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Bitcoin Developers are one of the most important stakeholders of the Protocol

Another internal risk to the protocol lies with one of the most important yet often ignored stakeholders; the developers of Bitcoin. Bitcoin is an open source protocol that is managed by a group of loosely connected developers all over the world. There is no one single entity that pays these developers.

Developers have many motivations and incentives to work on the protocol. Firstly, they may hold Bitcoin personally so it is in their best interest to continue to strengthen the protocol, which helps the price to increase. Secondly, they may be motivated by political or ideological reasons. They might want mass adoption of Bitcoin in order to take the monopoly of money creation and management away from the central banks of the world. Lastly, they may just be passionate about certain aspects of the Bitcoin space and enjoy devoting some of their time to research and development. This is mostly an altruistic motivation and hardly seems like the primary motivating factor.

Developers are starting to get sponsored by Bitcoin Companies

The risk lies in the fact that there is no guaranteed mode or method of funding Bitcoin development. Certain companies such as Blockstream and Lightning Labs fund specific initiatives and projects on the protocol but can only hope the wider network accepts the changes they propose. Just because they release a piece of code, there is no guarantee the network as a whole will adopt these changes. Again, since there is no one company in charge of Bitcoin, there is a real risk that developers will become underfunded and devote less time to upkeep, maintenance, research and development of the protocol. If less resources and ingenuity is going into the protocol there is a risk of stagnation and, more importantly, bugs going unfixed and ruining the network.

In recent months, private companies involved in the space have opened their eyes to this risk and have started to implement initiatives to fight it. For example, Bitmex and OKcoin have sponsored a core developer to work on making Bitcoin transactions more private. 21 out of 57 core developers are sponsored in one way or another. This is great news for the protocol because it allows developers to devote their time to Bitcoin without having to worry about making money to cover their lifestyle expenses. The can volunteer their time and efforts and get rewarded by other organizations and people that have an incentive to keep Bitcoin strong and resilient.

Sponsoring Developers has Reduced the Risk for Bitcoin

Developers being underfunded was definitely more of a risk a few years back when most developers were not sponsored by anyone. The trend is heading towards all development being funded or sponsored by big stakeholders in the protocol. This alignment of incentives between the stakeholders sponsoring developers and developers working on the protocol will continue to improve and scale Bitcoin, eventually leading to mass adoption and price appreciation.