Re: IPO of an Open Source Project

On 20 December 2012 18:37, Manu Sporny <msporny@digitalbazaar.com> wrote:

> 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. :)
>

The currency will just be a URI so it's up to that URI to define what it
means.

In my case, I'd probably like the credit to be a non binding honor system
to start with.


>
> > 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.
>

Will need to stay within the regulatory framework yet innovate on
technology, maybe in the slipstream of bitcoin which is something of a
vanguard.


>
> 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:
>

Yes


>
> 1. Forgive-able gifts/product pre-purchases (gift/award-based). Think
>    KickStarter, Kiva, IndieGoGo.
>

A good model


> 2. Equity-based investment (ownership exchanged for money). Think
>    BankToTheFuture, Fundable, AngelList.
>

Even more interesting


> 3. Debt-based investment (loans given in exchange for future repayment
>    plus interest). Think Abundance Generation, Lending Club, Prosper.
>

Sure that's a good model too, tho interest rates tend to be high.  With a
URI based system you can model many instruments.


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

There's two parts here.  The framework, which is like the web, which is
like a blank piece of paper.   Then there's the specific implementation.

It may start as an honor system, but I'd like to push the boundaries such
that we move towards fully funded projects.


>
> > 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.
>

It's up to each individual project to decide how they give out the
credits.  For me I am using my task system 'taskify' already as a form of
'self evaluation' ... i can record with great accuracy what i work on and
how much is awarded for it using webcredits.  As a project owner I simply
do a one to one swap for my web credits and project credits.  For others
I'll approve their workflows.

I will probably make it clear that the credits are not securities to start
with.  But say if one day the project is generating income (think mozilla)
it might be reasonable to look back on who contributed to the project and
offer rewards / incentives / buybacks or even a t shirt.


>
> > 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".
>

It may just be a scoring system to start with.  From my experience just
over 50% of people like things quantified, others dont care for it at all.

Things like stack overflow have benefited from a scoring system.  But if
the added incentive can be made to change this to real money, that would be
very close to the end game.


>
> > 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.
>

This is a great question and I am unsure I know the answer.  If it's going
to bring regulatory hurdles, then a conservative approach will need to be
taken.  But the idea is to show that the technology adds value and can
incubate projects, and provide a dividend to society.

I'm 100% focused on creating value in communities, in society, for
individuals and in open source.  As such I want to try to create a poster
child of how technology can empower democratic societies.  The web has a
good track record in terms of self regulation.  In fact, I would encourage
regulators to embrace the paradigm and even to fund it!  After all, we all
have the same goal of quantifying and creating return on investments in our
society.  I want to demonstrate this through metrics, technology and
markets.  The reason open source is selected, is because it has a track
record of value creation and the ethos is people volunteering their time to
create a better world.

I think we need to view regulators not as obstacles, but people whom we can
win the hearts and minds of.


>
> > 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.
>

This is certainly one way to go, and way ahead of what I thought we could
do at this point.  Could be very interesting.


>
> 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.
>

Would certainly be willing to give this a try.  My integration list is
prioritizing linked data to begin with.



>
> -- 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/
>
>