A new FOSS Business Model with Market Dynamics based on DAO + NFT

Hi. I want to share with you an article that offers a deep analysis of the aspects that affect the funding of Open Source Software, and proposes solutions for bringing incentives to investors by adopting blockchain technologies for tokenizing the value of these projects. https://nebairevelations.substack.com/p/a-successful-business-model-for-open

I’m glad to read any feedback from you. Att: Nebai Leon

Nebai, I read this and love it! Very thoughtful and I love the connection to Egregore. I do believe that in the long run Web3 principles will shape how open source is maintained. I would be curious to hear how this model might work for public goods where ownership should be staked to the public at large and not to the maintainers. A park, a forest, a road? How would it work if a government paid for the development of an open source platform with public money and then wanted it maintained? How would a decentralized maintainer community contribute to an asset that is publicly owned rather than owned by a DOA or other private enterprise? I believe that a DAO-like structure could and should maintain public goods. However, the concept of ownership must be more inclusive than simply by those who build. As governments are increasingly embracing open source licenses and the concept of digital public goods, models for maintaining these required. Finding a way to facilitate this through decentralized governance would be ideal.

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Hi Heath. I’m glad that you’re interested in my article. Your questions are very pertinent to this topic, and I hope that this thread could enrich the debate about solving those questions related to the sustainability of public goods.

  1. About “Ownership”, I think that is a wrong concept that cannot be applied to Intellectual Goods and FOSS. Copyright and Patents are just an obsolete institution from an old Industrial Era. Today, In this digital reality we’re dealing with a post-scarcity economy of abundant non-rivalrous intangible goods, so ownership of those works have no sense. That means that nobody can really own a JPEG, or a document, or a song, or a piece of software. Instead, in that article I’ve proposed an Sponsorship deal for those who invest in public goods. Sponsors don’t enforce any kind of control over maintainers of FOSS projects, but only provide economic support for their project. In exchange, sponsors obtain a Reputation Score that is recognized by the Decentralized Application for activating Smart Contracts in financial applications. A kind of Collateral, that has a lot of demand in current DeFi space. DAOs allow to establish that relationship of mutual support between Devotees(sponsors) and Authors (Maintainers and developers). In that way, we’re constructing a market for public digital goods, but always granting free access to users.
  2. About the role of the government, it’s complicated. But the problem is not about collecting enough money for supporting OSS and science research. The problem consists on allocating capital in the “right” projects, a problem that even Vitalik Buterin considers challenging and was one of the motivations for developing his proposal of Quadratic Funding. That problem is inherent to Central Planning, where governments designate to a group of so-called “experts” to decide which projects are more convenient for achieving the greater good and benefiting the most of the population. This could end up in corruption schemes and nepotism, where these “experts” would choose winners and losers in the game. In fact, this kind or reasoning is what left many independent science research projects underfunded, as related in this article.
  3. Instead, governments could become a positive influence for FOSS by providing an Universal Basic Income delivered in the form Vouchers, so citizens would invest them in the public enterprises of their preference. That’s because markets are the most efficient way of allocating resources for those who really need them, This strategy has proven to be a success for funding public education in countries like Sweden and Finland, as parents choose the best schools for their children in a competitive market thanks to School Vouchers. In our case, governments would offer Ethereum Vouchers to citizens for investing in Egregores (DAOs for FOSS projects). In consequence, citizens could become Devotees and being empowered to participate in sophisticated financial markets ( thanks to DeFi) by using their Devotee Tokens as collateral.

In that way, with UBI and FOSS Crypto Vouchers, governments encourage citizens to adopt a more sustainable lifestyle and grant them some of their carbon credit redeemable in the form of DAOVOTION Tokens, financing the innovation in renewable energies and efficient management of resources. That could help initiatives like Open Source Ecology, thus people could empower their homes for producing their own food, water and energy, becoming self-sufficient and reducing their impact on the ambient.

At last, I have to thank you for allow me to express these ideas in this space. We need to raise more awareness for the challenge of funding public goods, and in the short term we together could achieve better solutions for helping FOSS industry to thrive.

Att: Nebai León.

Nebai, I would love to talk about your ideas more, I have joined your Discord. In my work I am helping governments think of how to fund the maintenance of specific open source projects considered to be public goods. It is a collision in paradigms, traditional control organizations colliding with decentralized communities. I believe what you describe an elegant and feasible vision of the future. Interested to hear your thoughts on the steps to transition and how to simplify them to gain broader acceptance (without compromising the vision). I believe that quadratic funding tied to participatory budgeting is probably where to start. A system of governance that decides how votes are allocated in order to decide prioritization of budgets could be modeled closely to what you are describing. However, I am skeptical that tokenization as described will lead to the desired outcomes. Untethered value in relation to what is historically a cost center rather than a two sided marketplace could be destabilizing in the long term. Behind the money is simply this, hours of work to maintain a public good. Hours available are limited by the availability of hours to be worked and the budget to compensate for them (volunteer or paid contributors). Creating speculative future value of tokens as the basis for participation may be motivating to some but I believe is unduly variable. This puts the public good at greater risk by exposing unnecessarily to a market. Let’s imagine that governments are willing to invest in digital public goods as they would in roads, bridges, and parks. None of these public goods are for sale. Their value is intrinsic. Reading your ideas as closely as I think I can, and I recognize that some concepts I had a hard time grasping, it looks like it would all still work without the tokens being redeemable? Would love the thoughts of more minds in this community. Let’s continue this conversation as I do believe your vision as stated will work for some FOSS projects and with modifications, extended to other public goods.

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Well, there is a lot of questions to answer quickly. But I hope that this thread could be extended with more enriching conversations. But at least I would try to address some aspects that You’ve mentioned:

  1. Quadratic Voting requires a thoughtful discussion in a whole separated thread. The reason is that it has many flaws and, from a Game Theoretic perspective, very prone to be tainted because It incentives malicious behaviors against the majority of good participants. In most cases, the outcome of QF and QV could be much worse than direct donations or shareholder participation. Insiders and whales could hijack the system and introduce fraudulent mechanism for robbing the majority of the funds in favor of their particular business, by coordinating “Sybil Attacks” with botnets. QF just exposes the worst incentives for gaming the system, and when it was implemented in practical use cases demonstrates who bad it could become. See what happened with Mirror.xyz voting system.
  2. Vitalik and the Ethereum staff didn’t offer a definitve solution for incentivizing private actors on contributing for public goods. They just resolve that Prediction Markets may offer benefits to those investors. But for that, they would need adversaries that stake against them in order to obtain profit. That’s the worst kind of incentive for contributing in public goods, due that some players would be motivated to sabotage the project in order to win the gamble against the wishes of the majority of players.
  3. Don’t underestimate the benefits from markets. One think is the excessive speculative habits from those who only are expecting future valuation and price arbitrage. You’d get “Tulip Mania” situations when the stock market is disconnected from the reality of the business and industries, due to the lack of reliable price signals. But when actors behave rational they would take responsible decissions based on the best information that they could have. It’s hard to explain this in a few sentences, but it’s all about Fundamentals. Don’t underestimate the rationality of the common guy :wink: If you empower individuals for taking part in the business decisions from companies, you could foment truly community participation in public enterprises. We would study that more deeply in the next conversation.

Heath, your questions are very relevant and help us to enrich the debate with more powerful ideas.

Best regards,

Nebai.