Re: IPO of an Open Source Project

On 12/14/12 08:42, Melvin Carvalho wrote:
> Im interested in IPOing an Open Source Project

Interesting. :)

> The Project will issue 10 million credits
> 
> Credits will either be

Will the 'credit' be guaranteed to be a virtual currency? If not, we're
going to be knee-deep in regulations before we begin. :)

> A) Traded on the open web for other resources, money, time, bitcoin 
> etc.

In general, if you are exchanging some form of future promise for
fiat-backed currency, then you're selling a security and you fall under
securities regulations in your country. So, you'll have to be more
specific here because the path you take effects a number of the
technical requirements of a system that can do such a thing.

I think you're effectively talking about crowdfunding a project? There
are already some regulations in the UK for this that have shown some
promise. Crowdfunding is typically broken into three areas:

1. Forgive-able gifts/product pre-purchases (gift/award-based). Think
   KickStarter, Kiva, IndieGoGo.
2. Equity-based investment (ownership exchanged for money). Think
   BankToTheFuture, Fundable, AngelList.
3. Debt-based investment (loans given in exchange for future repayment
   plus interest). Think Abundance Generation, Lending Club, Prosper.

You'll have to narrow each of these things down before we can know what
sort of regulations are going to be in play.

> B) Awarded by project managers to contributors

Unless there is a stable metric... or unless money isn't involved at
all, this could generate a number of really nasty lawsuits. How are
rewards fairly applied to project participants?

You may be able to get away with something that basically says that
rewards are based on the decisions made by publicly elected project
participants. That would absolve the founders of the project from much,
but not all, of the legal hassle of minority-shareholder lawsuits.

> The advantage of this is to accelerate / kickstart the project to get
> it up and running faster, and reward contributions.

Do you think people would be interested in these 'credit's if they are
not tied to a real-world currency in some way from the start?

Many developers might, since they're already contributing to Open Source
projects for "free".

> What I would like to do is create a description of the credits such 
> that they will give value, either a honor system promise of future 
> dividends from the project, or voting rights, similar to the way that
> equity IPOs work today.

If you do a promise of future dividends, and money enters the equation
at any point, then you're selling securities. So, I'm assuming that you
mean something along these lines:

There will be 10 million credits that will have absolutely no value
whatsoever in the beginning. The only way of earning credits is to work
on the open source project (option B above). Credits will be conferred
to the worker based on a pre-agreed-upon scheme (such as major lines of
code committed, or work hours worked times an 'impact' multiplier -
developers are paid more than copy writers, etc.). There will be an
elected group of project leaders that will make all major decisions,
where some decisions will need something like a 2/3rd majority.

At some point, the project will start earning money, and a percentage of
that money would be classified as a dividend. The dividends are paid out
to each project participant according to the percentage share of the
total number of issued credits. You might be able to classify these as
gifts, but even those need to be tracked by the country's taxing
authority (IRS, HMRC, etc).

This is typically how most businesses are incorporated, so this system
would basically automate the way that most sweat-equity-based companies
are doing today.

> After issuing a tranche of credits let them trade on secondary 
> markets. This could be interesting it itself as you could see an open
> source stock market with projects rising and falling over time, and
> providing valuable metrics as to which projects are gaining traction

This is a can of worms that I'm just going to ignore for now. Lots of
regulatory rules involved here and something we can't tackle at present.

> Do you think we're at the stage where we can do this now?

PaySwarm is at the stage where it could handle fund raising and
disbursement of funds in USD.

We don't have alternative currencies supported yet, so the tranche of
credits would have to be managed outside of the system. The same with
tracking who has how many credits. We /could/ implement the alternative
currencies stuff, but someone else could just as easily implement it in
their OSSIPO project. For example, tie github accounts to the number of
credits the worker has earned. To send a dividend, just associate their
PaySwarm account with the worker and send out a big blast of payments.

You could have the OSS project register their public key w/ the PaySwarm
Authority and digitally sign agreements (JSON-LD documents) stating the
details of any agreement made between the project and the worker. This
creates a verifiable paper-trail for the number of credits disbursed,
the reason they were disbursed, the expectation of the use of the
credits in the future, etc.

So, the answer to your question is mixed:

No, we can't do the credits/alternative currency stuff via PaySwarm yet
(but it is on the roadmap).
Yes, PaySwarm can handle the disbursements.
Yes, PaySwarm (via Web Keys) can be used to digitally sign agreements.

Once you respond to the questions/assumptions I make above, we might be
able to narrow it down a little more.

-- manu

-- 
Manu Sporny (skype: msporny, twitter: manusporny)
President/CEO - Digital Bazaar, Inc.
blog: HTML5 and RDFa 1.1
http://manu.sporny.org/2012/html5-and-rdfa/

Received on Thursday, 20 December 2012 17:37:46 UTC