Bitcoin Development Funding “Healthy”

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The funding for Bitcoin and Lightning Network development is reportedly “healthy” compared to times past. According to a report from BitMex Research, a wide enough array of organizations fund development to make it seem good.

Distribution of Funding

Simply being open source and having a governance process (in the form of Bitcoin Improvement Proposals) isn’t enough to say that Bitcoin development is fully decentralized. Just as many charge that Bitcoin ABC is basically the sole developer of Bitcoin Cash, too many contributions from one company or individual would lead to charges that they were “in charge” of Bitcoin development.

The report found that the most active funder of Bitcoin development is Blockstream, a company sometimes accused of trying to take over Bitcoin with its Lightning Network project.

Blockstream and Lightning Labs by far fund the most open source Bitcoin developers. Whether or not that’s a problem is a matter of perspective. After all, they’re doing good work.

Using a different approach to measuring funding, the report has an alternative finding where it shows that Chaincode Labs actually contributed the most to Bitcoin development.

By that same metric, the majority of all contributions were independently funded.

The report concludes, in part:

Although the funding situation could improve, in our view the data indicates that the ecosystem is in a reasonably strong situation with respect to developer funding, based on metrics such as the distribution of funders and transparency. Of course, progress can also be made in the distribution of funding and Chaincode Labs is now the clear leader in terms of developer funding for Bitcoin Core. On the other hand, funding is far more distributed than it has been in the past, certainly compared to the 2012 to 2014 period when there was only one significant funder, The Bitcoin Foundation.

Decentralization Beyond Network Architecture

When BitMex says “improve,” they mean something important: with something like Bitcoin development, it’s better if there’s a wide range of sources contributing both funds and work. Development is time-consuming work, and it can’t always be done pro-bono. But that’s precisely what projects like Bitcoin, with their all hands on deck open source philosophy, call for.

Companies and exchanges, therefore, have to build Bitcoin for their own benefit. The more companies that have a hand in doing this, the better, and more secure, the project will be.

The concern around centralization of funding comes back to the same old concerns in cryptocurrency: one party collating too much control in its own hands, and controlling the actions of the rest of the network.

Things have come a long way since the days when the Bitcoin Foundation did most of the funding for development, but the ecosystem would probably be better off if every company with a stake in the protocol contributed a developer.

In cryptocurrency, however, there often come issues with disagreements around central themes like the design of the protocol. If there were a lot more developers than there are today, things might be even more chaotic. So instead, many crypto companies develop their own software for their own use, relying on Bitcoin Core development to propel things forward.

It’s good to see that things are “healthy” in the funding of Bitcoin development, but it does make you wonder about other protocols, where there are essentially dictatorships and single payer funding.