218-compliant marketplace, exchange, or bridge.

Manifold's Royalty Registry acts as a canonical on-chain source for royalty information. Paired with ERC-7496 (NFT Rights), it enables dynamic, upgradeable rights modules attached to NFTs, shifting power from platforms back to creators.

• Dynamic Updates: Creators can modify terms post-mint without breaking the NFT.
• Universal Hook: Any marketplace can query the registry for enforceable terms.

A16z Crypto packaged Creative Commons-style licenses as ready-to-deploy Solidity code, making open-source IP licensing verifiable on-chain. This solves legal ambiguity for derivative works and commercial use in Web3.

• Legal Clarity: Pre-vetted, standard legal text reduces friction and risk.
• Machine-Readable: DApps can automatically check permitted uses.

Story Protocol builds a programmable IP layer, treating IP as a composable primitive. It creates an attribution graph for derivatives, automating royalty flows and permissions for remixes, akin to a version control system for creativity.

• Automated Royalty Splits: Revenue automatically flows to all contributors in a derivative tree.
• Granular Permissions: Set terms for specific use-cases (e.g., commercial vs. non-commercial).

Embedded licensing transforms IP from a legal afterthought into a key financial and composability layer. The stack winners will be those providing the standards (EIP-5218, ERC-7496), registries (Manifold), and programmable layers (Story) that make this seamless.

• New Business Models: Subscription NFTs, time-bound access, revenue-sharing tokens.
• Institutional On-Ramp: Clear, enforceable on-chain terms are mandatory for large-scale IP.

Today's NFTs are dumb bearer instruments. A single on-chain sale triggers a royalty, but subsequent off-chain licensing deals, merchandising, or derivative works are untracked and unenforced, leaving billions in potential revenue unclaimed. The asset's utility is frozen at mint.

• Royalty Leakage: Secondary market royalties are easily bypassed.
• No Usage Tracking: Real-world commercial use is invisible to the IP holder.
• Manual Enforcement: Legal action is the only recourse, costing >$100k per case.

Embed a smart contract wallet (like ERC-6551) within the NFT itself. This account becomes the asset's compliance engine, autonomously executing license terms for any interaction.

• Automated Royalty Splits: Directly route payments to creators, co-creators, and DAOs on any revenue event.
• Permissioned Access: Gate derivative minting or API access behind a verified payment to the token-bound account.
• Persistent Attribution: The license and provenance travel with the asset across all markets.

IP exists in both digital and physical realms. An NFT for a sneaker design has no connection to the factory producing physical shoes, creating a verification gap. Oracles are too generic and slow for high-frequency, high-stakes commercial data.

• Data Silos: Production volumes, retail sales, and geo-location are off-chain.
• Oracle Latency: ~5-minute update cycles are useless for real-time licensing.
• Trust Assumption: Relying on a single oracle reintroduces a central point of failure.

Deploy lightweight, application-specific attestation networks (e.g., HyperOracle, Brevis) that generate ZK-proofs of off-chain events. The NFT's embedded account trusts and acts on these verified data feeds.

• Real-Time Proofs: Verify a manufacturing batch completion or retail sale in <2 seconds.
• Modular Security: Choose attestation networks based on speed/cost/security trade-offs.
• Censorship-Resistant Triggers: License fees trigger automatically without a centralized intermediary.

Smart contracts are immutable, but copyright law and licensing terms change. An embedded license from 2024 may be illegal or unenforceable in 2030, creating permanent compliance risk. Upgradability introduces admin key centralization.

• Legal Rigidity: Cannot amend terms for new jurisdictions or case law.
• Upgrade Dilemma: Proxies and multisigs betray decentralization principles.
• Forking Risk: Inflexible contracts will be forked by more adaptable competitors.

Embed a governance module within the token-bound account that allows rights holders to vote on parameter updates, with long time-locks (e.g., 90 days) for major changes. Pair this with off-chain legal frameworks (like OpenLaw TTLs) that reference the on-chain state.

• Controlled Evolution: License terms can adapt with supermajority consensus.
• Transparent Process: All proposed changes are visible and contestable on-chain.
• Legal Synergy: On-chain code provides audit trail for off-chain legal agreements.

Off-chain agreements and centralized marketplaces have failed to enforce creator royalties, leading to >90% non-compliance on major NFT platforms. This creates a $1B+ annual leakage for creators and undermines the economic foundation of digital art and music.

• Key Benefit 1: Code-enforced revenue streams become a native property of the asset.
• Key Benefit 2: Eliminates reliance on the goodwill of intermediaries like OpenSea or Blur.

Projects like EIP-5218 and ERC-6956 define on-chain licensing as a core smart contract standard. This turns static NFTs into dynamic, self-enforcing financial assets where terms are verified at the protocol level.

• Key Benefit 1: Enables complex, automated revenue splits for collaborators (e.g., 50% to artist, 30% to label, 20% to producer).
• Key Benefit 2: Unlocks new asset classes like licensed music stems for AI training or composable game assets.

Embedded licensing transforms IP from a legal claim into a tradable, composable financial instrument. This creates a new DeFi primitive where future royalty streams can be fractionalized, pooled, and used as collateral.

• Key Benefit 1: Enables royalty-backed lending and yield generation on platforms like Goldfinch or Centrifuge.
• Key Benefit 2: Drives the convergence of DeFi and IP, creating a transparent, global market for intellectual property rights.