Bitcoin Foundation Is ‘Effectively Bankrupt’

By April 4, 2015Bitcoin Business
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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. 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.

According to Janssens, who was elected to the board on a platform of transparency and decentralization of core development only a month ago, the foundation wasted all of its money throughout the past two years, 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.”

On the foundation forum, Andresen 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:

@jgarzik @BTCFoundation when you have 2 board members openly working against efforts to sustain the org might not be worth the effort

— Patrick Murck (@virtuallylaw) April 4, 2015

Regarding the future of the Bitcoin Foundation, Andresen has posted an open request to all members of the foundation 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 in his own Reddit-post. Most notably, he promises to create a special trust fund to which he says will donate 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 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.”

Conspiracy theories about the @BTCFoundation "controlling" #bitcoin core development, this time by a board member:

— Jeff Garzik (@jgarzik) April 4, 2015

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 outed some severe criticism on the proceedings at the foundation in his Reddit post. In particular, Janssens denounced the perceived lack of transparency in decision making, and he criticized 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 criticizm 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.”

7/ Anyone who thinks @BTCFoundation controls #bitcoin, or controlled in the past, is grossly uninformed about bitcoin, software & the net.

— Jeff Garzik (@jgarzik) April 4, 2015

CoinTelegraph reached out to both the Bitcoin Foundation and Janssens, but received no response before publication.

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According to Janssens, who was elected to the board on a platform of transparency and decentralization of core development only a month […]

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