Bitcoin Foundation: Insolvent And Broken

The Bitcoin Foundation was established in 2012 with the vision to change lives through the power of Bitcoin.

“As we move forward, our focus is on the necessities of any technology in its infancy: standardization, protection, promotion, and decentralization. These areas ensure the growth and maturation of Bitcoin. From a vulnerable platform, susceptible to parties whose work undermines the potential for good, to an independent source of freedom and promise.”
— – The Bitcoin Foundation

Olivier Janssens was elected a board member of the Bitcoin Foundation just last month. In his report, posted on both the Bitcoin Foundation forum and Reddit, Janssens has made some bold claims regarding the Foundation.

“First of all, the Bitcoin Foundation is effectively bankrupt.”
— – Olivier Janssens, Bitcoin Foundation Board Member

Janssens claimed that the Foundation almost ran out of money last November, and attributes the financial situation at the Foundation’s to poor decision making, and “ridiculous” spending over the past two years. Janssen’s report also outlines multiple problems the Foundation faces – and hides from its members.

Soon after Janssens released his report the foundation’s Executive Director, Patrick Murck addressed the claims on the bitcoin foundation forum. Murck accused Janssens of overreacting and misunderstanding a number of key points.

“The Foundation is not bankrupt, but a restructuring is needed. Janssens 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.”
— –  Patrick Murck, Bitcoin Foundation Executive Director

Murck claims that the Foundation has over $100,000 USD in receivables, which includes $75,000 worth of checks to the Foundation – that he won’t cash because of the proposed Foundation restructuring, and the posture of the new board members. He insists the Foundation has the funds to continue operating beyond the end of this month, which Janssens has contradicted while providing calculations. Murck also disputes Janssens’ claim that staff were fired.

“90% of the staff was not ‘fired’, some of the staff was reduced through attrition and in anticipation of the restructuring. That just happened and it was more like 50%”
— –  Murck

Gavin Andresen, one of the surviving employees, is the bitcoin core developer who has earned the largest chunk of the core development funds. Andresen agrees with Janssens on the state of the Bitcoin Foundations finances. In his post on the public bitcoin foundation forum, even though he did not say the Foundation is bankrupt, he confirmed the depletion of money. “The money has basically run out, and the money coming in from new memberships and renewals is not enough to fund ‘that vision’.” Andresen said, referring to the bitcoin foundation’s original vision of funding Bitcoin core development.

“The Foundation isn’t bankrupt, but the Board needs to decide whether the responsible thing to do is to continue the organization with a much smaller organization and vision or to dissolve it.”
— –  Gavin Andresen, Bitcoin Core Developer

Janssens clearly has less faith in the Foundations management, “instead of taking responsibility, they want to find the next executive director, that will come up with another magic plan.” he stated.

Murck replaced Jon Matonis, who resigned as the organization’s executive director in October last year. Shortly after Murck assumed the role he outlined a key area of focus for his term. He expressed a desire to establish a business model supporting the Foundation’s mission, without relying on the appreciation of Bitcoin or membership dues.

“The Foundation is a non-profit business whose mission is to support the development of the bitcoin project. The key word there is business and we will run the Foundation like a business. And, as we succeed in our business we will generate more funding to support the community that powers bitcoin.”
— – Murck

Murck’s term as Executive Director concludes later this month. According to Janssens, a new Executive Director is being selected in secrecy and the Foundation, as well as Murck, knowingly hide this fact from the Foundations members and the public.

“The current Executive Director (Patrick Murck), will be gone in 2 weeks, and they are trying to find the next person to blame everything on.”
— – Janssens

Murcks efforts as Executive Director may have proved ineffective, as he has lacked support from the public – and therefore failed to raise the much needed funds, “people were smart enough not to trust the Foundation anymore.” claims Janssens.

Janssens insight into the Bitcoin Foundation stems from his inside position. In an election, just last month, Janssens won his board member seat with a majority vote of 277 out of 440 – an impressive 63%, coinciding with a record voter turnout.

The win was a shock to many, considering his vociferous condemnation of the bitcoin foundation’s past actions. Janssens proposed removing the Foundations control over bitcoin core development entirely, and the addition of complete and total transparency – something which the foundation has been perennially scolded for lacking, by its own fee paying members.

Cody Wilson also ran for the same foundation chair. Despite his entire campaign being based upon disbanding the foundation altogether, Wilson was also well supported.

The running of two separate individuals advocating a reduction in the Foundation’s centralised control, and the apparent support from voting members, suggests wide agreement among bitcoin foundation members that greater decentralization is required.

Janssens is one of Bitcoins earliest adopters, and is well known for being pro-decentralization. He frequently speaks about the lack of transparency in the Bitcoin foundation, and vowed an overhaul when elected.

“When I joined on my first Board meeting, Jim Harper and myself immediately put forward a vote to have the board meeting recorded.”
— – Janssens

Janssens motion was declined. Without recording the board meeting in some way, there is no transparent method to show the public what the bitcoin foundation discusses, nor what its work and resources are being directed towards, “The Bitcoin Foundation hates transparency.” Janssens stated.

“If they would have been transparent then everyone would know there is no money left. Something I think the members have a right to know, wouldn’t you think? Members have a right to know that the current board failed to tell them the truth, and that their way of running the organization resulted in it going bankrupt.”
— – Janssens

The funding of bitcoin core development has always been a principal purpose of the Bitcoin Foundation. Janssens, and many others, believe that like everything else in bitcoin, development should be decentralized. Janssens has put his own money behind this belief, supporting Lighthouse core development projects. A $100,000 bounty was offered by Janssens for a solution to his question, “What is the best platform to replace the Bitcoin Foundation?” Janssens noted, “the main thing they are doing right now is funding some of the core Bitcoin developers. And I might add, they are not doing a very good job at that.”

“The truth is that the Foundation’s plan was to hire even more core devs [and] to start a Bitcoin Standards Body. No organization should have this much control over Bitcoin”
— – Janssens

Gavin Andresen seemed to agree with Janssen, as he joined the public bitcoin foundation forum, that the foundation’s vision to support core funding 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."
— – Gavin Andresen

According to Andresen, the resignations of the foundation’s most infamous board member, Mark Karpeles, and vice chairman, Charlie Shrem – who started his prison sentence this week – still lingers in investors minds.

In an attempt to repair the battered image of the Foundation, Janssens revealed his plan for a special trust fund – with full control given to the core developers. Any and all voting power over these funds would be controlled by investors, on a pro rata basis. Janssens will personally donate several hundred thousand dollars to this fund, although he was quick to add “At no point do I want to have any control whatsoever.” Janssens hopes to pay the core developer’s wages for the next year. He also plans to organize crowdfunds, and make this special trust fund public.

Janssens urged the foundation members to take control over the situation. He suggests; calling for a special board meeting, demanding all information be released; and either replacing the entire board, to save the Foundation; or vote to shut the whole foundation down, with a return of funds to members. In good faith, Janssens promised to help provide the difference in funds to repay the Foundation members – should the Foundation run out of money before all members are refunded appropriately.

“There might not be enough money left in the Foundation to pay its members back, but I will personally try to help make up the difference, even though I have not been part of it.”
— – Janssens

Whatever becomes of bitcoin’s core development funding is still very much up in the air at this point, however Janssens’ original  plan of using Lighthouse to fund bitcoin’s core development is picking up steam. Janssens has already put up $50,000 worth of bitcoin towards the most popular bitcoin core-funding campaigns on the decentralized crowdfunding platform. Added to the “hundreds of thousands” of dollars for the new fund, offered on Saturday, the future of bitcoin core development funding is brighter than ever, without a need for the Bitcoin Foundation.

“The lesson for all of us in Bitcoin is to never put any trust in a centralized [organization] again that wanted to represent Bitcoin or the Core Development of Bitcoin.”
— – Janssens

As for the Bitcoin Foundation itself, only time will tell if the members demand their membership dues back, let the foundation die gracefully, or somehow find a way to keep it up and running.