Originally published at marketprotocol.io.

Our goal is to build an open-source, decentralized protocol that powers safe, solvent, and trustless derivatives trading, so that crypto users can, for example, protect themselves against price volatility by hedging the price risk of their crypto assets. From the beginning of MARKET Protocol all the way through to the development of MPX, our soon-to-be-launched derivatives exchange simulation, we have been focused on building a community movement around this goal.

In the process of building MARKET Protocol and our community, we have learned first hand the importance of open-source software (OSS) development. As an open-source project, MARKET Protocol is able to attract the best talent in crypto, either as contributors to the development of the protocol itself or as developers building applications on top of the protocol. As a result, we feel that we have an obligation to our community to share our understanding of open-source software, its history and advantages, and its special relationship with crypto.

Origin of Open-Source

Open-source software is defined as a type of computer software distributed under a license that meets the criteria of being freely available in source code form, allowing programmers to modify it and redistribute without additional permission. This means that anyone can copy the code, fix bugs, improve functionality, or adapt the software to suit their own needs. This makes open-source software development perfect for open collaboration.

Three of the most popular licenses under which open-source software is released are:

MIT License

GNU General Public License 2.0

Apache License 2.0

Although the terms are often used interchangeably, OSS is technically different from free software. Both of these software types provide anyone with the ability to view and modify the source code, however the difference is that open-source software is a development methodology while free software is a social ideology (in this context, ‘free’ refers to liberty, not price). However, there is much overlap between these two types, and often the term OSS is used to describe software that is open-source and free, although technically the correct and more comprehensive term for this is free and open-source software (FOSS). It is important to note that this should not be confused with freeware, which refers to software that users can download at no cost, although the source code itself cannot be changed.

The free software movement was founded in 1983 by MIT computer science researcher Richard Stallman. He formally defined the “four freedoms” of free software, which were later published by the nonprofit Free Software Foundation in 1986. These freedoms emphasize the liberty of computer users to control the software that they use:

Freedom 0: the right to unlimited use for any purpose

Freedom 1: the right to study how the program works and understand it

Freedom 2: the right to share copies of the software

Freedom 3: the right to improve the program and to distribute the improvements

In contrast, the Open Source Definition (OSD) developed by the Open Source Initiative, emphasizes the pragmatic business-use cases of software and its source code, such as redistribution, derived works, and licensing. While open-source software is free to use, the expertise needed to implement, customize, maintain, and troubleshoot it can be quite valuable. For this reason, many developers and organizations indirectly monetize open-source software by providing services and support for a price.

Since its inception, OSS development has birthed much of the software that billions of people use on a daily basis. Examples of popular software derived from OSS include Apple’s OS X and Google’s Android, both of which are operating systems based on Linux. Other examples of OSS include Mozilla’s Firefox web browser, the Thunderbird email client, WordPress, Joomla, the scripting language PHP, and the programming language Python, to name a few.

Open-source is also being embraced by other areas besides software development, for example, open-source ecology and open-access publishing. In general, open-source organizations and their participants are advocates of community participation, collaboration, and volunteerism. They believe in working together to build open, high-quality products that are accessible by both for-profit and nonprofit organizations.

Open vs. Closed

Closed source (proprietary) software is a category of software whose source code is not published or shared with the public for anyone to inspect or modify. An end-user pays for the right to use the software, but does not actually own the software’s source code. Therefore, the primary business model for closed source software involves the use of limitations on what can be done with the software, which results in the artificial scarcity of a product that is otherwise very easy to copy and redistribute.

Compared to proprietary software, open-source software has a number of advantages, with the following being the most notable:

1. Lower cost

The fact that open-source software requires no licensing fees represents a decisive advantage in terms of total cost compared to proprietary software. One study has shown that open-source software solutions collectively save businesses $60 billion each year.

2. Safety and reliability

The diversity of developers collaborating on open-source code results in a higher likelihood that security issues are identified and corrected. OSS is continually evolving in real time as developers modify it, resulting in better quality and more security. Simply put, OSS is often less prone to bugs than proprietary systems, because many more participants are responsible for resolving problems with the software.

3. Personal control, customizability, and freedom

Developers can modify and adapt open-source software to their own requirements, which is impossible to do with proprietary software. And if you’re using proprietary software, you must make sure that all your servers and systems have the right type and number of commercial licenses. With open-source software, users are generally able to access the software as many times, and on as many devices, as they wish.

4. Vendor independence

With open-source software, users are not locked into a relationship with a particular software vendor. Since the code is open, users can take their business elsewhere to find the support they need for the software they use. Unlike closed proprietary software, OSS can be altered and extended by any developer familiar with the source code. This grants organizations freedom from “vendor lock-in” and gives them the ability to employ a third party for support if they so choose.

5. Better quality, collaboration, and efficiency

OSS is created and supported by a worldwide community of organizations and individuals. Because open-source software solutions are openly available and can be freely used, it’s often much faster and less expensive to evaluate and implement these solutions. The global communities united around improving these solutions often introduce new capabilities faster and more efficiently than internal teams working on proprietary software. The collective power of a community of talented developers working collaboratively towards the same goal results in not only more rapid development and troubleshooting but also in an overall increase in the pace of innovation.

Open-source software also directly benefits developers themselves. A study performed by the Boston Consulting Group concluded that a majority of surveyed programmers found open-source development to be enjoyable, intellectually stimulating, and a skill-improving experience. Participating in an OSS project is a great path to building a career in software development, allowing programmers to improve their skills by working collaboratively on exciting projects.

Open-Source Meets Crypto

The advantages of open-source software are essential to the development of crypto protocols like Bitcoin and Ethereum. In fact, only open-source software development can provide the transparency required to build these decentralized systems. If the code of a system is not open, then how would anyone be able to trust that the system is truly decentralized? Indeed, decentralized networks must be built as open-source software, because otherwise the result of closed development is the centralization of control over the network.

Crypto also solves the main challenge of open-source software, namely how to coordinate and incentivize open-source development in a way that is competitive with proprietary software development by centralized entities such as Facebook and Google, corporations with billions of dollars to spend on high-quality software engineers in a race to build controlled platforms where you are the product.

Cryptoeconomic protocols built by open-source communities provide a path forward, aligning the incentives of communities with the development of open protocols. This is only possible as a result of the innovation of digital scarcity, which was first invented by Satoshi Nakamoto as a feature of Bitcoin. Called coins or tokens, digitally scarce assets underpin systems like Bitcoin and Ethereum, incentivizing not only the miners that propose each block but also the developer communities that contribute the code required to improve these permissionless networks.

Permissionless networks are shared services, built by communities but owned by no one. Any developer can contribute to these networks, either by improving them or by building on top of them. And as the value of a network grows, so can the value of its native digital asset. This combination of open-source software development with networked incentives has resulted in the supercharged explosion of innovation and growth that we are still experiencing 10 years after the launch of Bitcoin.

The great promise of decentralized services is to level the playing field so that developers, creators, and businesses can build applications that truly empower users. We now stand on the doorstep of a new era of the internet, an internet in which we have alternatives to the proprietary centralized services that we use today for everything from finance and governance to communication and social media.