How Jack Dorsey’s Bitcoin Legal Defense Fund is Fighting for the Future of Open Source Software

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A crypto wallet theft lawsuit filed by a man claiming to be Bitcoin creator Satoshi Nakamoto could jeopardize the future of open source development.

That’s according to the Jack Dorsey-backed Bitcoin Legal Defense Fund, which is taking on a case to defend 11 Bitcoin developers named in a lawsuit filed by Craig Wright, an Australian computer scientist who came into the spotlight back in 2016 with a hotly contested claim. to be Bitcoin’s founder.

The crux of the current case goes back to 2021 when Wright, through a Seychelles-based firm called Tulip Trading, launched a so-called “pre-action letter” against 16 Bitcoin software developers, in an attempt to regain access to £4 billion. ($5 billion) worth of Bitcoin he claims to own. Wright said he lost access to private keys for 111,000 Bitcoins after his home network was hacked the previous year, and that it was the responsibility of key developers of Bitcoin Core (the main version of the Bitcoin protocol software) to remedy illegitimate crypto transactions.

Although the case was first dismissed last year before it went to trial, a UK Court of Appeal overturned that decision back in March, allowing the case to proceed with a trial expected some time in 2024. In his findings, Lord Justice Birss points to academic literature which questions whether public blockchains are truly decentralized.

“If the decentralized governance of Bitcoin is indeed a myth, then in my judgment there is much to be said for the proposition that bitcoin developers, while acting as developers, owe a fiduciary duty to the true owners of that property,” he wrote.

So on Wednesday this week, 11 Bitcoin developers filed their defense with the support of the Bitcoin Legal Defense Fund, a non-profit organization created in 2021 by Twitter and Block (formerly Square) co-founder Jack Dorsey; Block’s presiding judge Martin White; and Chaincode Labs co-founder Alex Morcos. The fund now also includes legal director Jess Jonas, who joined in January.

“Multi-front litigation”

The fund’s founders initially wrote an open letter to Bitcoin developers last year to explain their raison d’être. They pointed to the “multifront litigation” facing the Bitcoin community, including Craig Wright’s efforts for which they confirmed at the time it would lead the defense. While they noted that the main purpose of the fund was to defend developers “from lawsuits regarding their activities in the Bitcoin ecosystem,” they also noted that the ramifications extended far deeper into the wider open source space.

“Litigation and continued threats are having their intended effect – individual defendants have chosen to capitulate in the absence of legal support,” the trio wrote. “Open source developers, who are often independent, are particularly vulnerable to legal pressure. In response, we propose a coordinated and formalized response to help defend developers.”

A familiar story

In truth, the issue of the legal system interfering with the development of open source has become a hot topic of late. In a letter to EU authorities last week, more than a dozen open source industry bodies said the newly proposed Cyber ​​Resilience Act, which seeks to codify cybersecurity practices for digital products sold in Europe, could have a “chilling effect” on software development. as open source developers can be held personally liable for security flaws that occur in a downstream product. In other words, if the law is passed in its current form, developers may be less inclined to contribute to open source projects for fear of legal wrangles.

Elsewhere, some argue that the EU’s upcoming AI law, which seeks to govern AI applications based on perceived risk, could create burdensome legal liability for general AI systems (GPAI) and give more power to well-funded big tech companies.

While the latest episode emerging around Bitcoin is somewhat different, it raises similar issues. The overall story may well be about who gets or doesn’t get to control Bitcoin, and whether the project’s core developer base should be forced to create some sort of “backdoor” to service third-party access to private keys. But bubbling beneath the surface is something fundamental to the future of software, and whether open source developers should have a fiduciary duty to their users.

“We believe these lawsuits are frivolous, but we must still vigorously oppose them,” Jonas said in a statement.

Legal liability

Central to the defendants’ case is the simple fact that Bitcoin was released under an open source MIT license, which leaves little in the way of legal liability for those who maintain the software. The MIT license explicitly states:

In no event shall the authors or licensees be liable for any claim, damages or other liability, whether in contract, tort or otherwise, arising out of, out of or in connection with the Software or the use or other dealings in the Software.

But if, for whatever reason, a court our ruling on the side of Tulip Trading, this could effectively destroy one of the core principles of the MIT license that underpins countless open source projects today, setting a dangerous precedent that forces open source developers – many of whom work in their own time on their own dime – to serve the end user of that software, whatever they require.

“The Bitcoin Legal Defense Fund fights not only for Bitcoin, but for the right of open source developers to create and freely share their code with the world for the greater good,” Morcos said in a separate statement. “The Tulip Trading case threatens not only the MIT license, but also the very notion of free speech. Our collective mission is to secure innovation by shielding developers from legal threat.”

While there are 16 defendants in total, the Bitcoin Legal Defense Fund represents only 11 developers who worked on Bitcoin Core. There is a 12th Bitcoin Core defendant who has not sought help from the Bitcoin Legal Defense Fund, plus another 4 defendants who have worked on various Bitcoin forks who are arranging their own legal counsel.

Separately, Wright has launched a secondary suit against other Bitcoin developer entities, with Wright claiming ownership of Bitcoin copyright and database rights on the basis that he is Satoshi Nakamoto. That case was thrown back in February, but the lawsuit quickly resurfaced in a revised form, and the defendants filed their defense last month. The Bitcoin Legal Defense Fund is also supporting two Bitcoin Core developers named in that lawsuit.

“The outcomes of these cases are important to everyone, even those who may not be interested in Bitcoin, because these lawsuits could have serious detrimental effects on open source development, which will negatively impact our lives in ways we may not even be aware of over. until it’s too late,” Dorsey added in a statement.