I am continuing from the article that I recently published and this here is the second part.
If you have come across this article, please read this here first. https://research.muellners.org/nft-based-licence-of-oss/
So the question now is “Are we looking at a new form of NFT based open source license?”
Let’s continue the narrative using the example of Finscale as discussed earlier.
Finscale is a financial technology platform for embedded finance. It is a truly open source platform. It extends banking to digital services thus enhancing the open banking ecosystem.
Now, in terms of the platform licensing, we are looking at a new type of open source license where the license contents are: Ability to reengineer Finscale Ability to use and consume Finscale Ability to embody NFT value assigned against open-source platform accessibility rights: The way I visualise this is that a project maintenance committee (PMC) thus maintains a distribution platform for each interaction/integration of the open sourced Finscale platform. Basically,
- You can record multiple integrations on a blockchain of your choice.
- You can provide incentivisation too e.g on each successful improvement (in the form of a merged PR).
- The incentives can also be sponsored by other NFT holders who have vested interests in the project.
Think Github. The role of github in advancing the blockchain use cases and open source technologies is truly breathtaking.
An open source initiative is the one where the community has vested equity in the project. Imagine a global open source project where community members from different parts of the world, be it high income to low income countries, have this sense of equity. This is truly derived from a global governance model. Let’s talk more about the governance model later.
Now, let’s look at some prevailing concepts in the open source ecosystem: Traditionally, creators have had only such options:
i. Open source your work and relinquish all rights to it.
ii. Copyright your work, lock down your rights but severely restricting the reach of work And then there is a
iii. NFT License for blockchain applications and art.
An NFT License can offer a more practical middle ground when it comes to measuring a degree of monetization in open sourced projects.
We hope that a reformed version of NFT License provides a framework for developers/creators to establish sustainable businesses and offer them a secure path to monetization and IP valuation of their contributions. The NFT license, at its core, is a user agreement. Any NFT creator can literally copy and paste this license into their terms of service, and it will govern what users can and can’t do with their NFTs. Overall such an NFT license for open source should:
- Allow for digital portability.
- Give such NFT owners the right to commercialize the IP for their digital assets.
Finally, the license stipulates that experiences that use NFTs must cryptographically verify that the person using the asset truly owns it. If anyone could use any NFT, we wouldn’t need a concept of ownership at all!
I started digging deeper and thought more on extending and understanding NFTs as a medium for licensing closed source too:
What if all our software licenses were compatible and we could go to a single integrated app store and consume say three days of Adobe Creative Cloud and buy two days of Microsoft Office? This flexibility would be a clear win for consumers but may lead to a loss of revenue for highly centralised and copyright software creators. But what if this easy transferability of licenses reduced piracy for the same creators?
You can visit a simple proof of concept, representing software licenses as ERC721 tokens on the Ethereum blockchain, and using Metamask to passwordless login to a web app. https://atchai.com/blog/2018-04-11-software-licence-token-ethereum-erc721-fungible/
Or imagine if a closed sourced technology also defines access to their source code, when you have a sizable vested equity in that project. Consider Whatsapp or Apple lets you audit their source code when such secure and monetized access methods (based on NFTs) are available. In the end, you are tagging a value to this very event of accessibility. Nevertheless, we will cover this subject in another article. It’s a long story anyway. The NFT sector is evolving but still at its nascent stages in terms of commercially viable adoptions.
Coming back to Finscale, the NFT model against the open-source licenses of Finscale draws a framework of access to the project itself.
This form of open source and NFTs tagged software licenses allow end-users to study, modify, and distribute publicly accessible source code by anyone, to anyone and for any purpose. The production of open source technology usually relies on volunteer contributions and leads to the creation of communities, i.e groups of people interested in or working on specific projects. Communities form social networks where innovations are created and distributed. It is also our view that most disruptive technologies have a necessitated component immersed in open source engineering.
Network Effect within open source:
In economics, the phenomenon whereas the value of a good or a service is dependent on the number of people using it, is called the network effect. A positive network effect or network externality appears when the perceived value for any one user of a product, good or service increases as the number of other users grow. A classic example for a positive network effect is the telecommunication industry and its products like the telephone or the fax machine. The value of every phone or fax machine increases with every new one joining the network. It is worth noting that on the one hand, without other users in the network, the ownership of a phone or fax machine would be worthless. On the other hand, new users will most likely join the network with their own benefit in mind, but will create value for the community as a whole nevertheless.
Whereas the term “network effect” is usually associated with positive externalities and an increase in value, there can also be a negative network effect also known as “network congestion”. In this case, the value of a product drops as new users join the network. One example is when the data volume (needed for the product to function) surpasseses the transmission capabilities of the network.
Different types of network effects
Although, there may be many ways to segment different network effects, they most commonly fall into one of the following four categories:
- Direct network effects: In this first and simplest category, the increase in usage leads to direct increase in value. Telephone and fax service is an example of a direct network effect.
- Indirect network effects: Increase in usage triggers the production of increasingly valuable complementary products. This results in an increase of value in the original product. For example, the increased quality and availability of complementary applications for the Windows platform increases the value of the Microsoft operating system software.
- Two-sided network effects: Here, the increase in usage by one set of users increases the value of a complimentary product for another distinct set of users and vice versa. In networks where two interest groups are brought together, like in reader/writer networks, marketplaces and matching platforms, this kind of network effect can occur.
- Local network effects: In this case, an underlying sub-group of users directly connected to a user defines the value of the network. For example, the user of a social network is not directly influenced by the general growth of the user base but rather by the decisions and participation of a smaller, local subset of users or the group of users he or she is directly connected to.
Network effects in open source software development: Making use of online networks like github, other communities and resources like the Open Source Initiative (Open Source Institute (OSI)), developers in open source software projects can experience network effects of all four kinds: Once the code is opened up and can be further developed by anyone (or anyone in the network), an increase of qualified work on the code can lead to a direct increase of value. The addition of new complimentary software products, developed by members of the network can lead to an indirect increase of value of the original software.
By utilizing the user groups who solely and expertly test-use (or Beta Test) and feedback on the software in development, a network effect can also be two-sided as it creates value for both users and developers.
Most network effects relevant to open source software projects will also be local because the increase in value of a code in development usually depends on the participation of a highly specialized subset of users of a given network.
Consumer expectations regarding the size of the networks do play a crucial role in emerging community networks in the realm of open source initiatives too. However, the traditional approach barely addresses the origin of these network effects, focusing only on the number of users, regardless of their actual connection i.e. why, we introduce a redefinition of the network effect separating a potential component (related to the number of users) from the local component (related to the type or quality of connections and the topology of the network). We understand that there is a strong presence of network effects within Open Source projects, initiatives and communities.
Coming back to Finscale, the above NFT License / License token for our model of open-source accessibility rights to Finscale can be used. Here we can create our own M-FINS tokens or Collectibles NFT using Finscale Wallet to issue licenses against open-source contributions and bounties.
In a world where individual value or work is increasingly identified, recorded and traded as open source projects, these ideas might sound ‘outrageous’ yet they are now technically possible and economically feasible, while legally reforming.
About an open bounty platform: While planning Muellners Foundation’s bounties program for open source projects, we wanted to make sure that the developers find work and get paid to create value.
When it comes to bounties, whenever a contributor finds work, they come across a unique problem statement. How to assign a value to the solution of that unique problem? As the contributor owns the solution and one can typically reproduce the solution, the contributor can transfer the ownership to the another party on the same network and get access to a real value. Ofcourse, the solution (lets call it ‚ ‘Work’) is verified through a community PR mechanism.
To make this easy to understand, say, you as a developer encountered a problem statement “fix a code for this open-source project”, now you set upon a journey that’s unique and you “fixed the problem as a unique code”. You may have re-used the existing piece of code but your output and methods are different. All other community members should be able to put this unique piece of code out there so that other consumers buy and keep it as a collectible. This shall produce more valuables in the future such as the same code that could be used for producing the work in different contexts.
Who would want to keep the value of written code as only collectible? Open source projects are not deemed as private and exclusivity rights cannot be practiced to them. They are shared work and therefore possess characters of an alternative ownership model. The set of protocols governing the usage and issue of the NFT license simply covers liability, warranties, usage and transferability of the creation to begin with. Ownership can also be reduced to those who founded the project. Ownership can also be reduced to those who sponsor the project. Ownership can also rest within the business owners, who tend to reach out to the people who contribute regularly and value gets exchanged over to such self-sustaining ecosystems.
Now, if we look at this as an exchange platform where a value is assigned against a work, who would be willing to own that work? Maybe the simplest answer to this is someone who is going to execute that piece of code, a user who uses the project so by that deduction whoever is going to execute the piece of code they have to pay a price. Isn’t this like a competitive bidding freelance style? Indeed, it is but the ownership transfer happens across the ocean.
The idea of divisibility suits well in case of ownership of the piece of code or work can be divided among thousands of owners and beneficiaries.
The more important question is whether ownership is traded so that others can modify it easily. On modifying the code, the value could change and at times can even be reduced to zero.
Talking again about ownership, there is a piece of code that works on the OSS project and is owned by a developer, it’s just that there hasn’t been a strong way, one could trade this earlier. This happened because there was no way of a standard value chain, like how someone would value a piece of code that has no use for a different project or to a user.
We can try to categorize them as: – i. Subjective value of a code – ii. Code that can be used somewhere – iii. Users unknowingly execute the code but do not derive any value from the chunk, since standalone code has no value. – iv. Combined code value (like multiple pieces of code coming together building a project/application.
Scarcity Alone Drives Demand!
A skill that can produce goods or services that are hard to find or rare drives consumers to stack up. In a general sense of the examples above, a contributor writes a piece of code, say computes two values and outputs the sum. This piece of code written for a project is unique. All stakeholders including project maintenance committee and partners must agree to put this code in the executable and finalize a working build whereby users can use this.
A direct payment is made by users and partners to those who coded the value rather than a central entity. Assume a case in an open-source project where you have an independent computer programmer and group-based programmers working for an organization. This scheme would allow the owners of the code to be valued based on the services (metrics to identify). Partners can choose to value it, pay a price and in fact lend upfront advances also to make something more unique.
Another argument is uniqueness in work. This means that your work wouldn’t be traded to a unit which does not match its value, like a piece of code cannot be traded for something, say code written in a different language.
NFTs are not transferable, which means when the person dies, the NFT ownership dies. I believe that we can create smart contracts, like a legal contract, which transfers the ownership of a person to the next of kin or a specific nominee organization/person, in case of the owner’s death.
More questions that remain unanswered in this article and we shall endeavour to cover them in the upcoming releases:
- Is there a framework of issuance of NFTs that take the form of digital identity of the token holders?
- Is it password-less access to the Finscale platform’s open-source reengineering capabilities by the holder of the token?
- What is the global governance model of the Finscale project?