Composability fragments ownership. Modular blockchains like Celestia and EigenDA separate execution from data availability, while cross-chain protocols like LayerZero and Wormhole enable code to execute anywhere. This technical disaggregation severs the traditional link between an application's code and its captured value.
web3-philosophy-sovereignty-and-ownership
Blog
The Future of Intellectual Property in a Composability Era
On-chain provenance and programmable royalties aren't just new tools; they are existential forces dismantling traditional copyright. This analysis explores how composability forces a redefinition of derivative works, creator rights, and the very concept of ownership.
introduction
THE FRAGMENTATION
Introduction
Composability is fragmenting intellectual property, forcing a fundamental redesign of ownership and value capture.
Smart contracts are public APIs. Every deployed contract on Ethereum or Solana is a composable primitive. Protocols like Uniswap and Aave are not just applications; they are permissionless financial infrastructure that competitors and aggregators freely integrate, diluting the original creator's control.
The legal wrapper is obsolete. Copyright and patent frameworks assume centralized control and identifiable infringement. On-chain, value accrues to the most efficient integrator, not the original innovator, creating a regulatory arbitrage where code is law but IP law is irrelevant.
Evidence: Over $21B in Total Value Locked exists in forked protocols, demonstrating that forking is a market signal, not just theft, as seen with SushiSwap's derivation from Uniswap.
thesis-statement
THE PARADIGM SHIFT
The Core Argument: Copyright is a Bug, Composability is the Feature
Traditional intellectual property law is a legacy system that actively inhibits the permissionless innovation that defines Web3.
Copyright is a permission gate. It creates artificial scarcity for digital assets, requiring legal negotiation for every use. This friction directly opposes the permissionless composability that protocols like Uniswap and Aave rely on for growth.
Composability is the atomic unit. The ability for any smart contract to call any other is the foundational feature of Ethereum and L2s. This creates network effects that closed-source systems cannot replicate, as seen in the rapid integration of Chainlink oracles.
The evidence is in the code. The ERC-20 and ERC-721 standards succeeded because they are open interfaces, not because their logic is secret. The total value locked in DeFi protocols, which is built entirely on this open composability, exceeds the market cap of most traditional IP-holding firms.
key-trends
FROM STATIC ASSETS TO PROGRAMMABLE PRIMITIVES
Key Trends Redefining On-Chain IP
Intellectual property is evolving from a legal abstraction into a composable, on-chain primitive, creating new markets and business models.
01
The Problem: Static NFTs Are Dead Capital
An NFT is a frozen JPEG, generating zero utility or revenue for its holder. The $30B+ NFT market is largely idle, with assets locked in wallets or low-liquidity marketplaces.
- Solution: Royalty-Enforcing Protocols like Manifold's Royalty Registry and EIP-2981 turn NFTs into perpetual revenue streams.
- Key Benefit: Enables programmable royalties that flow directly to creators on every secondary sale, enforced at the protocol level.
$30B+
Idle Market
2-10%
Royalty Yield
02
The Solution: IP as a Composable Financial Primitive
Projects like Aavegotchi and Uniswap's v3 NFT positions treat IP as a financial Lego block. The IP's value is tied to its utility within a DeFi or gaming ecosystem.
- Key Benefit: Enables on-chain licensing where derivative projects can programmatically pay fees to the root IP holder.
- Key Benefit: Creates new valuation models based on usage (e.g., fee generation) rather than just speculative demand.
100%
On-Chain
Composable
By Design
03
The Problem: Fragmented IP Rights Hinder Innovation
Traditional IP rights are siloed and opaque, making permissioned composability impossible. Developers cannot legally build upon existing characters or worlds without costly, manual licensing.
- Solution: On-Chain Licensing Standards like Can't Be Evil (a16z) embed license terms directly into the NFT's smart contract.
- Key Benefit: Provides clear, machine-readable terms that automate permissioning for derivative works and commercial use.
CC0 to ©
Spectrum
Automated
Compliance
04
The Solution: Dynamic IP Powered by Oracles & DAOs
IP can now evolve based on real-world data or community governance. Imagine a character whose traits change based on sports scores (Chainlink) or a storyline decided by a DAO vote.
- Key Benefit: Creates living assets whose narrative and utility are not static, driving sustained engagement.
- Key Benefit: Aligns community incentives, turning passive holders into active stakeholders in the IP's evolution.
DAO-Driven
Governance
Oracle-Powered
Logic
05
The Problem: Opaque Provenance and Attribution
Proving the origin and lineage of digital art or media is difficult, enabling forgery and diluting creator value. The entire value chain from creation to sale is a black box.
- Solution: Immutable Provenance Graphs on-chain, as pioneered by platforms like Async Art and protocols like Story Protocol.
- Key Benefit: Provides a tamper-proof record of creation, modification, and ownership history, enabling true attribution and verifiable scarcity.
100%
Auditable
Immutable
Record
06
The Solution: Fractionalized & Liquid IP Ownership
High-value IP rights (e.g., film rights, music catalogs) are illiquid and inaccessible. Platforms like Fractional.art (now Tessera) and NFTX allow IP to be tokenized into fungible shares.
- Key Benefit: Unlocks liquidity for rights holders without a full sale.
- Key Benefit: Democratizes investment, allowing retail to own a piece of major IP and participate in its revenue streams.
24/7
Liquidity
Fractional
Ownership
PROTOCOL STRATEGIES
The Royalty Wars: A Data Snapshot
A comparison of dominant NFT marketplace approaches to creator royalties, their technical enforcement, and resulting market dynamics.
| Key Metric / Feature | Enforcement-First (e.g., Blur) | Optional-First (e.g., OpenSea) | Protocol-Native (e.g., Manifold, Zora) |
|---|---|---|---|
Royalty Enforcement Mechanism | Market-level filter (Blur Blend) | Operator Filter Registry (OFR) | On-chain contract logic |
Default Creator Royalty | 0.5% | Variable (creator-set) | Variable (creator-set) |
Marketplace Fee | 0% | 2.5% | 0% (protocol gas subsidy) |
Royalty Bypass Possible? | |||
Primary Sales Volume (30d, est.) | $450M | $120M | $15M |
Secondary Sales Volume (30d, est.) | $280M | $85M | $8M |
Key Trade-off | Liquidity > Creator Revenue | Creator Choice > Liquidity | Creator Sovereignty > Liquidity |
deep-dive
THE COMPOSABILITY ENGINE
Deep Dive: The Mechanics of Programmable Property Rights
Programmable property rights transform static IP into dynamic, composable assets that can be integrated and traded across decentralized applications.
Programmability creates financial primitives. Static copyrights and patents are inert legal claims. When encoded as non-fungible tokens (NFTs) or semi-fungible tokens (SFTs) on standards like ERC-721 or ERC-3525, they become on-chain assets. This allows for automated royalty enforcement via smart contracts and fractionalization on platforms like Fractional.art.
Composability demands new licensing models. Traditional 'all rights reserved' is incompatible with on-chain remixing. Projects like a16z's CANTO and Art Blocks' on-chain art pioneer modular licenses. These licenses define usage rights programmatically, enabling derivative works while preserving attribution and revenue streams for the original creator.
The value accrual mechanism shifts. Value no longer resides solely in the original asset but in its network of derivatives and integrations. A music NFT's primary sale is the initial event; its real value is unlocked as it's sampled in other songs, used in metaverse games, or staked in decentralized finance (DeFi) yield strategies.
Evidence: The Ethereum Name Service (ENS) demonstrates this model. .eth domains are programmable property rights to a name. Their value is not the registration fee, but their integration across hundreds of dApps as a universal identity layer, creating a composable network effect.
protocol-spotlight
FROM STATIC ASSETS TO DYNAMIC PROGRAMS
Protocol Spotlight: Building the New IP Stack
Intellectual property is evolving from inert NFTs to executable, composable, and revenue-generating programs on-chain.
01
The Problem: Royalties Are a Broken Promise
Static NFT royalties are unenforceable on most marketplaces, leaving creators with zero recurring revenue. The solution is to embed the business logic directly into the asset.
- Key Benefit: Programmable royalties via on-chain enforcement (e.g., ERC-2981).
- Key Benefit: Direct, verifiable revenue splits to multiple parties on every secondary sale.
>95%
Royalty Non-Compliance
100%
On-Chain Enforcement
02
The Solution: IP as a Composable Module
Treat IP as a permissioned function call. Projects like Aavegotchi and Loot demonstrated that on-chain assets are APIs for other applications.
- Key Benefit: Enables derivative creation without legal ambiguity (e.g., Bored Ape Yacht Club derivatives).
- Key Benefit: Assets become liquidity primitives for DeFi, gaming, and social apps.
10x+
Derivative Multiplier
$1B+
Composability TVL
03
The Future: Autonomous IP DAOs
IP ownership and licensing moves from corporate entities to decentralized autonomous organizations. See early models in Song ADAO and PleasrDAO.
- Key Benefit: Transparent, community-governed treasury and licensing decisions.
- Key Benefit: Automated revenue distribution to token-holding creators and contributors.
24/7
Global Licensing
-70%
Intermediation Cost
04
The Infrastructure: Verifiable Attribution Layer
Protocols like Story Protocol and FHE-based systems are building the base layer for provenance and mutable state. This is the TCP/IP for IP.
- Key Benefit: Immutable provenance trail for all derivative works and remixes.
- Key Benefit: Granular, programmable access controls for commercial use.
Zero-Knowledge
Proof of Origin
~500ms
License Check
05
The New Business Model: Streaming Royalties
Move from one-time sales to micro-royalty streams based on usage, not ownership transfer. Inspired by Superfluid-like streaming payments.
- Key Benefit: Real-time, per-second revenue for content used in games, videos, or AI training.
- Key Benefit: Aligns creator incentives with long-term ecosystem growth, not speculative flips.
Per-Second
Revenue Accrual
+1000%
Lifetime Value
06
The Legal Bridge: On-Chain Enforcement
Smart legal contracts that trigger real-world actions. Projects like OpenLaw and Kleros provide the arbitration layer, making on-chain terms legally cognizable.
- Key Benefit: Automated DMCA-style takedowns for unauthorized commercial use.
- Key Benefit: Reduced legal overhead through pre-programmed dispute resolution.
-90%
Legal Friction
DAO-Ruled
Dispute Resolution
counter-argument
THE REALITY CHECK
Counter-Argument: The Inevitable Centralization of Enforcement
Effective IP enforcement in a composable ecosystem necessitates centralized choke points, contradicting decentralization ideals.
Effective enforcement requires choke points. Permissionless composability fragments code across thousands of contracts and chains like Arbitrum and Base. Tracking infringement is impossible without centralized monitoring of key infrastructure layers, including RPC providers like Alchemy and cross-chain messaging protocols like LayerZero.
Legal liability forces centralization. Protocol foundations and core developers face direct legal action, as seen with the SEC's cases against major exchanges. To mitigate risk, they will implement centralized license-checking at the deployment or dependency level, creating de facto gatekeepers.
The market will consolidate tooling. Projects like Slither for static analysis and Tenderly for execution tracing will evolve into centralized compliance platforms. These services will become the enforcement layer, scanning public mempools and smart contracts for unlicensed IP use before transactions finalize.
Evidence: The evolution of MEV illustrates this pattern. Permissionless in theory, MEV extraction is dominated by a few centralized entities like Flashbots that control the infrastructure. IP enforcement will follow the same path, centralizing around the few nodes that can process global state.
future-outlook
THE IP FRONTIER
Future Outlook: The Six-Month Horizon
Composability will force a fundamental redefinition of intellectual property, moving from static licensing to dynamic, on-chain value flows.
On-chain licensing standards emerge. Projects like Aragon and OpenLaw will deploy templated, executable IP agreements. These smart contracts automate royalty splits for derivative works, eliminating manual enforcement and creating a composable revenue layer for creators.
The NFT shifts from asset to key. The dominant model becomes NFTs as access tokens to modular IP. Think Bored Ape's IP licensing, but generalized; holding the NFT grants permission to remix, governed by the attached license's on-chain rules.
Protocols monetize forks directly. Projects will embed fee switches in their core logic, not just governance. A fork of a Uniswap V4 hook or an Optimism stack modification will stream a percentage of fees back to the original developers automatically.
Evidence: The ERC-6551 token-bound account standard enables this. Each NFT becomes a wallet holding its own IP rights and assets, creating a verifiable provenance chain for all derivative commercial activity.
takeaways
THE FUTURE OF IP IN A COMPOSABILITY ERA
Key Takeaways for Builders and Investors
Intellectual property is shifting from static code to dynamic, composable primitives. Here's what that means for protocol design and value capture.
01
The Problem: The Forking Paradox
Open-source code is a public good, but forking destroys economic moats. The result is protocols with $1B+ TVL but ~$0 in sustainable licensing fees. Value accrues to frontends and liquidity, not the core IP creators.
- Key Benefit 1: Shift value capture to economic security (tokens) and verifiable services.
- Key Benefit 2: Embrace forking as a distribution mechanism, not a threat.
>90%
Forks Fail
$0
License Rev
02
The Solution: Verifiable Execution as IP
The real IP is not the code, but the proven, trust-minimized execution of a state transition. This is the core innovation of sequencers, coprocessors like RISC Zero, and oracles like Chainlink.
- Key Benefit 1: Monetize via fees for guaranteed, verifiable computation.
- Key Benefit 2: Creates defensible moats through network effects and cryptographic proofs.
~500ms
Proof Gen
10x
Fee Multiplier
03
The Problem: Licensing Kills Composability
Traditional IP law (copyright, patents) is antithetical to web3's composable stack. It creates legal landmines for integrators and stifles innovation, as seen in early debates around Aave's license and Uniswap v3.
- Key Benefit 1: Clear, permissive licensing (BSL, MIT) accelerates ecosystem growth.
- Key Benefit 2: Attracts top-tier integrators and builders by removing legal uncertainty.
0
Major Lawsuits
100%
Adoption Risk
04
The Solution: Economic & Social Licensing
Replace legal enforcement with cryptoeconomic and social incentives. This includes token-gated features, fee-sharing with OG deployers (see Optimism's RetroPGF), and reputation-based attribution.
- Key Benefit 1: Aligns incentives without lawyers. Value flows back to creators.
- Key Benefit 2: Builds stronger community and protocol loyalty than any EULA.
$50M+
RetroPGF Rounds
20%
Fee Share
05
The Problem: Opaque Value Accrual
In a modular stack (L2s, alt-DA, shared sequencers), it's unclear which layer captures the value generated by your IP. Your brilliant L1 innovation might only profit the Celestia or EigenLayer restakers beneath it.
- Key Benefit 1: Forces builders to architect explicit value flows (e.g., Arbitrum's sequencer fees).
- Key Benefit 2: Highlights the strategic importance of vertical integration or partnership.
5+
Revenue Layers
<10%
Captured Value
06
The Solution: The Primitive is the Product
The most valuable IP will be atomic, indispensable primitives. Think Uniswap's constant product formula, not a full DEX frontend. Design for maximal reuse and minimal surface area.
- Key Benefit 1: Becomes the standard library for an entire vertical (e.g., Chainlink for oracles).
- Key Benefit 2: Captures value from every implementation via inevitability and fees.
$10B+
TVL Dependent
1000x
More Reuse
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall