Supporting The Unsung Heroes Of Bitcoin: The Imperative Of Funding Open-Source Developers

Introduction
Bitcoin is a decentralized monetary system that depends heavily on the continuous efforts of open-source developers who are responsible for maintaining the Bitcoin codebase, addressing security vulnerabilities, implementing new features, and ensuring the overall health and stability of the network. Despite the critical nature of their work—the Bitcoin network would not survive without them—funding for Bitcoin’s open-source developers remains a significant challenge. In this paper, we’d like to share with readers the dynamics of Bitcoin’s developer network, focusing on the challenges and opportunities associated with funding its ongoing development. To read case studies that showcase the important work undertaken by the open-source Bitcoin developer network, please scroll to the end of this blog post.
Bitcoin’s Open-Source Software
Open-source software (OSS) is Bitcoin’s heartbeat. From its inception, anyone has been able to contribute, view, and modify Bitcoin’s source code. Open source has been fundamental to Bitcoin’s growth, enabling a global community of developers to collaborate on improving the software and seeking to ensure its security and stability.
Thanks to its open-source nature, Bitcoin incorporates a unique system of checks and balances that encourages the innovation and maintenance of its protocol while ensuring that changes are in the interest of all stakeholders. Core developers who architect and maintain the Bitcoin protocol are key to the system of checks and balances, as shown below. Their primary responsibility is to write and update the foundational software upon which the entire Bitcoin ecosystem operates: they define the rules for transactions, block creation, and consensus among nodes. That said, their power is not absolute. The beauty of this ecosystem is that modifications proposed by any developer must be adopted by the broader network.
Bitcoin's Governance Model
Source: Carter 2016/2017.1 For illustrative purposes only and should not be considered investment advice or a recommendation to buy, sell or hold any cryptocurrency.
Importantly, the system of checks and balances is not political, but it is central to Bitcoin's resilience in the face of attacks and vulnerabilities. Why? The answer lies in Bitcoin’s decentralized and open development process. Because its code is accessible publicly, developers can inspect it for potential flaws and patch it rapidly. A collaborative ecosystem fosters a culture of continuous improvement, with new features and updates proposed and discussed openly within the community.
Bitcoin and The Public Goods Dilemma
The features that make open-source software a powerful tool for innovation also can create challenges for sustaining Bitcoin’s development over time. Understanding open-source software as a public good is essential to grasp the broader dilemma facing Bitcoin. Open-source software (OSS) like the Bitcoin protocol satisfies two of the most important features of a “public good”: non-excludability and non-rivalry.
- Non-Excludability: Access to Bitcoin’s underlying software is available for anyone to access and use, regardless of whether they contribute to its development or maintenance. Without paying for access, anyone can run a Bitcoin node, own private keys, use the software to send or receive transactions, or contribute to the codebase.
- Non-Rivalry: As software, one person’s use of the Bitcoin network does not limit its availability to others. Multiple users can benefit from the software simultaneously.
- The Free-Rider Problem: Because of Bitcoin’s non-excludable and non-rivalrous nature, most of its users and beneficiaries are “free-riders”: they do not contribute to Bitcoin’s software development and maintenance.
Bitcoin faces a public goods dilemma: the success and security of the network depend on the work of developers who maintain the codebase, address vulnerabilities, and implement improvements but often are not compensated financially for their efforts. While ideology and/or the desire to contribute to a revolutionary financial technology might motivate them in the short term, Bitcoin developers are unlikely to be sustainable financially over the long term.
Compounding the challenge, the Bitcoin network is decentralized, with no central authority or organization responsible for ensuring that developers are compensated adequately. Unlike revenue-generating software companies, Bitcoin relies on a community-driven model funded by voluntary contributions, donations, or grants.
Dependent on the goodwill of contributors and other external funding sources, the health, reliability, and security of the Bitcoin network—importantly its developers—are at risk. Without dependable funding, Bitcoin could face risks to its development and security. If only a few entities were to support its development, Bitcoin’s decentralization could be compromised as well.
We must support and sustain the Bitcoin developer network, not only because it needs us, but because we need it.
Toward a Sustainable Funding Mechanism
The adoption of Bitcoin by institutions offers an opportunity for investors to rally and solve the public goods dilemma by facilitating sustainable funding for open-source Bitcoin developers. While somewhat helpful, one-time grants or donations may prove unsustainable over the long term. Instead, a concerted effort by various stakeholders to fund developers in perpetuity would support the health and sustainability not only of Bitcoin’s software code but also the first private digital rules-based global monetary system in history and a new asset class.
As a Bitcoin stakeholder since 2015, ARK has full conviction in the Bitcoin ecosystem and wants to ensure the sustainability of the open-source developer community. ARK is proud to announce that we are contributing a percentage of the management fees associated with our actively-managed private bitcoin strategies—not a one-off grant—to fund the crucial work of open-source developers and to address the public goods dilemma that has long challenged the open-source community, particularly in the context of Bitcoin’s decentralized development model.
ARK has selected the three organizations listed below to fund. To learn more, please visit the websites of the following organizations:
- Bitcoin Brink
- OpenSats
- Human Rights Foundation
We invite and encourage other institutional funds and stakeholders to join us in this effort. Together, we can build a robust and sustainable foundation that supports the ongoing development of Bitcoin and its broad open-source ecosystem.
Case Study: Open-Source Developers Solved Bitcoin’s Inflation Bug Security Vulnerabilities | Also known as CVE-2018-17144, the Bitcoin Inflation Bug was a vulnerability discovered in Bitcoin's code in September 2018. The necessary response to the bug underscores the importance of maintaining a strong developer network. The bug was particularly dangerous: if it had not been solved properly and in a timely manner, the bug could have allowed a malicious actor to issue bitcoin beyond the 21 million limit, inflating its supply and undermining the fundamental economics of the system. The bug was introduced in Bitcoin Core version 0.14.0, released in March 2017, and stemmed from an issue in the consensus code that checks the validity of blocks. Specifically, the bug was related to how Bitcoin nodes handle the validation of duplicate inputs in a transaction. An anonymous developer discovered the inflation bug and reported it to Bitcoin Core's security team, who identified it as a serious vulnerability that could have compromised the entire Bitcoin network. Patching The Inflation Bug The Bitcoin Core Development Team acted swiftly to address the vulnerability. Here's how they moved into action: 1. Immediate Fix: The developers quickly created a patch that fixed the bug. The patch was released as Bitcoin Core version 0.16.3. and ensured that nodes would reject any block containing the malformed transactions that could exploit the vulnerability. 2. Responsible Disclosure: Given the severity of the bug, the Bitcoin Core Development Team initially kept the full details of the vulnerability under wraps. Their primary focus was in getting nodes and miners to update the patched version as quickly as possible, minimizing the risk of exploitation. 3. Coordination with the Ecosystem: The Bitcoin Core Development Team worked closely with other stakeholders in the Bitcoin ecosystem, including miners and exchanges, to ensure a rapid update to the patched software. Their coordination was crucial in preventing exploitation before most of the network upgraded. 4. Post-Patch Disclosure: Once enough nodes had upgraded and the immediate risk had passed, the Bitcoin Core Development Team disclosed the full details of the bug to the public, including a thorough explanation of how the bug could have been exploited and the steps taken to fix it. |
Case Study: Open-Source Developers Initiated The Important Taproot Upgrade | A significant upgrade to the Bitcoin network in 2021, the Taproot upgrade was designed to improve the privacy, efficiency, and flexibility of Bitcoin transactions. Open-source developers carefully activated and coordinated its rollout: 1. Development and Testing: Taproot’s concept and initial code were developed over several years, starting with work on Schnorr signatures. The Bitcoin developer community rigorously tested the code to ensure that it was secure and would work as intended. Developers conducted extensive testing on Bitcoin’s testnet to simulate how Taproot would behave on the main Bitcoin network. 2. BIP Proposals: Bitcoin Improvement Proposals (BIPs) are the formal processes through which changes to Bitcoin are proposed and discussed. Taproot involved several BIPs, including BIP 340 (Schnorr signatures), BIP 341 (Taproot), and BIP 342 (Tapscript). The Bitcoin development community openly discussed those BIPs and incorporated feedback into the final proposals. 3. Signaling and Activation: Taproot was deployed in a process known as Speedy Trial, a signaling mechanism through which miners could include a specific bit in the blocks they mined to signal their readiness to adopt Taproot. The activation required a supermajority of 90% of blocks within a 2,016-block period. The process began in May 2021, and reached the required threshold in June 2021. After hitting the threshold, Taproot was locked until activation in November 2021. 4. Activation: Taproot was officially activated at block 709,632 on November 14, 2021. From that point onward, Taproot’s features became available on the Bitcoin network. Thanks to the careful planning and broad support from the Bitcoin developer community, the activation was smooth, with no significant disruptions. |
Important Information
Bitcoin is a relatively new investment, which has unique and substantial risks and which may be more volatile than other types of investments. Bitcoin operates without central authority or banks and is not backed by any government. Even indirectly, bitcoin may experience very high volatility. Bitcoin is not legal tender. Federal, state or foreign governments could restrict the use and exchange of bitcoin. Bitcoin exchanges could stop operating or permanently shut down due to fraud, technical glitches, hackers or malware.