Why is the open-source movement crucial in the world of Web3?

Original Title: 《Open source and web3, simplified》

Author: Joey DeBruin, Flying Penguins

Compiled by: jomosis1997, Translation Guild jomosis

A friend recently asked me: How can Web3 and crypto address some of the harmful issues caused by current social media? I gave him an answer, but I stumbled over my own words—I certainly didn’t help him, and it left me with an inexplicable guilt about my passion for this field. I believe others in similar situations would feel the same way, which makes me want to spend more time articulating the controversies around specific topics in the simplest language possible, much like "table talk." For me, one of the most important topics revolves around open source, so I will start there. Disclaimer: Many people are more qualified than I am to write about this topic—my intention is to see if I can clarify it for myself and, in the process, help others understand.

Open source technology provides many foundational components that most products use. Therefore, likening Crypto/Web3 to the extension of the open source field is quite compelling—you may have already encountered (or will soon encounter) this analogy when arguing "why it’s worth all this effort." The only problem is that open source software is a niche topic that doesn’t immediately present a psychological model that excites most people. It feels like a trivial academic exercise. I have been in this intersection for a while, so I plan to try to make this analogy as simple as possible, so you can use it, or at least understand it the next time you encounter it.

The Rise of Open Source Software

To draw a comparison between open source software and Web3, you need to understand three things:

1. What it is: The concept of open source software and how it impacts our daily lives.

2. How it formed: The trends that gave rise to the open source movement.

3. Why it needs to be improved: The public goods dilemma affecting open source software.

Once you understand these, you will see that both Web3 and open source software are moving forward to improve models, helping decentralized communities gain a larger share of the economic pie—while also actively growing that pie and enhancing its inclusivity. I will clarify each of the above points, simplifying them to adhere to the commitment of "presenting a clear psychological model." I can only apologize to those who are particularly serious about details :)

The Impact of Open Source Software

As the name suggests, the source code of open source software is publicly accessible to anyone. Linux is a mainstream open source operating system, and its source code is available for anyone to read, download, or modify into their own version on open source websites. You can think of open source software as Wikipedia, except a group of people comes together to write valuable software instead of an encyclopedia. One reason open source software is so beneficial and trustworthy is that you can "fork" a project at any time, meaning you can copy a version for personal use. As a result, many open source projects have become mainstream tools in their respective fields because people no longer have to rely nervously on a monopolistic product (this point will be very important later).

The impact of open source software is hard to articulate. In a recent report by Forrester, 96% of companies believe that "open source software is important, very important, or critical to their business," and 98% of companies indicated plans to increase or maintain their reliance on open source code in the coming year. For example, Linux is the preferred operating system for modern servers—one report stated that 96.3% of the top one million web servers run Linux. In short: open source software is a crucial component of every technology built today.

The Trends that Gave Rise to the Open Source Movement

If you want to understand the trends that propelled the open source movement, I highly recommend reading "The Cathedral and the Bazaar" or "Coase's Penguin." In simple terms:

• The reduction in software development costs.

• The cost of distributing information online is nearly zero.

• Technologies like Git or Wikis (version control tools that allow multiple people to work in parallel) have lowered coordination costs.

What these points express is that a diverse array of people can come together to create software, and the products they develop can be just as good, if not better, than the closed versions produced and sold by traditional companies. They do this either for fun, because they want to use it without spending money, or as a livelihood (more on this later). In short: the trend driving the open source movement has taken decades to form and is only just beginning—it’s not a flash in the pan.

Why Improve Open Source Software?

In most cases, the income of independent open source software developers is pitiful compared to the value they create or the salaries they could earn in traditional tech jobs. The result is that open source projects are highly valuable but resource-poor, which gives us another perspective on experiencing the impact of the open source movement—when open source software encounters problems. The "Heartbleed" vulnerability injected flaws into 20% of active servers, leading to massive attacks, including the theft of records for 4,500,000 patients in the U.S. healthcare system.

Recently, a vulnerability called "Log4j2" appeared in a critical protocol, causing data leaks affecting users from Apple to Minecraft. The following xkcd comic is both funny and frightening, and it captures the essence well. In short: despite the immense value of open source software, many critical projects still struggle to survive due to the public goods dilemma.

Web3 and Service Models

Although the label "open source" might seem self-explanatory, there are many viable business models in the open source space. In fact, many billion-dollar companies are built on open source projects. The largest of these is Red Hat, which sells services to enterprises looking to use Linux. Essentially, enterprise customers prefer to pay a fee to purchase a premium SaaS-type product model to obtain the security and privacy features they need, rather than developing these features themselves using the open source version. IBM acquired Red Hat for $34 billion in 2019, generating billions of dollars in revenue each year.

One issue with these centralized business models is that they are parasitic on their decentralized counterparts—Linux is so valuable because it has thousands of contributors who can provide stability and integration that other operating systems cannot. If Red Hat tried to produce Linux with employees alone, it would likely fail. For the same reason, Wikipedia has far more entries than the Encyclopedia Britannica or other centralized encyclopedias—when it comes to creating certain types of goods, swarm organization can outperform hierarchy. This is where the controversy around Web3 lies.

It seems strange that many Linux developers live on meager donations (from Red Hat and elsewhere), while Red Hat adds a layer on top and sells billions of dollars annually. Why don’t these Linux developers come together to establish a company to fund their work with profits? To answer this question, consider the steps the Linux community would need to take to do so:

• Establish a marketing team to deal with enterprise customers.

• Find developers willing to build an enterprise service business, which may not be as glamorous and likely requires paying higher salaries than the private market.

• If a billion-dollar company is eventually built, find a way to reward everyone according to their contributions.

These are essentially coordination costs. And coordination is what companies excel at, so you might need to establish a separate company for this purpose. In fact, the issue of distributing equity to temporary Linux contributors around the world is that you might have to exclude them from the benefits and maintain this parasitic relationship with open decentralized projects. In other words, you would end up back where you started.

Now let’s assume the same scenario, but you have fundamentally flexible, low-cost methods to coordinate digital ownership. This is what Web3 promises—let’s repeat the same steps, but this time we use tokens to do so:

• Create a DAO that looks like a traditional organization in every way except for using tokens to allocate ownership and governance.

• Use the cash generated by these tokens and the DAO to pay developers and marketing teams engaged in less glamorous work.

• Reward contributors to the open source version with tokens, directly linking enterprise version revenue to tokens, allowing everyone to proportionally benefit from the overall project’s success (open source + service model).

Yes, the crypto space still has room for development, but for those who dare to be pioneers, all of this can be done now. Tools to create DAOs with one click, methods to directly link revenue with governance tokens, and systems to reward contributors based on community-determined contributions—these are all already available.

DAOs and the Beer Business

Richard Stallman is often regarded as the godfather of open source. He founded the free software movement and the GNU project, one of the earliest open source operating models. The movement did not retain the title of "free software" primarily because of Stallman's famous quote: "Free as in freedom, not free as in free beer." Essentially, the significance of open source lies in its permissionless and open nature, rather than being free like "free beer." (Note: The English word "free" has both meanings of freedom and free of charge.)

Despite Stallman’s statement, and despite the continued growth of open source software, it largely remains free, just like free beer. But this is not because companies refuse to pay for services; rather, they prefer to use the source code themselves—in fact, the mainstream model for software today is "SaaS—literally, software as a service." Companies do not purchase a permanent license for Excel; instead, they pay a monthly service fee to use the current version of the product (usually in the cloud). Companies pay for convenience, which is precisely the business model you can build on open source software at scale.

To connect all of this, open source software has remained free like free beer because the coordination costs between open source projects and their service-based counterparts are extremely high. This is a golden opportunity for tokenization and decentralized communities. Some large companies are already using this model—binding service businesses to decentralized protocols, including Braintree, Parsiq, and most centralized exchanges, even Ethereum itself. These service business forms are diverse—for example, Ethereum’s service provides computing power for a multitude of applications, while Braintree’s platform facilitates fiat cross-chain transactions and assists traditional organizations in protocol interactions.

Not all of these platforms are open source themselves, but importantly, the profits tied to the service model directly feedback into the value of their native tokens. With such a setup, the incentives to open source the code over time are immense, as it energizes developers, sustains the service-based ecosystem, and instills confidence that the project will continue to operate in the best interest of the network (because if it doesn’t, it can be "forked," meaning easily replicated).

Tokenized, decentralized communities will not be the only viable model of the future. They are also not the only possibility for innovation in the crypto space. Bitcoin is digital gold, NFTs are digital safes (you can’t really stuff anything into them)—these primitives have profound implications for the future of open source software. But what excites me about this particular field is that decentralized communities are not just building open source software; they are constructing many aspects of our modern lives that can greatly improve our existence.

It’s not just about code. Think about Wikipedia, Facebook, Uber, Linux—all these projects are defined by a few people setting the rules of the platform, then a large number of people participating in value creation. Capturing and distributing value in these communities faces various dilemmas—Facebook or Uber models make a few people wealthy, while Wikipedia or Linux models are almost unprofitable. The structure I described above allows users to participate in value creation and capture, applicable to both Facebook and Linux.

I have spent my life in research, dedicated to the scientific cause, which is why I am drawn to Web3. Science is the most important public good in the world. In my view, the biggest problem is that the donations or fundraising that public goods rely on, if not directly linked to their value, will always be resource-poor, disproportionate to the impact they can bring. Through more flexible and dynamic forms of digital ownership, Web3 provides me with a business model that directly binds decentralized organizations and public goods to equity—this is the fusion of Red Hat and Linux through tokens. If we can achieve this, we will significantly strengthen the foundation of open source software, powering a more innovative and equitable world.

I would love to hear your feedback on this article, especially whether it made this topic easier to understand and whether it makes you feel comfortable discussing it over dinner with others. I am happy to treat it as a long-term document and make it shorter and simpler in the future. If you want to learn more about thoughts on Web3/open source code, please check out Scott Moore, Spencer Graham, or David Phelps.

Scott Moore: https://twitter.com/notscottmoore

Spencer Graham: https://twitter.com/spengrah

David Phelps: https://twitter.com/divine_economy