A friend recently asked me: How can Web3 and encryption solve some of the problems that make social media dangerous today? I gave him an answer, but got stumped by my own words—I definitely couldn’t help him, which also made me feel inexplicably guilty of my passion for the field. I’m sure other people in similar situations will feel the same way, and it makes me want to spend more time writing out the controversies on specific topics in as succinct language as possible, roughly like “tableside chat.” One of the most important topics for me revolves around open source, so I’ll start with that. Anti-bar statement: Many people are more qualified to write on this topic than me – my original intention was to try to explain it myself, and to make it clear to everyone in the process.
Open source technologies provide many of the building blocks that most every product uses. So, the Crypto/Web3 analogy to be an extension of the open source realm can be very convincing – an analogy you’ve probably already (or will soon) encounter when arguing for “why it’s worth all this effort”. The problem is simply that open source software is a niche topic that doesn’t immediately and clearly present a mental model that excites most people. It’s like dropping a book bag for nothing. I’ve been in this intersection for a while, so I’m going to try to make this analogy as simple as possible so that you can use it too, or at least understand it the next time you come across it.
The rise of open source software
To compare open source software to Web3, you need to understand three things:
What it is: The concept of open source software and how it affects our daily lives
How it came into being: The trend that gave birth to the open source movement
Why Make It Better: The Public Goods Dilemma Infects Open Source Software
Once you understand this, you’ll see that Web3 and open source software alike are riding the wave to improve the model to help the decentralized community get a bigger slice of the economic pie — while also aggressively making it bigger Cake, to improve its inclusivity, I will clarify each of the above points one by one, and in keeping with the promise of “presenting a clear mental model”, each part will be simplified a lot. I can only be sorry for those who are particularly serious :).
The impact of open source software
As the name suggests, the source code of open source software is publicly visible to anyone. Linux is a mainstream open source operating system, and its source code is available on open source websites for anyone to read, download, or rewrite to their own version. You can think of open source software like Wikipedia, except that a group of people got together to write valuable software, not an encyclopedia. One of the reasons open source software is so beneficial and trustworthy is that at any time you can “fork” a project, meaning you can copy a version for your own use. So many open source projects become mainstream tools in a certain area, because people no longer rely on a monopoly product (which will be very important in the following content).
The magnitude of the impact of open source software is difficult to put into words. In a recent Forrester report, 96 percent of companies believe that “open source software is important, very important, or critical to their business,” and 98 percent said they plan to increase or maintain their commitment to open source in the coming year. code dependencies. Take Linux, for example, which is the operating system of choice for modern servers—one report says that 96.3 percent of the top 1 million web servers run Linux. Bottom line: Open source software is a vital part of every technology built today.
Breeding the tide of the open source movement
If you want a more detailed look at what’s fueling the open source movement, I highly recommend reading “The Cathedral and the Bazaar” or “Coase’s Penguin”. Simply put:
Reduction of software development costs
The cost of distributing information online is almost zero
Reduced coordination costs through technologies such as Git or Wikis (version control tools that allow multiple people to work in parallel)
What it’s really saying is that people of all shapes and sizes can all come together to make software, and they can build products that are as good, if not better, than the closed versions that traditional companies make and sell. They do it either for fun, for their own use and not wanting to pay, or for a living (more on this later). In a nutshell: The trend driving the open source movement took decades to form, and it’s only just getting started — not a flash in the pan.
Why make open source software better?
In most cases, the income of an independent open source software developer is pitiful compared to the value they create, or the compensation they receive in traditional tech jobs. The result is that open source projects are valuable but resource-poor, which brings us another perspective on the impact of the open source movement—when open source software goes wrong. The “heartbleed bug” injected a vulnerability into 20 percent of the software on active servers, sparking massive attacks, including the theft of records from 4,500,000 patients in the US healthcare system. Recently, a vulnerability called “Log4j2” appeared in a key protocol, causing a data breach that affected everyone from Apple to Minecraft. The xkcd comic below is as funny and scary as it is very expressive. Bottom line: Despite the immense value of open source software, many key projects still struggle to survive because of the public goods dilemma.
web3 and the service model
While a label like “open source” may be taken for granted, there are many viable business models in the open source space. In fact, there are many multi-billion dollar companies built on open source projects. The largest of these is Red Hat, which sells services to businesses that want to use Linux. Basically, enterprise customers would rather pay a fee for an advanced SaaS-type product model to get the security and privacy features they need, rather than develop those features themselves with an open source version. IBM acquired Red Hat for $34 billion in 2019, generating billions of dollars annually.
One of the problems with these centralized business models is that they are simply parasitic on their decentralized counterparts – what makes Linux so valuable is that it has thousands of contributors that provide what other operating systems can’t Provides stability and integration. If Red Hat tried to produce Linux itself with employees, it would probably fail. For the same reason, Wikipedia has far more entries than Encyclopaedia Britannica or other centrally compiled encyclopedias—swarms are able to beat hierarchies when it comes to creating certain types of items. This is where the web3 controversy comes in.
It should seem odd that many Linux developers live off meager donations (from Red Hat and elsewhere), and Red Hat adds a layer directly on top of it, selling billions of dollars a year. Why don’t these Linux developers start a business together and use the profits to fund their work? To answer this question, consider what steps the Linux community must take to do this:
Build a marketing team to deal with corporate clients
Look for developers willing to build an enterprise services business, a less sexy job that will likely pay more than the private market
If in the end this multi-billion dollar company is built, it will have to figure out how to reward everyone according to their contribution.
These are essentially coordination costs. And coordination is what companies are good at, so you might want to set up a separate company for that. In fact, the problem with allocating equity to casual Linux contributors around the world is that you may have to keep them out of the good stuff and also have to maintain this parasitic relationship with open decentralized projects. In other words, go round and round and you’ll still be back where you were.
Now let’s assume the same scenario, but you can fundamentally have infinitely flexible, low-cost ways to reconcile digital ownership. This is what Web3 promises – let’s repeat the same steps above, but this time with the help of tokens:
Create a DAO that looks like a traditional organization in every way, except for using tokens to distribute ownership and governance.
Use these tokens and the cash created by the DAO to pay developers and marketing teams doing boring jobs.
Token rewards are also given to contributors to the open source version. The revenue of the enterprise version is directly tied to the token, so that everyone can be paid proportionally to the success of the entire project (open source + service model)
Yes, the crypto space is still developing, but for those who dare to be the first, all of this can be done now. Tools to create DAOs with one click, methods to directly tie revenue to governance tokens, and systems to reward contributors based on the level of contribution determined by the community—these are all available now.
The DAO and the beer business
Richard Stallman is almost the godfather of open source. He founded the free software movement and the GNU project, one of the first open source modes of operation. The movement’s failure to retain its “free software” moniker is ultimately due to Stallman’s famous quote: “[free means] freedom in free speech, not free in free beer”. Essentially, open source is about being permissionless and open, not free like “free beer”. (Annotation: English free has both free and free meanings.)
Despite what Stallman said, while open source software continues to grow, it’s still largely free, like free beer. But that’s not because companies refuse to pay for services, but because they prefer to use the source code themselves – in fact, the prevailing model for software these days is “SaaS – literally software as a service”. Instead of purchasing a perpetual license for Excel, companies pay a monthly service fee to use the current version of the product (usually on the cloud). Companies pay for convenience, and that’s the kind of business model you can build at scale with open source software.
Putting it all together, the reason open source software has always been free like free beer is because the coordination costs between an open source project and its service-based counterpart are prohibitively high. This is a godsend for a tokenized, decentralized community. There are already some big players using this model — tying their service business to a decentralized protocol, including most centralized exchanges like Braintree, Parsiq, and even Ethereum itself . There are many business forms of these services – for example, the service of Ethereum is to provide computing power for a large number of applications, while the service of the Braintree platform is to realize cross-chain legal currency and assist traditional organizations in protocol interaction.
There is the same picture at the beginning, but hopefully now you can see what it means.
Not all of these platforms themselves are open source, but importantly, the benefits tied to the service model feed directly back into the value of their native tokens. With such a setup, the incentive to open source code over time is huge, as it makes developers more dynamic, allows service-based ecosystems to survive, and convinces people that projects will The way that is most in the interest of the network continues to work (because if it doesn’t, it can be “forked”, i.e. easily copied).
Tokenized, decentralized communities will not be the only viable model in the future. Nor are they the only possibilities for innovation in the crypto space. Bitcoin is digital gold, NFTs are digital safes (you can’t really stuff anything in them) – these primitives have profound implications for the future of open source software. But what I find so exciting about this particular field is that decentralized communities aren’t just building open source software, they’re building a lot of things in our modern lives that can be vastly improved.
It’s not just code either. Think Wikipedia, Facebook, Uber, Linux – all these projects are where a few people define the rules of the platform, and then a large number of people participate in value building. Capturing and distributing value in these communities faces a variety of dilemmas—a Facebook or Uber model that makes a few rich, a Wikipedia or Linux model that is almost unprofitable. The structure I described above enables users to participate in the creation and capture of value, both for Facebook and Linux.
I’ve worked with research all my life and dedicated myself to a scientific career, which is why I stopped at Web3. Science is the most important public good in the world. The biggest problem, as I see it, is that donations or fundraising on which public goods depend, if they are not directly linked to their value, will always be resource-starved, disproportionate to their impact. Through a more flexible and dynamic form of digital ownership, Web3 provides me with a business model that ties decentralized organizations and public goods directly to equity – a fusion of Red Hat and Linux through tokens. If we do this, we will be able to greatly strengthen the foundation of open source software to power a more innovative and equitable world.