Tokenized Micro-Licenses on The Blockchain: An Overview

Typically, when people want to know the history of Dragonchain they often ask about how it all started at Disney. It’s a great story and you can read about it here. But, today I want to talk about a different origin story, albeit related, the Dragon. 

Like most innovations, the Dragon solves a problem, in this case, software licensing. The world of software licensing may sound like a snooze fest but the $456.1 billion software industry is expected to grow to $507.2 billion by 2021. 

Although it may not feel exciting, licensing is necessary. We’re all familiar with agreeing to a set of terms to use a software program. In these terms, the software company, i.e the vendor, lays out the criteria for using its product. 

Software licensing has seen a change in its relatively short existence going from being fairly limiting to being pretty flexible. Perpetuated by the transition to an internet-based society, software (and the accompanying license) has gone from pay upfront to pay as you go. But, neither method is perfect and for that reason, the Dragon was invented. 

Before we dive into the innovation behind the Dragon and explain what the heck a micro-license is let's talk about the two methods of software licensing from which the Dragon hails. 

Version-Based Licensing Model

Before the 1990s, version-based licensing was the method used for granting software application permissions. At that time, software was tangible and came in the form of a floppy disc, CD, or DVD. Using software from one of these mediums required consumers to purchase the software and agree to the terms before installing the code onto their systems. 

Version-based licensing had many attributes and served the industry well for quite some time. With this type of licensing, consumers maintained ownership of not only the software but any data that was created on the software. For businesses, version-based licensing offered some level of scalability, in that, additional licenses could be purchased and were easily transferable to new staff. 

But, as the saying goes, all good things must come to an end. As technology advances, software, operating systems, and hardware all need constant updates to stay useful. But, unfortunately, software companies will routinely discontinue support for a particular piece of software and those updates and patches are no longer available. 

The lack of updates puts consumers at risk for viruses, spyware, and data breaches. For this reason, consumers must maintain software integrity to guarantee safety and compatibility over time. 

Beyond software becoming outdated and unsupported, it can be wasteful. For a business, if the size of the team is reduced or if a project comes to an end, version-based software licensing can sit dormant. According to a study from 1E, as much as 38% of business software is wasted, costing $34 billion a year for the US and UK, alone. 

Subscription-Based Licensing Model

As Internet usage and cloud-based computing became the norm, software companies have transitioned to a subscription-based licensing model. With 80% of vendors using the method, today. The transition to subscription-based licensing was great for both the consumer and the vendor addressing a lot of the issues seen with version-based licensing. 

Constant connection to the internet now gave consumers access to updated versions of the software to address bugs and maintain compatibility. These adjustments are more accessible and can be made either when the license is up for renewal or in real-time.

With subscription-based licensing consumers are afforded more customization with graduated tiers of service like basic and premium to provide more tailored price points, paying for only the services they want. 

And, of course, by transitioning to software downloads vendors can reduce costs, and those pesky disks aren’t cluttering up our shelf space. Sounds good, right? Not so fast.

Like with version-based licensing, subscription-based licensing has its problems. One issue that persists is, even though consumers are paying for what they need monthly or yearly, the consumer may not be using the software 24/7 during that month or year. So, even though the waste is reduced, the consumer is still paying for software use while it sits unused.

The other problem with subscription-based licensing is data ownership. In version-based licensing data, ownership was retained. But in subscription-based licensing, once the subscription runs out, it is over. Consumers are required to “re-up” or lose the rights to the software and thus the data created. Even though subscription-based licensing is more convenient and beneficial to both consumers and vendors, it lacks the crucial ability for the consumer to keep access to their data.

What is a Tokenized Micro-License™?

This brings us to the Dragon. The Dragon is a unique innovation in software licensing that operates on the blockchain. A Dragon is a Tokenized Micro-License™ and combines the best aspects of version-based and subscription-based licensing agreements. Dragons are used by businesses, developers, and the community to interact with the Dragonchain ecosystem to verify, validate, and secure transactions to the blockchain. Businesses can use Dragons to build applications or they can build their own Tokenized Micro-License™ for their applications. 

Inside each token is an embedded license that is maintained on the blockchain with both programmable terms (smart contracts) and human-readable (legal) terms. These customizable and programmable terms apply to every interaction of the software. This kind of licensing creates a very flexible framework for the vendor opening them up to endless possibilities and more licensing control on a micro-level. 

The Tokenized Micro-License™ allows the local holding of licenses much like version-based licensing, yet allows for the decentralization of software services. The inclusion of a tokenized license comes with transparent tracking, provable ledgering for accounting purposes, and powerful anti-piracy measures.

The two biggest issues with software licensing for consumers are addressed with the Tokenized Micro-License™. First, commodity service micro-payments are modeled into the license itself to fine-tune licensing at a granular level. Meaning, a user is only paying for software that they use. 

Secondly, license ownership is recorded on the blockchain and decentralized. This gives consumers ownership and control over their data. Consumers can physically hold the key that allows access to their own data even if they no longer have access to the software.

In an environment that values personalization and customization, the one size fits all modeling of version-based and subscription-based software licensing needed an upgrade. With the Tokenized Micro-License (™), Dragonchain was able to bring together the best attributes of both models and in doing so, created an innovative model poised to be the foundation for software licensing for the foreseeable future. 

Find more information on the Tokenized Micro-License here.  Contact us today to discuss all your software licensing needs.