Open-Source Operational Risk: Should Public Blockchains Serve as Financial Market Infrastructures?

Abstract

This chapter explores the operational risks raised by the use of common 'grassroots' open source software practices in public blockchains, such as Bitcoin and Ethereum, in their potential role as financial market infrastructures. These practices include the informal software development process, problematic funding for software development, and the possibility of forking inherent to open source software. The paper argues that the risks raised by these practices significantly undermine public blockchains' suitability to serve as financial market infrastructures. Further, they herald the need to reevaluate the use of these practices outside the blockchain technology setting, in other critical infrastructures based on grassroots open source software.

Keywords: blockchain, distributed ledger technology, DLT, distributed ledger, Bitcoin, Ethereum, open source, open source software, software forks, risk, operational risk, financial market infrastructure, fintech, critical infrastructure