Open-source software projects are starting to use bitcoins as a way to pay programmers for their work.

Open-source software is developed under a license that enables anyone to view and modify its source code. Many commercial projects use open-source code, and popular software such as Linux is based on it.

Although most open-source developers volunteer, there has also been a growing tradition of bounty sites, which will pay open-source developers for their help in developing software.

These sites have used traditional currencies. Now, Bitcoin Bounties has a system that will enable programmers to be paid in bitcoins for helping to develop or fix software.

Founded by Portland, Oregon-based programmer Ryan Casey, the site focuses on fixing software bugs, using the GitHub collaborative programming site.

GitHub hosts a plethora of software development projects, started by its users. Each project has a central repository, where the most up-to-date version of the source code is kept.

GitHub enables users to contribute to a software project by connecting to the repository, and making a copy of it. This version of the code is called a “fork”. User make changes to their individual code forks and then, when they are ready to have it considered for inclusion in the main project, they issue a request. A project administrator can then decide whether to include it, at which point the changes are written into the central repository.

All projects maintain lists of unresolved bugs that need fixing. In most cases, interested GitHub programmers will volunteer their time, but Bitcoin Bounties offers members the chance to speed up the process by paying people with bitcoins.

GitHub users can paste links to a project’s unresolved issues into the Bitcoin Bounties web form. Other users can connect their accounts, enabling them to work on the issues and be paid.

Casey, who formerly worked at medical site WebMD, took two weeks to develop the system. He explained that the bounties can be funded by groups of people. Anyone who sees a software issue posted on the site can pledge bitcoins to it. Bitcoins are sent to an online wallet, and they are held there until at least 24 hours after the GitHub issue is closed. Bitcoin Bounties keeps 0.5% of all bounties paid.

“I am technically an escrow service,” Casey said. “The people send the bitcoins to the bitcoin address and it goes to our wallet. Then I transfer the bitcoins off our wallet in the server, to an offline wallet. Then every 24 hours, any issues that were closed out, I pay out from the offline wallet.”

Following criticism in an online forum for holding the money, Casey is now reconsidering the model for the site. He points to a multi-party transaction capability within the bitcoin architecture, which allows a third party to co-sign a transaction between two people. Until all parties sign the transaction, it will not go through, and the money sits in limbo, not controlled by any one party. This allows the third party to arbitrate any dispute between the sender and receiver of the bitcoins, without actually holding the money.

“That particular application isn’t that well known yet,” Casey said. “It’s got a lot of potential.”

However, all of this will have to wait. No sooner had Casey launched the site than another company, preparing a service called Code Bounty, contacted him and asked him to join forces so that it could bitcoin-enable its forthcoming service. Casey is working there for three weeks to evaluate the project, during which he is freezing work on his own site.

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