“What should be owned in the Metaverse, and how? This is a philosophical question.”
In January, before Spice DAO dropped $2.7 million on a rare copy of Alejandro Jodorowsky’s production book for Dune at Christie’s, the group tweeted its intention to “tokenize” the book. This is a typical common IP misconception related to NFTs – the purchase of a physical book does not necessarily equal the transfer of the book’s copyright. Therefore, Spice DAO has no right to recreate as they don’t own the copyright.
Releasing NFTs raises many intellectual property-related issues, such as:
- Who has the right to create and issue NFTs?
- Does NFT infringe on the rights of third parties?
- What rights are transferred and resold?
- How is this transfer of rights accomplished?
Even if there is no intention to create and distribute NFTs, brands and copyright owners must be vigilant in protecting their IPs in the metaverse and web3 industry.
Euterpe – IP-NFT as a Service
Euterpe is the world’s first IP-powered NFT as a service. It is a marketplace where musicians, filmmakers and other creators can offer high-quality IP-NFTs of their works to fans. The concept of “IP-NFT” was first described by Euterpe. For the Euterpe team, the true value of an NFT depends on what it is anchored to.
- Copyright owners can obtain long-running copyright royalties;
- Copyright investors can invest in IP-NFT by participating in auctions and secondary market transactions to obtain transaction income and royalties;
- Fans can support their favorite artists and works, earn tokens and earn rewards by playing, promoting, voting, etc.
Euterpe’s whitepaper is the first blockchain whitepaper in the world published by an SSCI law journal and awarded the Top Prize by the International Machine Lawyering Conference 2021.
Euterpe has built a team mainly comprised of Stanford graduates, including several Stanford alumni from Law School, Scientific Computing, and Business School. Its members served as fellow at Stanford Center of Internet and Society, director of Intellectual Property and Technology Law Program at the University of San Francisco, counsel for International Phonographic Association and the American Motion Picture Association and other leading blockchain innovators and IP experts from Google, Tencent Music, ByteDance, Sony Music, Alibaba Entertainment and Warner Bros. Its core team members have more than ten years of experience in copyright, law, finance, and computer fields. Euterpe has also established partnerships with several players in the industry, such as Stanford Codex: Stanford Legal Informatics Center and HKFAEx: Hong Kong Financial Assets Exchange Group. In terms of financing, Euterpe’s seed round of financing was led by Fenbushi Capital.
After several product iterations and copyright negotiations, Euterpe successfully launched its first IP-NFT auction on December 27, 2022. The auction adopted Vickrey auction mode. This mechanism was developed by two Stanford business school professors（Paul R. Milgrom and Robert B. Wilson）, who are Nobel Prize winners. Bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins but the price to be paid is the second-highest bid. This new model gives bidders an incentive to bid their true value.
This auction method has several benefits for the IP-NFT buyers:
- The winning bidder pays the second highest bid instead of the highest bid;
- The IP-NFT copyright owner obtains its real value and bidding value;
- Bidders will be self-motivated and willing to bid the highest price;
- The winning bidder can get the balance between the highest price and the second highest price.
For example, during the auction, a bidder bid 0.05ETH for “Hello” of Shan Yichun. When a bidder bids, he won’t bid more than 0.05ETH because he thinks the NFT’s highest value is that much. But, on the other hand, the bidder also won’t bid less than 0.05 ETH, because he may think that if he bids less than that, he may lose his bid. Thus, we find that in Vickery auctions, buyers are willing to make bids for the item reflecting the actual value of the song, and the buyers have stronger incentives to bid at a higher price in order to win the bid (even if he wins the bid, he does not have to pay his bid price).
Suppose there are four bidders participating in the bidding process of Zhou Shen’s “Together” in Euterpe auction. Bidder A bids 0.03ETH, Bidder B 0.055ETH, Bidder C 0.035ETH, and Bidder D 0.045ETH. Bidder B have placed the highest bid and would win the auction bid. In the Vickrey auction, although Bidder B wins the auction with a bid of 0.055 ETH, he will only pay the second highest bid, which is 0.045 ETH. In this way, he would finally get a surplus of 0.01ETH. Therefore, in a Vickrey auction, each bidder can bid with confidence as he will always pay less than his bid, thus the second highest bid.
The First Application of Vickrey Auction in Web3
The Vickrey auction on Euterpe, which started on December 27, was a huge success. 213 IP-NFTs (3 copyright songs, 71 NFTs for each song) were auctioned at the same time and all successfully were sold out. With the auction reserve price of 0.01ETH, the total bidding price hit 11.4 ETH and the total purchase price reached 5.68 ETH. The highest purchase price of a single NFT hit 0.03 ETH, which was 3 times the reserve price.
3 copyrighted songs auctioned were:
- “Stay Together” by Zhou Shen
- “Hello” by Shan Yichun
- “Dance Underwater” (feat. TITIAN) by Pet Conspiracy
All successful bidders can collect their items and trade on the Euterpe website at 18:00 on January 8, 2023 (UTC+8). One of the big buyers who participated in the bidding shared his experience in the community. When asked why he bought more than 10% of the auctioned items, he mentioned his childhood idol – The Beatles. “Yesterday,” one of the Beatles’ biggest hits, is said to have been written by Paul McCartney in 1964 and earned $30 million in royalties and becoming one of the 10 songs that has brought the most royalties for the copyright owners. “Every Breath You Take” by Sting from British rock band, has brought him $20.5 million in royalties since its release. Sting still gets $730,000 royalties annually.
J.K Rowling’s “The Wizarding World of Harry Potter” series is one of the most famous IPs in the world. Since 2000, the IP has created around £820 million for its owner, J.K Rowling. In those areas with sound laws and regulations, the royalties of literary and artistic works (including but not limited to music, movies, books, etc.) are magical. Once a work is recognized by the audience, the owner is able to live on the royalties of this work for the rest of his life. Euterpe adopts the smart contract to protect the interests of NFT owners and allow the royalties generated to be distributed among the NFT holders.
Whether you are a professional NFT investor, a music lover, or an artist fan, you can get Gold NFTs by purchasing a Mystery Box and earn the royalties generated. You can trade the Gold NFTs 2 days after the mystery box mint ends on January 8, 2023. Copyright royalties will be generated from music streaming media, offline KTV, entertainment venues and secondary development, etc.
In addition, the IP-NFT holders can enjoy other benefits, such as future autographs for the creator/singer, meet-ups, premieres and collectibles.
For those who hope to get high profits through NFT investment, several factors need to be taken into consideration before entering the market.
Firstly, we need to know what makes NFTs different from other digital assets such as cryptocurrencies or stocks. NFT is created when someone takes ownership of a piece of art or music, which is stored on blockchain and tradable in exchange for payment in cryptocurrency(such as Bitcoin). Each NFT has its own unique identity that cannot be replicated by anyone – making them more valuable than traditional investments because they are not subject to inflationary like fiat currencies. Euterpe enables NFT holders the copyright protection(and the generated copyright royalties).
Secondly, we need to know which platforms can provide liquidity. The partnership fostered between Euterpe and many labels indicates that Euterpe is recognized by the traditional music market as an entry to the Web3 world. If you think about your decisiveness in changing the music app to follow your favorite singer, you can understand that the traffic goes with copyright.
Thirdly, we need to take into consideration the possibility of continued profitability. Euterpe’s built-in SocialFi provides users with an opportunity to earn token rewards by playing, sharing and voting. This innovation makes Euterpe a community where all players are motivated to benefit mutually. The logic behind is simple: as more and more people join Euterpe’s SocialFi, OG members will get more token rewards. By engaging a larger user base, it creates a self-sustaining cycle where everyone will benefit from their contribution to the community.
In addition to SocialFi’s token incentives and potential royalties from NFT sales, Euterpe’s IP-NFT can also provide users with exclusive experiences behind NFT creation or three-dimensional special benefits (such as meet-ups, signatures, etc.). At the same time, the social nature of the platform connects fans around the world with similar interests in music styles—creating a completely unique social experience in its own kind. Individuals in the ecosystem benefit from each other rather than being the disadvantaged groups – allowing everyone involved (artist/creator/listener) to get sustainable profits over time.
To make it simple, investing in NFT is likely to lead people to their first fortune. It is a smart choice to choose a trusted platform with higher probability! In the long run, Euterpe regards NFT as an important infrastructure of the metaverse and a gateway to the layout of the metaverse, where most assets other than homogeneous tokens exist in the form of IP, which can be represented in NFT. Euterpe starts from music IP and will gradually expand to video, books, games, offline concerts, celebrity peripherals, patents and trademarks in the future. Euterpe will extend to a broader application scenario in the Metaverse. Amazon started as a book-focused company but eventually became the Everything Store of the Web 2 era. Euterpe will forge ahead to become the Everything Store of the Web 3 era.
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