Last month, Huawei’s CEO Ren Zhengfei commented that blockchain is worthless in the face of quantum computing. He didn’t seem to understand what a blockchain is, and also appeared to confuse blockchain technology with cryptocurrencies.
The irony is that Huawei would have benefitted from the open-source principles underlying blockchain. Huawei’s smartphones are cut off from installing Google Mobile Services on Android, due to restrictions by the US government. As a result, the telecoms giant saw a sharp drop in its overseas phone sales, as people in Google-oriented areas would not buy a phone without access to GMS, just as people in China may not buy a phone that didn’t support WeChat.
Android is open source, which means that users can freely change and distribute software, but its apps are not. Blockchain technology is also supposed to be open source, but that is not always the case. The chart below shows the distribution of blockchain patents, with America in the lead and China coming in second.
Those who truly understand the philosophy of blockchain will find this chart funny, because patents go against the spirit of blockchain technology. Major public blockchains like Bitcoin and Ethereum are open source, and would obviously not apply for patents. Instead, they will put code on web sites like Github, so everyone can access it for free.
Open source principles are essential for blockchain technology. Being open and transparent are prerequisites for a system that allows everyone to participate with mutual trust. And open source is the best way to be open and transparent. Each line of code should be visible to everyone, not hidden in an opaque black box.
The revenue model behind open source software
Open source software is not new, but the challenge is making money from it. Due to meager returns, the open source community often looks like a laboratory for geeks. One typical example is that only a small group of volunteers are maintaining the OpenSSL security protocol on the Internet. Each year the OpenSSL project receives about $2000 in donations. This spare resources likely contributed to Heartbleed, a major security flaw that spurred companies like IBM, Intel, Microsoft, Facebook and Google to pledge funding for open source.
If there is no commercial value, we can hardly expect open-source software to compete with commercial software in terms of ease-of-use and frequency of upgrades, unless they can find a “sugar daddy” like Google or IBM.
Blockchain technology, by contrast, allows open source developers to earn real profits. How? One way is through something called “gas.” Anyone using a service of a certain blockchain must spend the native tokens in the corresponding system, while those who maintain that system can receive tokens as a reward. This creates an economy that can operate on its own. Early participants can acquire a certain portion of tokens for their contribution in development or investment, and the value of those tokens increases with the growth of users and demand.
Once a certain technology is recognized by a group of people, a small community soon emerges, with members constantly joining and leaving. Some communities are steered by multiple independent opinion leaders, and the prosperity or disappearance of the community is entirely self-determined. The community’s recognition and pursuit of a certain technology is called “consensus.” The more attractive the technology, the more people join the community, making the consensus mechanism stronger.
You can't simply fork the code of a blockchain to create another Bitcoin of equivalent value. You must win the consensus of the community, which represents the true value of open source software. In that sense the core competitiveness of blockchain technology lies in consensus, not code.
Open source is critical for industry development
Open source is a key component of the fast development of the blockchain industry. Whenever a technical upgrade to a blockchain is added, it can be immediately noted, quickly discussed and studied, and rejected or adopted in a short period of time. The smartest developers in the world can participate. This speed of development and iteration is unparalleled in other industries. This is a brand-new technical era in which developers in the open source community can earn profits.
Open source is a mainstream trend, and today the world has already moved into the open source hardware field. One typical case is the RISC-V instruction set.RISC-Vis a RIS-based open source instruction set architecture (ISA). The project was born at the University of California, Berkeley in 2010, but many contributors are volunteers and industry practitioners from outside of the university. Compared with most instruction sets, the RISC-V instruction set can be freely used for any purpose, allowing anyone to design, produce, and sell RISC-V chips and software without paying any patent fees. In the future Internet of Things, we will see more and more open source hardware. In the blockchain industry as well, many hardware wallets have also adopted an open source approach to improve security.
Patents acquired by tech giants represent traditional business strategies that could struggle to compete in an open source industry. Programmers in big companies are likely aware of this problem. But they may nonetheless choose to apply for patents to prove their capabilities to regulators or other decision makers.
Some governments are embracing blockchain as more of a closed technology. The Chinese government recently expressed its support for blockchain, but it’s clear that regulators are seeking a kind of “controllable” self-development of blockchain technology. But rather than focus on blockchain patents, regulators should encourage the establishment and growth of the open source community. They could, for example, appoint an independent third party to assess the community or simply encourage more developers to contribute to public chains like Bitcoin.
Huawei clearly suffered from the loss of Google’s support. Chinese regulators more generally should look at this example. If the government devotes all its resources to patent-intensive companies, it could kill off the local blockchain industry. In order to better learn from the open source technology and develop its own “controllable” tech, we must abandon the “patent thinking” in the traditional industry and make efforts to set up our own open source communities.