Blockchain Development Funding
Miners are well rewarded for the role they play in securing the network. Merchants have built a business which relies on the network to function. Users avail of the service the network provides (or hold their coins in speculation that they will increase in value as more people wish to obtain them and use the service the network provides in future).
The motivations of the engineers who write the software the network runs on are not as clear. Developers may be (and most likely are) intrinsically motivated to participate, in the same way that they typically are with other FOSS projects. Blockchain projects also have the capacity to fund development in some ways which are familiar from other FOSS domains (Software as a Service, patronage, and donations), and some which are unique to the cryptocurrency space (appreciation of holdings, ICOs, block reward funding).
The centrality of the software to the blockchain means that developers will always tend to have some influence over the course its development takes, but the nature and degree of this influence varies significantly between projects. The sense of being part of the team which is facilitating and steering the course of a blockchain’s development is likely a big incentive for participation, irrespective of whether and how that participation is compensated.
Since I wrote this section originally the subject of Bitcoin and blockchain development funding has been visited by a number of other researchers:
2019-10-31: An analysis of developer funding in Bitcoin published by Derek Hsue, Su Zhu, Hasu, & Brandon Curtis. This essay makes some of the same points as the following sections, with more detail and focus on Bitcoin’s history. 1
2020-03-28: BitMEX Research compiled a list of 17 organizations funding Bitcoin research and development, defined broadly to include projects like Lightning Network. Entities funding the most developers are Blockstream, Lightning Labs, Square Crypto (mix of in-house LN devs and sponsoring Bitcoin Core devs), MIT Digital Currency Initiative and Chaincode fund 6-8 developers each. 2
References
- Hasu, & Hsue, D. (2019, October 31). An analysis of developer funding in Bitcoin. Deribit Insights. https://insights.deribit.com/market-research/an-analysis-of-developer-funding-in-bitcoin/ [return]
- BitMEX Research (2020). Who Funds Bitcoin Development? | BitMEX Blog. Retrieved 24 December 2020, from https://blog.bitmex.com/who-funds-bitcoin-development/ [return]