The former Twitter CEO sent out an email to the developers of the original cryptocurrency promising to defend them with a team of volunteer lawyers.
The email stated: "The Bitcoin community is currently the subject of multi-front litigation ...
“litigation and continued threats are having their intended effect; individual defendants have chosen to capitulate in the absence of legal support.”
It added that the aim is to "minimise legal headaches that discourage software developers from actively developing Bitcoin and related projects such as the Lightning Network, Bitcoin privacy protocols."
The fund will assist with "finding and retaining defence counsel, developing litigation strategy, and paying legal bills."
Up first, they will be overseeing the "coordination" of the existing defence of the Tulip Trading lawsuit against developers.
The lawsuit regards Craig Wright, an Australian who claims to be Satoshi Nakamoto, the inventor of Bitcoin.
Since leaving the social media platform in November, Dorsey has focused his attention on Bitcoin.
Dorsey is the co-founder of the digital payments company Block, which was previously called Square, and the firm has in excess of $350 million worth of Bitcoin.
Bitcoin is a "digital currency that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries."