The Bitcoin Legal Defense Fund is a grassroots non-profit organization funded by individuals around the world who believe in protecting developers working on Bitcoin and related open source software.

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Bitcoin developers have been subject to increasing litigation over the past few years and often do not have the time, resources, or legal expertise to defend themselves in court. Bitcoin developers are often supported with grants from individuals and organizations within the community that cover their living expenses, but do not provide legal support. BLDF fills that gap by helping developers find and retain defense counsel, develop litigation strategy, and pay legal bills.

Many other cryptocurrencies launched with “pre-mines” or “ICOs” where the creators of the cryptocurrency award themselves a substantial share of the newly created coins to fund the network’s development. Unlike these tokens, Bitcoin did not launch with a pre-mine or ICO. There are no privileged parties that get payments. Anyone who has obtained Bitcoin has done so on an equal and competitive basis by mining or purchasing it. The defendants in the Tulip Trading case are not the creator(s) of Bitcoin, but volunteers who began working on Bitcoin after its creation. Any support for Bitcoin’s development is from volunteers who choose to fund development efforts or contribute their own time.

Tulip Trading brought a suit against multiple open source developers who have worked on Bitcoin on the grounds that these developers have fiduciary and/or tortious duties to Tulip to grant them coins they claim to have owned and lost.

The central question that must be decided by the court is whether Bitcoin developers, and indeed all open source software developers, owe fiduciary duties to users of their software irrespective of their use of license which disclaims liability. But a duty to perform the impossible can’t exist so, as a result, Bitcoin’s decentralization is also central to the case. Bitcoin’s decentralization is what prevents parties, such as defendants or Wright, from imposing unwelcome changes on other users of Bitcoin such as the backdoor demanded by Tulip Trading.

There are 16 defendants in the lawsuit, all of whom are current or former developers working on Bitcoin, Bitcoin Cash, Bitcoin SV, or Bitcoin ABC. The Bitcoin Legal Defense Fund supports the Bitcoin developers.

Some of the individuals named in the Tulip Trading lawsuit are or have been maintainers of Bitcoin Core. Bitcoin Core is an open source software client that allows users to interact with the Bitcoin network. Bitcoin Core is by far the most popular Bitcoin client, although several other clients exist such as Bitcoin Knots and BTCD.

The maintainers of Bitcoin Core have write access to the “Bitcoin” repository hosted on Microsoft’s GitHub and use that access to merge updates proposed by other community members into the software distributed there. At any given time there are around half-a-dozen Bitcoin maintainers, but there are only four currently. Several have recently resigned and only one defendant in the Tulip Trading case is currently a maintainer.

If the UK High Court rules in favor of Tulip Trading and concludes that Bitcoin developers have a fiduciary duty to users of the Bitcoin network, it may attempt to compel them to publish software containing a backdoor that allows Tulip to bypass Bitcoin’s public key authentication and seize coins they claim belong to them.

The problem, however, is that there is no means for enforcing this ruling because Bitcoin maintainers do not control the software run by participants in Bitcoin. As such, even if they published software containing a court-ordered backdoor, any effect would be limited to users who chose to adopt the update. Because a change allowing bitcoins to move without their required keys would be incompatible with the prior consensus rules, users running such a change would form a separate network and currency from users who didn’t adopt the change.

It is highly unlikely that an economically significant portion of users would adopt the Tulip version. In 2018, Wright created his own version of Bitcoin with incompatible rules. It currently trades under the name “Bitcoin Satoshi Vision” for $35 per coin, compared to Bitcoin’s $30k and appears to be used almost exclusively by Wright affiliated entities.

Nevertheless, this ruling would set a dangerous legal precedent that would disincentivize developers from contributing to Bitcoin and other open source projects in the future.

No. The Bitcoin network is decentralized and each participant decides for themselves what bitcoin rules they follow through the software they choose to run. Bitcoin software is open source and can be modified and distributed by anyone. Most Bitcoin participants currently use Bitcoin Core, which is the original Bitcoin software developed by a large public collaboration. Since 2009, thousands of individuals have contributed to it. If users adopt software with mutually incompatible rules the result is the creation of multiple distinct currencies, which would be disruptive and so the Bitcoin community collaborates and doesn’t adopt incompatible rules.

In short, Bitcoin maintainers have significant prestige in the community because of their work on the most popular software that is used to interact with the network, but they have little power in terms of being able to change the network on their own. The true power in the Bitcoin network is wielded by the tens of thousands of people operating Bitcoin nodes and the many more who decide what they accept as Bitcoin when they trade it for goods and services.

A fiduciary duty is a duty of “single-minded loyalty” where the fiduciary is obligated to put the principal’s best interest above all others, including their own. This is an exceptional obligation far beyond an ordinary duty of care to deal honestly or without negligence. In fact, it is the strongest duty of care under the law.

Tulip argues that in this case a fiduciary or positive duty exists: An obligation to take action in their interest to rescue them. This is a stronger duty than even a police officer owes to a person in front of them who is about to fall in front of a train, for example. In general the law avoids positive duties (the obligation to act) because of the potential for creating impossible conflicts with negative duties (the obligation to not act), even in the context of fiduciaries. To the extent that any authors of Bitcoin software owe any heightened duties to other users it would be a duty to not act to undermine the well understood and long advertised security and economic properties of the system as Tulip demands.

Any discussion about duties cannot ignore that like many open source projects, Bitcoin is developed and distributed under the MIT License, one of the most popular and permissive open source licenses in the world. The license explicitly states: “The software is provided ‘as is’, without warranty of any kind, express or implied, including but not limited to the warranties of merchantability, fitness for a particular purpose, and noninfringement. In no event shall the authors or copyright holders be liable for any claim, damages, or other liability, whether in action of contract, tort or otherwise, arising from, out of or in connection with the software or the use or other dealings in the software.”

Without this kind of protection many open source developers wouldn’t participate at all because it would be unreasonable and unfair to take on substantial liability for software they give away on a volunteer basis.