Open source describes software whose source code (the human-readable instructions) is made public under a licence that allows anyone to use, study, modify and redistribute it. The term also covers the collaborative way such software is usually built, with contributors from many companies and countries working in public repositories.
Open source sits at the heart of cryptocurrency: Bitcoin was released as open-source code in January 2009, and every major blockchain client since then has followed the same model. It is just as common in mainstream finance, where banks and payment firms run on open-source operating systems, databases and libraries. The idea overlaps with "free software", a movement that stresses users' freedoms, but the two camps differ in emphasis rather than in most of the licences they accept.
Open source in plain terms
A recipe published in a cookbook can be cooked by anyone, adapted to taste and passed on to friends. A secret family recipe cannot. Open-source software is the published recipe: the full instructions are on view, and the licence says what you may do with them.
Because anyone can read the recipe, cooks around the world spot mistakes and suggest improvements. For money software, that means people do not have to take a company's word that the system works as promised; they, or experts they trust, can check the code themselves.
Origins and definition
Sharing code was normal in early academic computing. In 1985 Richard Stallman founded the Free Software Foundation to defend that practice, and its GNU General Public License (GPL), first published in 1989, became the model "copyleft" licence. Linus Torvalds released the Linux kernel in 1991, later under the GPL.
The phrase "open source" was coined in February 1998, and the Open Source Initiative (OSI) was founded the same year to promote it to businesses. The OSI maintains the Open Source Definition, a ten-point test covering free redistribution, access to source code, permission to make derived works and non-discrimination against people or fields of use. Licences that meet it can be "OSI-approved".
Types of licence
- Permissive licences. The MIT, BSD and Apache 2.0 licences allow almost any use, including in closed commercial products, provided the original notice is kept. Bitcoin Core uses the MIT licence.
- Copyleft licences. The GPL family requires that distributed modifications be released under the same terms. The Solidity compiler is GPL-3.0, and the Go Ethereum (Geth) client uses the GPL and LGPL.
- Source-available licences. Some projects publish code but restrict commercial use for a period, which does not meet the Open Source Definition. The Uniswap v3 exchange contracts, launched in May 2021, used the Business Source License, which barred commercial copies for about two years before the code switched to the GPL in 2023. The approach was a sign of how decentralized finance (DeFi) teams try to protect their work while still publishing it.
Open source in cryptocurrency
For a public blockchain, open code is a condition of trust. Anyone running a full node can read and compile the software that checks the rules, so no single company controls what counts as a valid transaction. Satoshi Nakamoto published the first Bitcoin client, and the project now known as Bitcoin Core is maintained by volunteers and funded developers in a public repository.
Changes are proposed openly: Bitcoin through the Bitcoin Improvement Proposal (BIP) process and Ethereum through the Ethereum Improvement Proposal (EIP) process. If a community cannot agree, the code can be copied and run as a separate network, which is how a fork such as Ethereum Classic continues. Ethereum runs several independent open-source clients, a design meant to limit the damage of a bug in any one of them.
Applications follow the same norm. Most smart contract code is published and verified on block explorers, and audited libraries are shared widely. Users of a decentralized application (DApp) can, at least in principle, check what the contract will do with their money. Enterprise projects such as Hyperledger, hosted by the Linux Foundation, brought the same approach to permissioned ledgers.
Open source in payments and banking
Outside crypto, open-source projects aim at financial inclusion and lower costs. Apache Fineract offers open-source core banking software for microfinance and digital lenders, and Mojaloop, backed by the Gates Foundation, provides open-source software for national instant-payment switches. Most commercial payment platforms also depend on open-source components, and many providers publish their software development kit (SDK) code openly so customers can inspect it.
Benefits and risks
Supporters cite transparency, lower licensing costs, freedom from vendor lock-in and the security benefit of many reviewers. Critics note that "many eyes" do not guarantee review: widely used projects can be maintained by a handful of unpaid volunteers. The Heartbleed bug in OpenSSL (2014) and the backdoor found in the xz compression library (2024) showed how a flaw or a malicious contributor in a small project can threaten global infrastructure.
Financial firms using open-source code therefore track which components they depend on, apply updates promptly, check licence obligations before distributing products and treat data security reviews of third-party code as part of their own controls. In crypto, published code also helps attackers; hackers study open contracts for flaws, which is why audits and bug bounties are standard.