The Tulip Trading saga has been making headlines in the cryptocurrency world for several years, and no doubt is seminal reading for industry participants and litigators around the world.

Whilst it is easy to get side-tracked by the divisive characters involved in the case and some of the claims made, the Court of Appeal is now expected to delve deeper into the core values of Bitcoin’s decentralisation- the outcome of which will no doubt have significant implications for the cryptoassets industry as a whole.


As a high-level overview the Claimant entity, Tulip Trading Limited, claims that it has lost access to a significant amount of Bitcoin due to an attack that deleted the private keys which are needed to access and authorise transactions for the two wallets where the Bitcoin is held.

The CEO of Tulip Trading, Dr Craig Wright, who has claimed to be the infamous Satoshi Nakamoto (a claim which has been the subject to separate legal proceedings) alleges that he has no other backup of the private keys.

The Claimant subsequently brought a claim against the Defendant (a group of developers) seeking declarations that Tulip Trading owned the Bitcoin and that the Defendant owed the Claimant fiduciary or tortious duties to assist it in regaining control of the Bitcoin.

Fiduciary duty

Simply put, a fiduciary duty refers to an obligation that is owed by one party to another to act in good faith and in the best interests of the other.

Some relationships automatically establish a fiduciary duty by merit of the nature of the relationship. For example, a relationship between a solicitor and a client. Fiduciary duties can also arise from statute, for example, the fiduciary duty between a director and a company or those between a trustee and beneficiary.

In the context of Tulip Trading, the argument being made is that the defendants have undertaken a role in maintaining a blockchain, and by merit of this, they have the ability to exercise control over assets belonging to others, and as such, they should be recognised as fiduciaries.

What do these developers do?

Without getting too caught up in the technology and intricacies, it is often helpful to be able to visualise what developers do and contextualise why the claim is being brought against them.

Bitcoin developers are typically independent developers who work on the Bitcoin protocol and its associated software. Some work on a voluntary basis, and others such as bitcoin core maintainers take salaries from donors.

The developers work on various aspects of the bitcoin software, including fixing bugs and ensuring compatibility with other software. They are often highly skilled programmers and software engineers who share a common passion for the technology behind blockchain and cryptoassets.

What is it that Tulip Trading wants the developers to do?

Essentially, Tulip Trading is asking that the developers implement a ‘patch’ to the code that operates the network which would have the effect of transferring the bitcoins in question to a new address, which would have a new private key, which it could then use to regain access to the bitcoin.

For most people familiar with the core concept of the bitcoin blockchain, such a course of action would strike at the very foundation of the blockchain, being that the only way to transfer bitcoin is through the use of a private key.

Alternatively, Tulip Trading say that a patch could be provided such that they may regain control of the bitcoin in their existing locations, presumably by means of allocating a replacement private key to the two wallet addresses where they are held.

Is that even possible?

Technically speaking, yes it is possible, and it is something that has happened in the crypto world before.

In 2016, the Ethereum DAO was subject to a hack and significant sums of Ether were stolen (around $50 million at the time). In response, the developers of Ethereum decided to apply a patch to reverse the change of the Ether that was stolen.

This resulted in a hard fork in the Ethereum blockchain where the original Ethereum blockchain was split in two, with the majority of users choosing to adopt the patch which would essentially create a new version of the Ethereum blockchain with the stolen funds returned.

However, not all members of the Ethereum community agreed with the decision to hard fork the blockchain. Some maintained that the immutability of the blockchain was a core principle of Ethereum and the hard fork represented a violation of that principle.

It still remains a hotly contested topic to this day, and two distinct user communities have arisen from this. Those that continue to use the ‘original’ pre-forked version, which is now known as Ethereum Classic, and those that adopted the forked version- Ethereum.

So whilst there has been precedent for this in the crypto world, there is no such legal precedence which has established the fiduciary duty that is claimed and subsequent compelling of implementation of patches, which is perhaps why the Tulip Trading case is being followed keenly by industry players and practitioners alike.

More acutely, the question is not so much one of whether what is being claimed can be done, but rather whether it should be done.

What do the developers say?

The developers, along with many other participants in the crypto industry, argue that the remedy being sought would go against the core values of Bitcoin’s decentralisation.

They also strongly resist the claim that developers owe fiduciary duties, relying on the decentralised nature of Bitcoin essentially entailing that there was no centralised authority or fiduciary duty owed to any particular entity and that Bitcoin operates through a decentralised model with a large group of contributors in a state of flux.

They also argue that the remedy being sought, i.e. the implementation of a patch, would be ineffective if not adopted by the majority of miners as they would simply refuse to run that version of the ‘patched’ blockchain and it would lead to a fork in the networks- much like the Ethereum example mentioned above.

What do the courts say?

Initially, the High Court dismissed the claim brought by Tulip Trading on the basis that they had not established a serious issue to be tried because there was no realistic prospect of establishing that there were fiduciary or tortious duty owed by the developers.

Tulip Trading appealed this decision, and earlier this month, the Court of Appeal allowed the appeal finding that there is a serious issue to be tried, namely the potential existence of fiduciary duties, and the allegation made by Tulip Trading that the network is not as decentralised as it would appear.

It is prudent to point out that it is the appeal that has been allowed, which would mean that the case will proceed to trial, and the fact that the appeal has been allowed does not really give any indication either way on the position the court will take on those points. It is this appeal that will delve deeper into the core values of decentralisation and may have significant implications for the crypto sector as a whole.


If Tulip Trading were successful in its case, it would set an uncomfortable precedent for blockchain developers where they may find themselves owing duties to any number of blockchain users. This would no doubt have the effect of suffocating innovation in the sector as developers would simply not be willing to take on that liability for changes or additions that they make.

The court has already recognised that for Tulip Trading’s case to be successful, it would “involve significant development of the common law on fiduciary duties.”

Much will revolve around the decentralisation element relied on by the defendant, and scrutinised by the claimant. On that front, the court said: “if the decentralised governance of bitcoin really is a myth, then…there is much to be said for the submission that bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property.”

If successful, Tulip Trading’s case would potentially establish a means of redress for those who have lost access to digital assets or have been victim to a hack. However, this would no doubt be at the cost of decentralisation and innovation.

If developers owe a duty to users, then it is foreseeable that the whole chain will eventually be under the control of a single entity so as to minimise liability and manage risk.

Decentralised blockchains will become centralised databases, and as for the crypto sector and financial innovation and inclusion that it could herald- the tulip bubble would likely be burst.

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