Or is that version completely hidden from everyone, and just used to develop and test new features until a funding threshold is met to release them into the public version?
The official documentation of my project lists exactly which features are "Insiders only", and which aren't. When the features tied to the funding goal that was hit are merged, everybody can use them. I try to always have sponsors-only features on higher tiers to keep sponsoring attractive.
As I understand, Caleb does it with content and entire projects - I'm doing it with new features for an existing project. Also, I'm doing it fully transparent, disclosing how much I earn with this, which I think is crucial to build the necessary trust relationship.
So as a user, you can start some work based on the insider version and be confident that you will be able to release your work even if the insider version never goes public for some reason, instead of relying on a promise that the code will be released in an open source license.
True, although just removing a couple of words from the MIT license would still be a very attractive and easy to use license. Examples of words you might remove: "sell" and "sublicense".
Yes, the model is far from being perfect, but it allows me to pay at least some of my bills. I'm always curious to learn how to improve it!
[1]: https://squidfunk.github.io/mkdocs-material/insiders/#terms