NFTs for Open-Source and Commercial Software Licensing and Royalties

Abstract

Software licenses are legal agreements of sale and usage among software developers and clients. Such legal agreements are crucial to effectively manage ownership and protect the rights of involved parties. Today’s software licensing mechanisms are mostly centralized and do not address the ever-increasing issues and complexities of modern software that may include multiple licenses, open-source distribution, rewarding other contributors of external software libraries, and utilizing royalty payments for monetization. As a result, developers have lost confidence in the existing software licensing models, and many software projects are failing due to lack of funding and royalty payments. This paper addresses such issues and complexities by proposing a novel decentralized software licensing system based on Non-Fungible Tokens (NFTs) and blockchain. The proposed licensing system is applicable to both commercial and open-source software. We use NFTs as digital tokens that encapsulate software code and their artifacts by minting them as unique valuable assets that allow developers to store and manage them on a blockchain ledger. With NFTs, developers can register and license their code, monetize it on NFT marketplaces, and earn royalties from other software projects that use their code. We present system architecture, relevant sequence diagrams, and develop aggregation algorithms for Ethereum smart contracts with ERC-1155 NFTs. Furthermore, we perform functional validation of our system and analyze the cost of its adoption. We also analyze the security of the solution and show how its applicability can be generalized and extended. We have made our smart contract code and related testing scripts publicly available on GitHub.