The Tragedy Of The Commons In Open Source Software, Explained Through Bitcoin Wallets

Closed versus Open Source code has divided the Bitcoin and broader crypto industry for well over a decade. Bitcoin advocates have long argued that the financial infrastructure of the world should be built in public. Transparency and auditability, they say, are non-negotiable when real money is at stake. Yet the app and legacy layers of finance often disagree. 

Yet the recent Coldcard hack, a popular self-custody hardware wallet where users lost over $100 million worth of bitcoin (more than 1,500 BTC), cast doubt over what “Open Source” actually means. It revealed that perhaps most people, even many hardcore bitcoiners, are poorly educated on the Open Source software development philosophy and when it fails.

The  Principles and Terminology

The language around Open Source can be complicated. Free and Open Source Software (FOSS) and Free/Libre and Open Source Software (FLOSS) refer to software that meets formal definitions of user freedom.

The Free Software Foundation (FSF) defines free software through four essential freedoms:

• Freedom 0: The freedom to run the program as you wish, for any purpose.
• Freedom 1: The freedom to study how the program works, and change it so it does your computing as you wish (access to the source code is a precondition for this).
• Freedom 2: The freedom to redistribute copies so you can help others.
• Freedom 3: The freedom to distribute copies of your modified versions to others (access to the source code is a precondition for this).