The term “open source” is one that you’re likely to hear a lot in the Bitcoin community. It means different things to different people but there are a few core ideas that appear to be important to open source supporters. All open source projects seem to be run by the people who use them. One of the reasons bitcoin has been able to thrive over the last decade is because of this open source ethos. Unfortunately, the traditional banking system has not yet adjusted to this new reality. As a result, your bank isn’t open source and it will get left behind if it doesn’t adapt.
What Is Open Source?
Open source is a collection of values and practices that promote the free exchange of ideas, cooperation, transparency, and a community dedicated to creating something that benefits everyone. In its most basic form, open source software is software that anybody can inspect, edit, and improve. There are several advantages of using open source code vs proprietary closed source code.
– When you use open source code, you have the ability to audit the source code to ensure that it isn’t doing anything that you don’t want it to.
– Open source code can be used in whatever way you see fit, not just the way the original creator thinks you should.
– Open source code is an excellent learning tool for novice developers since it allows them to audit the source and gain an understanding of how it works.
– Open source code is thought to be more secure than proprietary code because it can be checked by anyone and any mistakes can be fixed in public.
– When a piece of software is released under an open source license, it typically stimulates the emergence of a user and development community around that project.
Since your bank isn’t open source, you are unable to benefit from all of the flexibility, transparency, honesty, and community that comes from open source projects.
Banking Is Closed Source
The code that underpins the operation of the financial system is a mystery. There is currently no method for anyone to inspect or audit the code in order to understand how the system operates at its core. If you want to learn more about how the financial system works, you can’t just go to a website and read the code. It’s really hard to locate any kind of clear and open information on how the financial system operates. I’ve even visited a few Federal Reserve museums and have yet to come across much information about how the system operates on a technical level. The basic banking system is totally closed source and proprietary all the way down to the lowest level of code development. If you want to view the code that your banking system operates on, the only thing you’ll be able to see is an API that allows you to create applications to make utilizing the system easier.
Limited Open Improvement
Banking has not been entirely void of innovations over the last few decades, though. PayPal, Venmo, ApplePay, and other systems have significantly enhanced the ease of use for traditional payments. The issue with all of these payment networks is that they all employ the same old fiat money on new payment rails developed by tech giants. These new services simply make it easier to transfer old money on new payment networks. Additionally, some financial services are attempting to make bitcoin easier to use with the legacy financial system by incorporating it into their business models.
Fold: Every time you use your Fold debit card to make a purchase in USD, they reward you with sats.
CashApp: The CashApp has allowed bitcoin purchases with on-chain withdrawals for years.
LVL: LVL is a new Bitcoin bank that offers a debit card that allows its customers to spend Bitcoin seamlessly everywhere in the United States where MasterCard is accepted.
IRAs: Other organizations like Unchained Capital and Choice Bank are progressing with ways to allow their consumers to keep Bitcoin in their IRA accounts while their users retain ownership of their private keys.
Bringing Bitcoin into the traditional financial system is a step in the right direction, but none of these new systems are open source. By default, they are all proprietary closed systems because they rely on the traditional banking system.
No Software Forks
One of many important benefits of using open source code is that you can modify and “fork” to make your own version of the code. If you are dissatisfied with how the banking system or the fiat monetary system operates, you can’t just duplicate the code and try to develop a better version of the system. The whole banking system is a completely proprietary system that is held back by regulation, making it difficult for new enterprises and entrepreneurs to enter the market. If you attempted to develop a new financial system that works outside of conventional banking norms, you would definitely get shut down by the government.
The closed nature of banking not only hinders technical innovation, but it also contributes to global financial exclusion and the increasing wealth inequality in the world.
When you use a bank, you are not using a free and open system. The entire system is proprietary and closed source from start to finish.
The Supply Of Fiat Isn’t Transparent
Transparency is non-existent in the central banking system. The Federal Reserve in the United States lends money to member banks, which then lend to smaller banks, who then lend to people like you and me. When this occurs, money is essentially created out of thin air. When money is repaid, it is taken out of circulation. That’s how we’d like to think the system works, but we have no way of knowing for sure.
We have no option but to believe the Federal Reserve if they provided statistics on how many dollars are now in circulation. We have no way of knowing how much money is available. We don’t have any way of auditing the federal reserve or any other central bank. We have no way of knowing whether or not the system is honest or fair. The entire banking system is based on our belief that they aren’t printing more than they say they are.
We wouldn’t have to put as much faith in central banks to conduct themselves ethically if they were all open source and we could just verify how the system works.
Bitcoin Is Open Source
Luckily for all of us, we don’t have to rely on a closed centralized system any longer. Now we have open source alternatives to banking. Bitcoin is an open source system and it differs from your bank in several ways.
– Bitcoin is voluntary.
– The source code and supply are auditable.
– At both the wallet and protocol levels, Bitcoin improvement proposals are continually being introduced, debated, and implemented.
– Bitcoin’s software can be forked if a group of users disagrees with how something is being done.
– Rather than a central authority, the network of bitcoin nodes and miners function autonomously.
– It also boasts one of the most powerful and decentralized marketing and customer service teams, dubbed “The Plebs.”
Bitcoin is a genuinely decentralized system that does not rely on a central authority. Because Bitcoin is open source, it can do things that your bank either can’t do or won’t do. Without all of these open source elements just mentioned, bitcoin would be no different or better than the legacy financial system.
Open Source Is Voluntary
Rather than a system required by law and enforced by different types of authority, Bitcoin and all other open source initiatives are administered on a voluntary basis. You might say that the rules of Bitcoin are enforced by de facto law rather than de jure law. The miners are not forced to mine. They do so as a result of the incentive mechanism incorporated into the Bitcoin source code. The nodes are not forced to run. They do so because they benefit from the privacy benefits while simultaneously contributing to the network’s decentralization. The Bitcoin team and community of open source developers all contribute code because the collective benefits from each contributor. What makes this even better is that this group of developers is all paid for by the Bitcoin community around the world.
From beginning to end, bitcoin’s open source nature is entirely voluntary.
Open Source Code
To begin, Bitcoin’s protocol source code is open source, which means anybody may look at, alter, contribute on, and even copy it. This is significant for several reasons. To a large extent, open source code’s value comes from the fact that it is not subject to centralized control. It is produced in the open by a community of developers who care about a project rather than by a centralized body such as a company or government. The developer community all contribute their unique set of skills to Bitcoin’s code, and the entire community benefits as more code is adopted and deployed by the network.
Bitcoin Is Auditable
Because the code is public and visible to the whole world, anybody can audit it to ensure that it functions precisely as it should. Because Bitcoin’s code is available to the public and continually under peer review, there are no hidden fees or small print. Everything is accessible to the public via the Bitcoin GitHub repository.
Bitcoin Can Be Forked
If you don’t like how bitcoin works, you can make your own version of bitcoin and try to get other people to use it. This is referred to as a software fork, and I go into more detail about it below. All of Bitcoin’s community-driven features are a key part of what distinguishes it from your bank.
Simply said, Bitcoin can do things that your bank cannot or will not do.
BIPs
Bitcoin Improvement Proposals (BIPs) are maybe one of the most important elements of Bitcoin. BIPs are the means through which the bitcoin ecosystem evolves, adapts, and changes over time. If a person or company wants to improve the way bitcoin works, they can suggest improvements to wallets or even the core bitcoin software. If the community decides that adopting a proposal would benefit them, then they can adopt that particular BIP and implement it into their wallet or even to the protocol itself.
Here are some of the BIPs that have been widely adopted by the community:
– BIP 32: Automatically generates a new address for each new payment. This increases your own privacy and other bitcoin users.
– BIP 39: Your wallet generates a 12-24 word seed phrase instead of a raw private key. This makes for less errors when storing your wallet backup.
– BIP 174: Allows for partially signed bitcoin transactions so you can fully air-gap your hardware wallet and keep your private keys 100% offline.
BIPs are one of the most important parts of Bitcoin’s open source ecosystem because they enable the bitcoin ecosystem to constantly grow and constantly increase the number of ways that we are able to use bitcoin.
Software Forks
Another critical aspect of open-source code is the ability to split off if you are a member of a group of people who believes Bitcoin should operate differently. In the past, various members of the Bitcoin community have had different opinions on how Bitcoin should move forward and scale. Rather than just one path forward, the open source structure of Bitcoin enables one group to break away and do things differently. This split is called a fork and there are two main types of forks: soft forks and hard forks. Both types of forks produce new protocol rules, but only soft forks are compatible with the previous rules.
Soft forks enable modifications that result in a more precise set of rules that are compatible with the previous one.
Hard forks enable modifications that result in a less precise set of rules that are NOT compatible with the original set of rules.
Hard forks result in such a drastic change that the new rules split off to start a completely different software.
With the closed source banking system, there is no way to fork the software and change how the system works. Even if all bank customers agreed on a better method to operate the bank, the customers have no power to influence how things work. Everyone is at the mercy of the banks and the authorities who determine how banks are able to operate.
Owned and Operated By Nodes And Miners
One of the most important advantages of open source code is that it belongs to no one and everyone at the same time. Bitcoin is owned and operated by a network of volunteers, rather than proprietary code being monopolized and centrally controlled by a business under IP law.
Bitcoin nodes are responsible for enforcing the rules of the Bitcoin protocol. These rules can be run on a low-cost computer for less than three hundred dollars. Nobody pays these node operators to run the code. They do it because they believe in it. Node operators also enjoy increased privacy because they can use their own copy of the blockchain to check the balance of their addresses and view transactions rather than asking a third-party server.
The Bitcoin network is protected by the sheer amount of energy that miners expend in order to win the block reward. The machines that compete to mine new bitcoin and add transactions to the blockchain do so voluntarily as well. They mine primarily for the reward associated with “mining” (discovering a scarce/precise number) bitcoin blocks. As soon as they discover this very precise number, they are able to add a block of bitcoin transactions to the blockchain and collect the miner fees for the transactions in that block.
Because the system is open source, anybody can join, run a node, mine bitcoin, and become a part of the bitcoin network.
Open Source Marketing
Since Bitcoin is just a software protocol, it lacks a dedicated marketing team to promote all of its applications and functionality. That’s where the worldwide distributed marketing team of plebs comes in. Rather than requiring a centralized institution to promote Bitcoin use throughout the globe, all of the quality bitcoin content and products on the internet (including this project) are produced, owned, shared, and maintained by the plebs from a diverse collection of cultures, languages, and countries.
Because open source is all about working together, the international coalition of plebs is able to make and distribute content all over the world more quickly than a bank. Whether it’s wallets, payment processors, decentralized exchanges, magazines, books, or just good practices, the plebs promote them all around the world in a multitude of languages. The closed source banking system has no chance against an autonomous community of self-interested HODLers, developers, promoters, content creators, and fanatics who stand to earn immense amounts of freedom and prosperity when bitcoin becomes the global reserve asset.
Open Source Payments, Wallets, and Apps
Bitcoin’s open source ethos extends beyond the technology itself. Many of the most commonly used and trusted applications in the Bitcoin world are also available as open source projects. The whole ecosystem is built on the shoulders of open source giants, from payment service providers to node software to mining firmware. With Bitcoin, you can run your own online store without the need for any third parties or middlemen by using an open source payment server.
You can accept payments using an open source desktop, mobile, or hardware wallet while maintaining full control over your private keys. Then, using one of the numerous open source implementations, you can run your own Bitcoin node to verify the balances of your own addresses. Open source “app stores” are even being created on top of some of the node software services, allowing you to control your own data and run messaging apps, video servers, photo libraries, home automation assistants, password managers, network ad blockers, and other applications.
You simply cannot accomplish any of that with the legacy banking sector because your bank is not open source.
Use Bitcoin
While bitcoin the coins are sound digital money, Bitcoin the network is an entire ecosystem built around the open source ethos.
Open source code built by a community of self interested developers.
Open source apps built by users who value privacy and freedom.
Open source wallets that give you more control and functionality than a Swiss bank in your pocket.
The list of reasons to use bitcoin goes on and on.
The open nature of bitcoin is what fuels innovation, collaboration, and will eventually eclipse the banking system. As the bitcoin space continues to grow and evolve, the closed source banking system simply will not be able to compete. If you want to enjoy any or all of the benefits that I have mentioned, you simply must use bitcoin.
Why you ask? …because your bank isn’t open source.