Open Source, Open Revenue: How to Take On Big Tech

Transcript

Does this work? This is the first time I'm using one of these rap ones. I feel very TEDtalkie. Um, my name is Kilgore. Uh, I'm an evangelist at Powerhouse. Uh, and the title of my talk today is open source, open revenue, how to take on big tech. Uh, I had dreams of being able to memorize all this, but I'm going to have a few notes here to help. Um, so if you listen to most of crypto and open source these days, the mood is pretty bleak. Governance is dead. Open networks can't compete with centralized companies. Just use the cloud, bro, and worry about the power structures later. But now, suddenly, three cloud companies basically control all of our data and all of our users. They have leverage

over all of us. They say jump. We say how high. This was not the intention. The internet was supposed to be open. But that's what happens when you get speed, convenience, and capital all pointing in the same direction. You reach for manage clouds, proprietary tools, and closed feeds because those are the fastest way to ship. But then over time, the digital rails of our economy are held by a few landlords who are only beginning their rented extraction.

We cannot go back to the old corporate stack and call that a win. We have to go forward. We have to come up and think of something else bigger and better. In this talk, I want to lay out a concrete model for doing that. How can an open network keep control of the critical parts of their stack, stay forkable and composable, and still generate real revenue that flows back into the people and products that created the network in the first place? Let's be honest, most of us rent our computational life. I do. Uh I'm embarrassed to admit it, but I do. Um we rent compute and storage from a few clouds. We rent identity and payments through a few walled gardens. We rent

our audience through social media platforms. You do not own the access to your Twitter followers. Elon does. Renting is convenient. It scales quickly and cheaply and feels cheap at the beginning, but the value you create doesn't flow to you. It flows to the landlord. Economists call this rent extraction. You do the work, the platform collects the rent. When the rules change or prices rise, you accept it. What other options do I have? Are there is there another X, YouTube, VMware, or other digital monopoly that exists that has a strangle hold on its users and developers? So, the question for builders is not is cloud good or is

cloud bad. The cloud is not going away. I would love to see everyone run their own servers at home. Um, but that's just not realistic because it's even hard, very hard for me to do it. The real question comes around leverage. Who has leverage in these situations? Do you control the rails of your project that they depend on or do you depend on someone else's incentives? Okay, so let's look at a quick history of how we got here. I think the three moves that I see getting us in this. So one open source um built the infrastructure but big big tech won the platform game. Linux, Postgress, Kubernetes everything is is open source.

Yet the companies that wrapped them in closed interfaces captured the customers the data and the profits. Microsoft won, Apple won, Salesforce won. Maintainers mostly got a Venue. Second, cloud and cloud and platforms turn that into a soft lock in. If you notice in the back, we have some coasters uh that say no lock in. And I think that is a like rallying cry in today's world is like trying to build things. You're not trying to lock your customers and consumers into it.

Third, our open-source funding answers have mostly gone at the wrong end of the equation. So we have had a lot of experience especially in the crypto area about how to better fund open source but too many of them look at the distribution side of things. It's how can we better distribute funds to those that maintained and built the product. What's missing is the value capture side. How do we get more money flowing in to open source funding and then we can figure out how to distribute it. So, why software needs new economics?

I'm not an economics major, but I don't think most people talk about economics are. Um, so I feel like I can make this up, but there seems to be something like really unique with software, right? Um, we learn all about, you know, shipping goods across the country and all these things, but software is just so so different. And I think it's kind of weird that we just have this new economic asset, capital, labor, whatever we want to call it, and we're really still fitting it into corporate structures that were they were spearheaded 200 years ago. So the three things that make software like very different. First, near zero marginal costs. Once you produce software, it is almost is almost cheaper, very cheap to be able to reproduce that software. Now,

it cost a little bit to run that. We can get to to that in a second, but just in terms of like the actual code itself, zero marginal cost to rapidly distribute to them. Network effects reward scale. Networks, software enables new networks all the time. We're just kind of understanding the power of networks, whether they be cities, digital ones. Um, but software really has created uh really new networks. Um but unfortunately now if we look at these networks whether it's Facebook who has of course it has a network of users but it also has a network of advertisers. We look at YouTube all of the content creators in the world are on YouTube.

Everybody is watching YouTube. So we have that network effect. The reason you go to YouTube is because everyone's there. Everyone's there because you go to YouTube. That's really powerful. It's a great network. The problem is Google owns it. So, how can we build a network where we have that network that is driving productivity and innovation, but it's just not owned by a corporate cloud. And this is probably going to happen this week in DevCon, but I'm I'm happy I've gotten to slide six and I've not said AI yet. But of course, it's coming because everything I've said before has happened before the AI wave or we're in the AI wave wave now. But this is only going to put things on on on supercharge. Obviously there are policy modes and regular capture going on in in

the US and elsewhere um that really give the incumbents a huge advantage. If you look at um you know now we're shifting where most of the the compute use is moving from training to inference and that's just going to give another huge advantage to the large uh the large cloud monopolies. Um yeah and then nations and then silicon igopoly. Um this is obviously taking you know geopolitics to a whole another level. Um so all of these issues are just going to get worse worse with uh with with AI involved um to try to bring us up a little bit.

Um obviously thing we want the world to be a bit better but I think it's time we can take stock of the things that we have built well and are doing well. Of course Bitcoin uh and Ethereum um we've created neutral economic infrastructure at global um scale um and we have um trillions of dollars in assets secured payments all that all of that all of that happening without a single corporate entity owning anything. All of that is being run by the network itself, right? The network is somehow coordinating to deliver, you know, DeFi, Dows, NFTs, all these things that I have in Ethereum. That was not a top-down initiative. That was something that was enabled by open networks. So, we're trying to do that more. How can we

figure out what that coordination engine that helped power Bitcoin and Ethereum and other blockchains, how can we harness that and bring it to other areas of the digital stack? Okay. Sorry. The Dow stall. Is anyone here smoke meat? I don't know if that's a thing that you like say at conferences, but I've been getting as I've aged. Thank you. Um I know people eat meat, so that's good. Um but I've been as I' as I've aged and I've had children, I think you're required to to at least experiment with smoking meat. Um but I love pork butt. Pork butt, you're trying to get the perfect temperature. takes 12, 14 hours. The first 3 hours, the

temperature just rockets up. Every hour you're just getting a new one. You're feeling really good. And then like hour five or six, it just like stays right at like 170 degrees Fahrenheit, which is I don't know, like 75 75 80 degrees Celsius. It just stays there for like four or five hours. You've got it in a fire and it's just staying right at that one. And then it eventually goes up and and and and the meat is excellent, whatever. Anyway, I think we're in that DAO stall phase. We had the first couple years of things like, "Oh, wow. We can do really somewhat exciting things. This is really, really cool." And then we've just been like moving this direction.

Doesn't mean that there's not a fire going on, that we're not smoking things, that it's not doing the work, that we're not actually melting the uh what the membranes and the fat to make that that meat really really juicy. Um, but we have kind of stalled in there. And so kind of what's um what's been going on with that? Um, yeah. Um, we have a couple different reasons here that we're going to kind of come up with a reason to fix, but governance without execution. We have lots of people in forums, not enough people kind of building things and the links between those. And I think one I just heard on the panel before that I think has always been really underrated by folks in the Dow space and that's a legal and jurisdiction risk. Right? This

doesn't mean that we have to adopt those corporate structures, but it does mean that like, yo, I pay taxes and like I'm going to pay taxes and uh I need to buy, you know, house and so how do I do that? And, you know, it's difficult for me. I can I have some way of maneuvering it. But if you're going to try to figure out a way to get lots of people involved in there, you can't just make everyone go out on their own and try to deal with themselves. We have to figure out ways um to do this better. Okay. I just saw him on the stage so I don't know if he's back in here but Nick um had this tweet from Hats had this tweet a couple um weeks ago and it makes me feel really seen. He says it's pretty revealing that everyone is trying to

frame their thing as not a DAO but a new thing some better thing. Um now first I feel very very seen because in the next slide I'm going to try to pitch you on like a new thing that's not a Dow but like a new better thing. So um Nick Nick is definitely on to something. Um, but I think that what this uh, you know, this criticism has is pretty fair. You know, we had a phase where everything was a DAO, right? Like I mean people, you know, before 2020, it wasn't necessary that every crypto project eventually would like, oh, we're going to launch a token and be a DAO. But suddenly, like we went through that wave where everything was a DAO. And now we're in like another phase where no one wants to say DAO anymore, right? Um, and so I don't know if this is the the DAO the

DAO stall or not, but um, I'm not here to pretend that Dows secretly worked and are like the greatest things. Um, but I'm also not here just to do a lazy rebrand. I think we do need to look at what has gone wrong and how we can kind of build better structures and systems. Um, but what I still care about, what I still care about is what got me interested in Dows in the first place. I want to build organizations that the network owns. I want to build things that have sovereign sovereignty that are not tied to any corporate identity. The same dream that you had in 2017 with folks that got in then or later. Um, we want to revive that same dream.

So, the cool new DAO rebrand. Um, well, first off, we're not getting rid of the DAO. That's a really important thing. The Dow can stay. We love the DAO. We want to have we want to have governance and everything now. But the DAO is not enough, right? Because as we, you know, just think from a basic stand, we need other things involved. So, we have five. I have this. Here we go. I wasn't sure if I was going to use it, but this is perfect. So, we have these five entities, one network. Um so the DAO onchain organization the decision-making community sets direction in public allocates resources and maintains shared standards. Now the operational the operational hub this is what pays contributors. So we have this and we powering set this up ourselves. We've also spinning out of sky ecosystem. So

we've done a lot of work with with sky in terms of setting up these entities that can pay contributors easily compliantly without any any hassle. um but that's all that entity is is responsible for. Third is the operational collateral fund. So this is an investment layer, right? So this is what links capital to contribution. Um and we have a a structure uh that does this um for that. And then the fourth is and I think this is really the key missing element in a lot of the more the open source element is this is the revenue generating hub. So this is the entity I like to think is this is what has to apply to be in the app store. So we can build an open source software but then have someone else another entity monetize it and then have another entity

that's actually paying the contributors and then have another entity the operational collateral fund that is uh actually allocating capital between them. Um and then the fourth entity outside the DAO is the IP entity and this is really important both in terms of the brand of the company um and also the license the software licenses themselves. Um, so for the software licenses, we are proposing like a two dual track license model. So you of course we're open source. We'll get to that in just a second. Um, but uh, everything open source. If you want to use it open source, personal use, totally fine, do whatever you want. But if you're going to like take the code and then make money off of it, some of that money needs to flow back into the

system, right? A certain percentage kind of how that works. But having that dual license model ensures that people can still play around, compete, and do whatever, but also ensures that you'll have revenue back in the the system. So this gets to open source capitalism, which of course every time I say it, I still think or the first time we were talking about it, I'm thinking of it. It's that word like no one knows what it means, but it's provocative. It gets the people going. Um, and I was uh, you know, I'm American and when I was thinking of open source, we were talking about it and you know my my image is like the 1990s with like Bill Gates being like those Linux communists, they are challenging the American way of life. Um, and I just think that's

totally off base and like wrong. It's more the opposite. You look at open source like open source is highly competitive, right? There's no moes for people to sit in. It creates better products because you're not paying as much for in terms of rent. Um, and it's it's a it's a shift in terms of viewing open source just as oh this is a good thing that we all want to support to being like open source creates better economies, better products, better societies. The problem is we don't know how to kickstart the flywheel, right? So this is uh this is actually a Gemini creative flywheel. I'm not sure why I was doing that because it was difficult to do it in Google Slides, but now I see the stuff behind it. Anyway, um the problem with o, you know, if you get a

company, it's very easy. You take in you take investment, you build a product, you make some revenue, you get more investment because you have the the product, you pour the revenue back in, and like the flywheel goes. Open source is just missing that because it's always dependent on some charity or donation at some point, right? And we've got to we've got to break that. Um, so the two the the the the key here, not just in terms of getting revenue that pumps back into the system, but once you do that, then you can go to investors and ask them to invest in an open source project, not because they just want to be like nice people and donate to their their these these the nice little open source folks, but because they want to make money, right? Because they want to have see their investment go up. And if

you can tap into that, then you're unlocking billions of dollars of capital that is just reserved for like SAS um products now. So the key is to be able to do that and that's what you get when you can capture more of the revenue from from that. Um so making it practical the powerhouse stack. Um so these are we have two products and I don't know if we would call legal blueprints a product. I don't think lawyers do do products but um Acura is the marketplace for coordination. So this is a decentralized upwork. It is the way where Dows and builders can come together, find work, give give projects to other folks, pay people compliantly, easy across across

the globe. Uh it's the way to really be able to run your organization uh in a in a way that you can tap into the global network of of developers around the world. Um, Vetra is sovereign scalable applications. So, this is a new stack to basically build any type of um, application. We originally built this um, for the organ like for operational software. So, as I said, we doing we within the Sky and Maker Dow ecosystem. So, we're trying to figure out how to build customized software for um, Sky and Maker Dow. And if you looked at any large company in the world, they have lots and lots of customized software.

So, we started in with that, but it's really something that could um that could make anything. Here we go. Um the key this is coming out of my guess the hair. Um the uh the key thing here um tying back to the the the the talk is um scalable sovereign infrastructure. So right now cloud providers VMware has just had this big uh big you know crisis but they they have people locked in and then they'll just like jack up jack up the prices. Um and so Vetra is a is a platform and also a cloud platform that you will not uh the no lock in right so even if you you can choose your cloud provider but you will not be tap you will not be tied in

for the whole stack. And the last one is legal blueprints. So going over all of those different entities that we're talking about for scalable network organizations, powerhouse is working on different legal blueprints to make that easy for anyone to be able to do to set up an operational hub or revenue generating hub anywhere in the world to be able to pay someone um very quickly. Um there um so I think there hasn't been you know people complain there hasn't been that much interesting happening in Dow governance in a while. Um it does look like we had an interesting proposal um this week in terms of the unification proposal um that was submitted by Hayden Adams. Um this would be a major overhaul over the Uniswap ecosystem. I it's gotten a lot of chatter on on the the

the the Twitter webs. But it is well the big thing is it would turn the fee switch on um but and it would then drive that back to uni through token burn. Um, I found the most interesting part of it was really twofold. Um, one is the lab's sunsetting private monetization. I'm sure most folks know because you don't trade on unis swap's front end, but unis swap's front end takes a 0.15% fee for every trade that it goes on. Um, that's only when it comes from the front end. Um, that they're getting rid of that and they're going to send the proceeds from that or the estimated proceeds from that into a into a uni burn. Um, and so what you see here is you see unis swap trying

to align their whole ecosystem around a single economic asset, the uni token. Not so much so you have labs off trying to build its own it its own product that is monetized by the front end, but where everything comes back to the uni token. And I think that alignment is something that is need in in all Dows and that's an alignment that you really need to um you need different structures to prevent. So while I see the UNI proposal as a as a step forward in terms of economic alignment and like the kind of open source capitalism um element, I am a little concerned in terms of like the decentralization um element because you know as we look at these entities that we have here. The

point of this is to split up the labs entity right into basically these like four different entities that are doing that. whereas like labs now becomes this gigantic gorilla in the unis swap ecosystem that it's hard really I think for anyone to be able to to overcome there. Um I do think it's good that they got rid of or folded the foundation into labs. Not that the foundation wasn't doing great work but just because that had a very uncertain role in kind of how things um existed there. Um but it is let's see yeah so it does kind of get into um why token from the beginning um you know bitcoin

and ethereum like y token is very easy you can't run a blockchain unless you have an asset that is valuable that you're handing out for block rewards or something but for unis swap like unis swap runs it's an application like it runs trustlessly without anyone else besides like ethereum right? It doesn't need to incentivize people with uni to run its network. So, this move I think sends a another clear signal that the that um I mean token alignment um that the reason we have tokens is to economically align networks themselves.

Uh and I think that's a really important thing. Obviously, we have a lot of regulatory struggles here in terms of being able to to implement that, but I think that's that's ultimately um that's ultimately where we're going. Um so, I did just want to take where was it? I wanted to go back for just a minute to that's this one. Um yeah, and and I think as I said, I'm not an economics major, but I think we need to be thinking like more interesting about how the digital world operates. And so um the systems that we have here on the governance side I think we are we we've moved things forward through the Dow stall right where we are really experimenting with governance it doesn't necessarily feel like we've achieved

much but I think all the experiments uh in that are are are working well just as much as we talk about like the political science of of DAO and governance and that um I think we need to be talking about the economics of it um because we need to talk about the economics of how we create new economic systems that can actually make these things sustainable. I mean the same thing happened when you look at blockchains themselves, right? A lot of the blockchains like started off as just like a technical security kind of matter but then you realize like very quickly we have these things called cryptoeconomics to be able to like actually create this the security. So if there's anything I would ask for Dows these days is to look more at the the economics of things um and be able to experiment in that in that phase uh and

to really looking at creating sustainable ecosystems that capture the value that they're creating uh and recycle it back into the products people and networks that actually built the that built the product in the first place. So that's it. Um thanks so much for my taking the time. I don't think I have a just have the powerhouse. Here we go. Um, just have the Powerhouse logo. We have a booth out there with, I'll be honest, I think some pretty pretty effing sweet swag. Um, it seems that koozies are something that is maybe just an American phenomenon. I don't know if people know what a koozie is. No.

Well, you must not like cold beer. No, it's not beer, but it's the thing that keeps your your beer cold. So, it's these like little like hugs. And so, we have we have cool ones out there for Acra and Vetra. We have some cool stickers um out there, but I think the koozies are are are sweet. So, I'm just going to show those. But yeah, that's it.