Open Source and Accountability – CoinGeek
This article was first published on Dr. Craig Wright’s blog, and we have republished it with the author’s permission.
Several individuals in the so-called “cryptocurrency space” have begun promoting a misleading and false premise: that open-source software is necessarily free and copyright-free. And, dangerously for those involved in related projects, there is the misperception that open source developers have no responsibility for the software they develop. Both concepts couldn’t be further from the truth.
Such mythology is promoted by organizations such as Twitter and Facebook, which internally use closed source code and open source code developed by third parties. In software development, reliability is associated with the offering of a product. For companies like Twitter, the enterprise of open source projects allows them to distance themselves from any responsibility, handing it over to unsuspecting developers. Indeed, these large Silicon Valley companies end up having products developed for them at almost zero cost, with the risk and associated problems falling to third parties. That is, developers without knowledge of the law or what they need to know about software development and the fiduciary obligations that apply.
The law recognizes a few business and corporate structures. Everything fits in one way or another. They include:
the individual (including simple business structures);
associations or partnerships;
businesses and corporations; and
trusts and foundations.
For all simplification, the same four groups cover virtually every available structure offered by a software development group.
Such a structure occurs when individuals act and control a project by themselves. A simple business structure falls under such an environment, leaving the individual responsible for all risks and damages. Businesses present the simplest and most common reporting framework, where the tax liability rests with the individual.
Associations or Partnerships
The formation of a common-law union can occur whenever groups work together outside of formal structures. There are multiple rules for creating partnerships and entire courses are taught in law schools around the law of partnerships. Typically, partnerships are formed where companies have not been developed. Most of the development groups that we see in the “cryptocurrency space” are general partnerships.
A general partnership is a form of structure where all partners (such as submitting developers) are part of the system, where they can be personally liable for all debts. General partners are left with strict liability to third parties for any damage or loss that can be attributed to the partnership. In the case of software development systems, some people believe that because we are talking about a group of software developers, there can be no accountability. It couldn’t be further from the truth. Without a corporate structure, those who develop the software and control the project retain joint responsibility.
Businesses and corporations
Corporations present one of the greatest freedoms ever won against government. Before corporations, an individual going bankrupt or the actions of a partner would impact the entire business. Businesses allow all risks to be minimized and individuals working on a project to maintain a limit to the loss they may incur.
What a lot of people don’t see in the open source movement is that big companies in Silicon Valley are using people to take risk away from their businesses. Companies like Twitter use open source software and modify it for internal use. They do this without having to pay any fees or incur any liability. All responsibility for potential losses rests with the developers of a project. From a user’s perspective, companies like Twitter get all the benefits without the overhead.
Trusts and foundations
Trusts and foundations act as an alternative form to corporations and are primarily designed to protect assets, for example for estate planning and to create foundations and charitable structures for the pursuit of a goal or purpose created by the individual or group initially forming and funding the foundation.
There have been individuals who have sought to raise capital and revenue to defend against lawsuits that may be brought against open source software groups. When an individual, or a promoter, receives money to pay for his defense in a lawsuit, that money is income. It is not tax deductible, and the individual must declare it and pay tax at the full rate, the rate they owe for additional income. For example, if you’re a US citizen and a developer on an open source project, and you get funding for a court case you’re facing, you’ll have to pay taxes on the full amount.
For example, as a US developer, if you receive $100,000 and your top tax rate is 46%, it is your legal responsibility to pay $46,000 to the Internal Revenue Service (IRS). If you face legal fees worth US$160,000, none of the fees associated with the legal fees will offset your taxable income in that case. The scenario may differ for corporations and other registered entities. As an individual development group partner, you cannot claim the cost of legal defense against your tax. You will owe all the money that is owed to the IRS and will have to pay your attorneys.
Even though people talk like these amounts are donations, donations are only good for registered charities. In all other cases, this money is not a gift, but taxable income.
If you are given money to develop an open-source platform, it is not up to you to spend it as you wish. Simultaneously, it is treated as income under tax rules. It is the same as raising funds through ICOs, presenting taxable events.
What else is there?
Of course, the big companies in Silicon Valley will tell you that you are free thanks to open-source projects. Open source projects allow them to develop and use external software at a lower cost. Twitter, Facebook, Google and a slew of other Silicon Valley companies have lowered the production costs facing their businesses, managed to shift risk to third parties and abdicate liability, all while making people believe in uninformed, untrained software developers that they were doing good. Therein lies one of the big lies of the Silicon Valley internet industry. They take away their own risk and entrust it to uninformed people.
When you’re part of an open source project, be sure to cover the legal aspects of what you’re doing. Those who tell you there is no risk in being a developer are either ignorant or lying. There seems to be a lot of promotion for this in Silicon Valley. Silicon Valley seems to welcome the new old world hackers; they lie, they steal and they misinform.
With systems involving “cryptocurrency”, including BTC Core, the people behind the associated website will try to tell you that they are just an open source group and therefore there is no liability. You cannot simply remove responsibility for your actions by saying that you are not responsible. It doesn’t matter what the website says; if you are part of such a group, you are responsible for the actions of the group. This is why corporate structures were developed; they limit liability.
“Bitcoin” Core is a partnership-based software company. It has a duty towards its users and those who invest in the ecosystem they develop. It has a duty of care and loyalty to provide working software. Similarly, actions such as impersonating one system can make individual developers responsible for the actions of a few malicious individuals. Ignorance is no defense.
In accordance with the common test provided by Reckitt & Colman Products Ltd against Borden Inc. 1 WLR 491, the development of an alternative system, changing something that was set in stone and misrepresenting it as the same product is an act of deception. In the case of BTC Core, you cannot decide that a community now owns a project. I never handed over the project. I explained that the project was based on a protocol that was set in stone.
So, from a legal standpoint, there are hundreds of billions of dollars of goodwill and reputation that have been destroyed, which was done by misrepresentation. Therefore, since Bitcoin Core does not form a corporate structure and is simply managed by its members, the developers, it is the developers who are responsible for these actions. Liability is unlimited. And, since there is no corporate structure, there are no donations. Here, any money sent as payment is not tax deductible in any way.
Interestingly, such cases do not even require me to assert my personal rights. As with protection rights in the case of a company, Champagne and Port, acting to defend their rights against producers such as those in California who sold sparkling wine as champagne, any individual within the Bitcoin community (BSV ), or any company or investor in the community, has a right of action. In other words, all individuals within the Bitcoin community and all businesses in the community who have lost money have personal rights of recourse against the developers of BTC Core.
It’s time for the truth about open source software to come out. It’s time for the lies promoted by Twitter and other companies in Silicon Valley industries, which have parasitically reduced risk and cost by handing it over to individuals, to stop.
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