Merit Systems raises $10M to create a new economic model called ‘open-source capitalism’ – News

A pioneering startup called Merit Systems Inc. is getting a lot of attention today after raising $10 million to create a new economic model for software developers that it calls “open-source capitalism.”

Today’s round was led by heavyweight investors like a16z Crypto and Blockchain Capital and also saw the participation of a number of unnamed angel investors.

The startup is aiming to create a sustainable system that will fairly reward contributors to open-source software projects. It wants to lead the way into a future where the key infrastructure that underpins the internet is not built on unpaid labor, but rather, ensures that everyone is rewarded proportionally for their efforts.

Merit Systems explains that open-source software is the backbone of most modern technologies in use today. Such code is found in the vast majority of databases, artificial intelligence frameworks, analytics tools, web browsers and mobile operating systems in use today.

For instance, the Android operating system is built on open-source code, as is GitHub and the Linux operating system. The Mozilla Firefox browser is another example, and so is the Chrome browser. Then there’s the likes of Databricks Inc., which has built a proprietary big-data platform that’s based on the open-source Apache Spark project.

Open-source software is what has enabled countless digital innovations, yet most of the people who write this code go unpaid, and keep it up to date on a voluntary basis.

Some open-source projects are run entirely by small teams, or even single developers, yet many companies use that software as the foundation of paid products and generate millions in revenue that they keep for themselves. That’s because there’s no consistent model available to ensure the all-important contributors to their foundational software get paid, despite their critical role in maintaining the underlying code.

Open-source software maintainers and creators do not get the credit they deserve, and Merit Systems wants to change that. To do so, it’s building a system based on blockchain and other Web3 technologies that ensures code creators receive full credit for their work, and get rewarded fairly according to the value of their contributions. It’s doing this by tackling the “attribution problem” in open-source software, co-founder Ryan Sproule told CNBC.

Merit Systems’ protocol is designed to properly attribute and reward users by adding rich attribution data to software version control systems such as GitHub. This allows capital sources to route funds to codebases, incentivizing builders directly, it says on its website. By tying this capital directly to impact, Merit Systems says it’s creating a dynamic market where innovation will thrive.

For now, we don’t know much more about how Merit’s proposed Open-Source Capitalism model will work. What we do know is that its other co-founder, Sam Ragsdale, has extensive knowledge of open-source and blockchain technologies, having previously helped to design Jolt, which is a virtual machine that uses cryptographic zero-knowledge proofs to enable privacy and anonymity in decentralized systems.

Ragsdale was a former investor at a16z, while Sproule was previously associated with Blockchain Capital, so it’s easy to understand how the startup got the attention of those firms.

Even so, the backing of two of the most prominent Web3 venture capitalists suggests that Merit Systems is on the right track, and it could soon find itself at the heart of a reinvigorated open-source ecosystem that finally starts offering incentives to those who drive innovation and progress.

Image: Merit Systems