Bitcoin Foundation Is 'Effectively Bankrupt'
Newly elected board member of the Bitcoin Foundation Olivier Janssens has gone to Reddit to post an extensive critique on the foundation.
Newly elected board member of the Bitcoin Foundation Olivier Janssens has gone to Reddit to post an extensive critique on the foundation. Janssens claims that the foundation is “effectively bankrupt,” which has since then been confirmed on the foundation forum by Chief Scientist Gavin Andresen and—to a slightly lesser extent—Executive Director Patrick Murck.
The Bitcoin Foundation was founded in September 2012 by then Bitcoin lead developer Gavin Andresen, then BitInstant CEO Charlie Shrem, then MtGox CEO Mark Karpeles, CoinLab CEO Peter Vessenes, investor Roger Ver, and lawyer Patrick Murck. Although the foundation never officially represented Bitcoin itself, it did intend to standardize, protect and promote the use of Bitcoin.
The establishment of the Bitcoin Foundation has always been controversial in the Bitcoin sphere, however, as some feared that such an organization could become a centralizing force in the decentralized Bitcoin ecosystem. One of the most severe critics is the Belgian Bitcoin early adopter and millionaire Olivier Janssens, in particular since Brock Pierce was elected to the board of the foundation in May of 2014, and after Janssens visited the Bitcoin Foundation's Bitcoin 2014 conference in Amsterdam that same month. Janssens therefore put up a US$100k bounty for a software platform that could replace the Bitcoin Foundation - a price that was won by Mike Hearn and his Lighthouse crowdfunding platform last year.
More recently, Janssens decided to run for a seat on the board of the Bitcoin Foundation himself, and was elected on a platform of transparency and decentralization of core development last month. As such, he gets to attend the meeting of the board, and has now revealed to the Bitcoin community that the Bitcoin Foundation is essentially out of money, stating:
“[The] Bitcoin Foundation is effectively bankrupt. As a result of two years of ridiculous spending and poorly thought out decisions, they almost ran out of money in November of last year.”
Because of that, Janssens says, the foundation decided to replace then Executive Director Jon Matonis with Murck, who made the decision to refocus the foundation's efforts on core development:
“In extremis, but way too late, they decided to select a new executive director during that time. That new director decided that the only way to still get funds at that point, was to focus solely on funding core development, in the hope that people would see that as a good cause.”
Based on statements made by others involved with the foundation, it seems that Janssens revelations regarding the effective bankruptcy are mostly true.
On the foundation forum, Andresen - who was a board member of the foundation until last month - acknowledged that the organization has gotten itself in financial trouble. Moreover, Andresen expressed doubt this situation can be resolved easily, stating:
“'The Foundation will support core development' vision didn't work; I took a couple of weeks off from doing technical work to meet with people capable of funding that vision and it very quickly became clear most 'deep pockets' don't trust that the Foundation would stick to that vision, or aren't willing to risk their reputations being closely associated with an organization that had two of its Board members resign in disgrace last year.”
Murck, in turn, nuanced Janssens’ statements somewhat, while expressing his discontent for the manner in which the information was published. Murck said,
“The Foundation is not bankrupt, but a restructuring is needed. Olivier basically jumped in front of our announcements on that and our annual report on the 2014 finances to be released next week, and he spun it very very negative.”
On Twitter, Murck expressed doubt on the future of the Bitcoin Foundation as a whole:
Regarding the future of the Bitcoin Foundation, Andresen has posted an open request to all members to share their opinions in order to come up with a solution. He wrote,
“I had an idealistic vision of the Foundation being a member-driven organization, but that never happened. Now would be a good time for you, the membership, to make me proud and come together and figure out a vision for the Foundation moving forward. What do you want to do, and how will that get paid for?”
Janssens, meanwhile, proposes some solutions for the lack of funds in his own Reddit-post. Most notably, he promises to create a special trust fund to which he says he will donate several US$100K in order to pay for the salaries of Andresen as well as core maintainer Wladimir van der Laan and some other core developers. Additionally, Janssens pledges to organize a crowdfunding campaign to add to the initial several US$100K, while emphasizing that the core developers, and only the core developers, should have control over the money: “At no point do I want to have any control whatsoever.”
Andresen, in turn, seems open to this suggestion: “I still think the best way to move forward with [core development] funding is some type of not-for-profit legal entity, whether that is Olivier's crowdfunded Trust or something else (or both) I don't really care.”
Another of the core developers, Jeff Garzik, tweeted in strong disagreement with this proposed solution, however. He said, “It is a HUGE mistake to create a single trust fund controlled by [the core developers]. That centralizes [development] funding, which is currently more decentralized [because it is] spread across several companies/entities. ” He added that it also “formalizes the notion of core [developers] as a legal entity, rather than a decentralized group as it is now.” Garzik is currently on the payroll of BitPay.
The weak financial status of the Bitcoin Foundation is somewhat surprising, as the organization owned over US$4.6 million in assets only a year ago. One obvious reason for the loss of funds is the decline in the bitcoin price, as the foundation held about 90% of these assets in bitcoin. On top of that, the foundation indicated spending roughly US$1.8 million a year. Neither of these account for the loss of the full US$4.6 million, however. What happened to the rest of the funds remains unclear for now.
In addition to the revelation that the foundation is “effectively bankrupt,” Janssens also expresses some severe criticism on the proceedings at the foundation in his Reddit post. In particular, Janssens denounces the perceived lack of transparency in decision making, and he criticizes the control he believes the foundation has over the process of development, stating:
“The truth is that the Foundation’s plan was to hire even more [core developers and] to start a Bitcoin Standards Body. No organization should have this much control over Bitcoin, and a disaster was avoided.”
1/ A #bitcoin protocol standards effort should be applauded, not derided with fear-mongering. Ask yourself: does IETF rule the Internet?— Jeff Garzik (@jgarzik) April 4, 2015
This criticism was strongly refuted by Garzik on Twitter, however. Garzik said, “A [Bitcoin] protocol standards effort should be applauded, not derided with fear-mongering. Ask yourself: does IETF rule the Internet?” He added, “Anyone who thinks [the foundation] controls bitcoin, or controlled [it] in the past, is grossly uninformed about bitcoin, software [and] the net.”
Cointelegraph reached out to both the Bitcoin Foundation and Janssens, but received no response before publication. (Edit: After publication of this article, Janssens has commented in response to Garzik in the comment section below this article.)
This article was further edited on Sunday to add some clarification and fix minor mistakes.
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