“Instead of creating a clear contract where you take on some of the risk, you implicitly put the entirety of the risk on the contestants (eg partial solutions don’t get any payout).”
A bounty pays one winner and gets free labor from everyone who lost. The sponsor takes no risk, does no hiring and owns no maintenance. The winning patch only has to pass a test suite, and the project inherits it forever. Zig named the problem correctly: venture-funded companies want contract work at contest prices.