Open Source vs. Source-Available: What the Coldcard Failure Teaches About Bitcoin Software Incentives

An important story is making waves across the blockchain ecosystem. Bitcoin Magazine Open Source vs. Source-Available: What the Coldcard Failure Teaches About Bitcoin Software Incentives 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.

Market Dynamics

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). The FSF emphasizes that “free” refers to liberty, not price, in a common quote heard from FOSS advocates: “‘free’ as in ‘free speech,’ not as in ‘free beer. ’” The Open Source Initiative’s Open Source Definition adds ten practical criteria.

Market Impact

These include free redistribution without royalties, availability of source code in the preferred form for modification, the right to create and distribute derived works, and no discrimination against persons, groups, or fields of endeavor — including commercial use. A license must meet all ten criteria to qualify as Open Source under the OSI standard. “Source available” or “source viewable” is different.

Code may be publicly readable while the license restricts the right to sell it. Coldcard’s firmware, for example, is released under MIT terms plus the Commons Clause. The Clause specifically removes the right to “Sell” the software — defined as providing it to third parties for a fee or other consideration in a product or service whose value derives entirely or substantially from the software itself.

In other words, Coldcard’s firmware could not be used commercially.   The Commons Clause’s own FAQ states the difference explicitly: “Is this ‘Open Source’? ” It notes that applying the clause means the software meets many elements of the Open Source Definition but not all of them, and therefore should not be called Open Source.

Crypto markets are watching this development closely as investors weigh its potential impact on prices.