Bitcoin ETF applicant VanEck has made a remarkable commitment to donate 5% of its fund’s profits to Bitcoin Core developers if and when its application is approved by the U.S. Securities and Exchange Commission (SEC). This pledge could potentially serve as a major lifeline for the developers of the world’s pioneering cryptocurrency network, who often face a lack of adequate funding or sufficient financial incentives for their work.
VanEck, which has been an active ETF and mutual fund manager since 1955 and holds $76.4 billion in assets under management as of September 2023, expressed its dedication to the Bitcoin ecosystem. In a statement to X on Friday, VanEck wrote, “We’re not Bitcoin tourists at VanEck. We’re in it for the long haul.” The firm also revealed that it has already made a $10,000 donation to Bitcoin developers. This commitment by a prominent financial institution is a testament to the belief in the importance of decentralization and innovation within the Bitcoin network.
VanEck’s donations will be channeled through Brink, a non-profit organization that facilitates the transfer of donor funds to Bitcoin code testers and maintainers. Brink’s fellowship and grant partners include major crypto exchanges such as BitMEX, Kraken, and Coinbase. This collaborative effort aims to provide sustainable support to the developers who play a crucial role in ensuring the stability and growth of the Bitcoin network.
Addressing the Funding Gap
Unlike many other cryptocurrencies and blockchain networks, Bitcoin lacks a natural source of funding or an established protocol for ongoing maintenance. Bitcoin’s growth was not financed through an initial coin offering (ICO) or a dedicated foundation. As a result, Bitcoin developers have faced significant challenges in securing adequate financial resources. Many maintainers, who are responsible for reviewing proposals to change Bitcoin’s code (known as “commits”), have stepped down from their positions in recent years. Moreover, they have even encountered legal pressures from individuals like Craig Wright, who claims to be Bitcoin’s pseudonymous creator, Satoshi Nakamoto.
Bloomberg ETF analyst James Seyffart predicts that Bitcoin exchange-traded funds (ETFs) could attract a cumulative inflow of $10 billion within their first year of approval, a milestone that is expected to occur imminently. If VanEck were to capture 10% of the market share, its fund could accumulate $1 billion worth of Bitcoin within a year. While VanEck has not disclosed its sponsor fee, if it charges a fee similar to rivals Ark/21Shares and Valkyrie at 0.8%, the fund could generate approximately $8 million in profit annually after its first year. Considering VanEck’s pledge to donate 5% of these profits, Bitcoin developers could potentially receive $400,000 in donations per year for a decade.
A Potentially Bright Future
Notably, these calculations do not take into account the potential increase in the value of the fund’s Bitcoin holdings over the course of many years. Some analysts anticipate that the value of Bitcoin could reach $200,000 per coin by 2025. If this projection materializes, the support provided by VanEck and other entities in the form of donations could significantly benefit Bitcoin Core developers.
VanEck’s commitment to support Bitcoin Core developers through the donation of fund profits marks a significant development in the funding landscape of the Bitcoin ecosystem. With the potential approval of Bitcoin ETFs and the expected influx of billions of dollars, the financial support provided to developers could play a crucial role in overcoming the funding challenges faced by the Bitcoin network. This initiative not only demonstrates VanEck’s dedication to the long-term growth of Bitcoin but also highlights the importance of collaborative efforts between financial institutions and the cryptocurrency community in nurturing innovation and decentralization.
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