I generally agree that a strong product will still be profitable even if it's open source.  However, the question remains of how the developer gets paid.

With open-source code, anyone can build and run it, at least in theory, so you can't easily charge per-download or per-license key like some closed-source projects.

If you have a client-server model, you could charge for server usage and earn money that way.  That applies less to Nostr, though, due to the distributed relay model.

One option I may explore in the future is a paid early access.  Maybe v1.0 is free, but higher versions with new features are closed-source and behind a paywall.  So users who want the latest and greatest features can pay to see them sooner, but the free user base continues to receive maintenance and support. 

 Lots to discuss about funding models, I think many are legacy. 

While I personally believe in FOSS mostly, source doesn't need to be free, and it definitely doesn't "need" to be anything more than copyright. I would rather have someone (like Apple does on occasion) release source code without a free license or a license at all (protected by copyright in most countries) than not share source at all. It means we can at least audit and learn from a product, as a bare minimum. 

Again prefer foss, but baby steps are important.