[fc-discuss] Financial Cryptography Update: Software Licensing and the Know-how to Issue

iang@iang.org iang@iang.org
Wed, 1 Jun 2005 20:13:24 +0100 (BST)


 Financial Cryptography Update: Software Licensing and the Know-how to Issue 

                             June 01, 2005


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https://www.financialcryptography.com/mt/archives/000462.html



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Software charging for big ticket sellers is getting more complex again,
as dual cores from AMD and Intel start to invade the small end. 
Oracle, which made billions charging on the muscle power of CPUs, will
have to do something, and we've by now all seen IBM's adverts on TV
suggesting "on demand" with its concommitant charging suggestion:  You
demand, we charge.

http://www.businessweek.com/the_thread/techbeat/archives/2005/05/big_sh
ifts_in_t_1.html
http://commentary.itmanagersjournal.com/commentary/05/05/17/1718228.sht
ml?tid=104&tid=89&tid=114

I've done a lot of thinking over the years about how to licence big
ticket items like issuance software.  In practice it is very difficult,
as the only revenue model that makes sense for the supplier is for
large up front licence fees to recover large up front capital and sunk
costs.	But for the demander (issuer and user of the software) the only
model that makes sense is to pay later, when the revenues start
flowing...

Issuance software has all the hallmarks of an inefficient market and I
don't think there has been successful case of issuance licencing yet,
as those two "sensible" options do not leave any room for agreement. 
This may be rational but it's very frustrating.  Time and again, we see
the situation of people wanting to get into the issuance market who
think they can produce the software themselves for a cheaper price. 
And they always end up spending more and getting a lesser quality
product.

In practice what we (Systemics) have been doing is this:  running the
software ourselves as "operator", and charging operating costs, with
some future licencing or transaction flow revenues.  Yet, the deal for
future revenues is always based on a promise and a prayer, which is
already asymmetrical given that most startups do no more than start up.
 (And it isn't just me bemoaning here - if you look back through
history there are literally hundreds of companies that tried to build
value issuance and sell it.)

Which leads to the freeware model.  In the freeware world, big ticket
items are given away and money is made on the consulting.  This has
worked relatively well in some areas, but doesn't work so well in
issuance.  I'm unclear of the full reason why open source software
doesn't work in issuance, but I think it is mostly the complexity, the
sort of complexity I wrote about in FC7.  It's not that the software
can't capture that complexity but that the financial cryptography
business often finds itself so squeezed for management complexity that
partnering with a strong software supplier are beyond capabilities.

What will potentially help is p2p issuance.  That is, "everyone an
issuer."  We've always known this model existed even as far back as
1995, but never really considered it seriously because too many
questions arose.  Little things like how we teach grandma to sign a
digital contract.  We've now done enough experiments in-house to
confirm that the corporate internal issue and the individual issue are
workable, sustainable economic models but we have to get other
companies and individuals to do that and for the most part they still
don't do anything they don't understand.

I'm guessing the way forward here is to turn client software into
issuance software.  This brings up a whole host of issues in financial
cryptographic architecture.  For a start it can never seriously scale
simply because people do silly things like turn off their laptops at
night.

But, more and more, the barriers to issuance and financial cryptography
in general I believe are spreading the knowledge, not the tools and
tech.  Every year our tools and tech get better;  but every year our
real barriers seem the same - how to get users and customers to make
their first tentative issue of a currency of value.  Oh, and how to
make money so as to keep us all alive, which was the starting point on
this long rant of liberal licence.

A couple of footnotes:	In a similar thread over at PGP Inc, Will Price
reveals how they've managed to get out of the legacy freeware version
trap:

"When the 30 Day Trial version of PGP Desktop Home expires, it reverts
to a set of functionality comparable to what used to be known as
Freeware, and said functionality remains available indefinitely --
under the same license conditions as Freeware used to be under."

Nice one.  That works for client software, not for server software.

Here's a further article on how the big companies are also working out
how big ticket software isn't the way to go:
http://commentary.itmanagersjournal.com/commentary/05/05/17/1718228.sht
ml?tid=104&tid=89&tid=114


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