Square Crypto's first employee talks open-source bitcoin development and small-team funding models

Square Crypto seems to have achieved what nonprofits, media outlets and think tank projects dream of – the opportunity to conduct research without being beholden to commercial success or donation hunting.

Twitter and Square CEO Jack Dorsey bankrolled the project separate from Square, allowing a small team of about half a dozen developers to do what they do best: develop.

Dorsey unveiled the project – a team separate from Square that would focus on open-source bitcoin development – in March of last year. The team recently announced a software development kit to help other developers contribute to the Lightning Network, with an eye towards what the else the network has to offer the growth of bitcoin.

Despite the attention that came with the announcement of Square Crypto’s single-digit hires, employee number one and project leader Steve Lee said the core team will be about six people. As of now, Lee is joined by four other developers and is still on the hunt for a designer, rounding out the half dozen employees that both Dorsey and Lee envisioned.

This is meant to contribute to an ecosystem in which Lee hopes more small open source development teams will spring up, making the space sufficiently decentralized.

What's in a funding model

With Dorsey’s backing, Square Crypto has no intention of ever having customers, making revenue or even growing beyond its small team, according to Lee.

Nabbing financial backing like Dorsey’s requires a shared vision, according to Lee, and part of that shared vision is staying small and remaining focused on creating work that’s free and open source.

Its funding model is almost too good to be true, as other companies with similar missions may struggle to secure backing or donations, forcing some to turn to commercial ventures to stay afloat. Still, Lee said he sees opportunities for types of funding models to grow despite the challenges.

“I agree it's definitely a challenge to find and raise funding for open source development because it's not like it's a traditional venture capital model where you can promise and you give investors equity and there's a potential for a large return,” he said. “Having said that, there's a number of proof points of this already being successful, and I think it can grow.”

Chaincode Labs is perhaps the company with a funding model that most closely resembles Square Crypto, according to Lee, with Square Crypto borrowing bits and pieces that have worked. It has a similarly small team created by two of its members, Alex Morcos and Suhas Daftuar, who made much of their wealth co-founding Hudson River Trading in 2002. As a research group dedicated to Bitcoin network research, Chaincode Labs has no disclosed sources of external funding nor has any products that can generate profits.

Blockstream, in contrast, is venture-funded but has its employees contribute to open source projects. Other companies opt to support open source projects outside of their day to day business by hiring developers and soliciting donations. While there are a variety of models in the space, Lee said he’s looking to see a more decentralized way forward, in which multiple organizations with small teams contribute to the ecosystem.

It’s what he calls a 10-by-10 model, in which ten organizations, each with a team numbering about ten people contribute to open source bitcoin. Each organization would be independent of the others when it came to funding and leadership.

“I think it's a really good match for the decentralized nature and spirit of bitcoin as opposed to like a one by one hundred model where it's centralized and just one entity controlling all the funding and all the people,” said Lee.

Still, Lee acknowledged that there are challenges in finding funding for small teams. Square Crypto represents the coalescing of a shared vision between Dorsey and the team, according to Lee, allowing them to focus on their mission independently of moneymaking Square and Twitter.

“Bitcoin has had a professional design from individual companies like Square, Coinbase and others, but there really hasn't been a design community that's been created or cultivated in the ecosystem,” said Lee.

Crypto vision

This is the shared vision that Square Crypto has been building off of for the past year, according to Lee, and Dorsey’s backing comes with free reign to do it as the team sees fit. 

“We were given independence and latitude from the company to determine our priorities and how to go about that, so no square commercial interests influence,” said Lee. “Our priorities, the work we choose to do, is what we think is best for Bitcoin and for the open-source bitcoin ecosystem.”

Those priorities include improvements to user experience as well as scaling, privacy, and security. The team settled on a Lightning Network development kit since Lightning checks all these boxes, according to Lee. In the interest of conserving resources on a team numbering in the single digits, Square Crypto created a product to serve other developers.

“We felt like the way we get the biggest impact is to serve other developers and hopefully one day has dozens, if not hundreds of applications and wallets using a development kit that we that we build,” said Lee.

Moreover, Lee said the team received feedback from industry players that the development kit served a unique need rather than competing with other products on the market. This, Lee said, aligned with the goal of seeing Bitcoin succeed rather than capturing market share.

Instead, the development team’s work will be distributed under software licensing like the MIT License, which Lee said is common practice for open-source projects. Lee also committed that none of the work from the Square Crypto team will coincide with patents that Square owns. Even the employee contracts between Square employees and Square Crypto employees differ. 

“We don’t expect it [the open-source nature of the work] to be encumbered,” said Lee.

These protections could serve as barriers against debacles like the Compound and Lendf.Me squabble, in which startup dForce allegedly used Compound’s “open source” code in a way that the licensing did not allow, creating a copyright infringement issue.

Regardless, Square Crypto isn’t interested in competing with other products – likely because it doesn’t need to stay afloat in the traditional sense.

Celia Wan contributed reporting.