Written by: Ethereum Optimism
Translated by: Lu Jiangfei
The Optimism team has long been looking for solutions on how to fund public goods in a sustainable manner, and thanks to a brilliant design by Vitalik Buterin, we now have our first experimental structure.
If you want to build an ambitious project without giving it a business model, then project construction will definitely be extremely difficult. Because you can't get funding, you can't attract/hire the best talent, and it's even harder to overcome the hardships and obstacles to creating great things.
It is well known that even with adequate investment capital, startups encounter many other serious challenges, and most people have to face the end of failure. However, investors still have one important advantage when investing in startups: the possibility of exit. Exit means that investment institutions/investors convert their invested capital from equity form to capital form when the invested venture enterprise is relatively mature or unable to continue to develop healthily, so as to realize capital appreciation or avoid and reduce property losses The mechanism and related supporting institutional arrangements can also create incentives for early-stage funding, recruitment, incentives and adjustments. However, this “light at the end of the tunnel” does not exist for nonprofits, FOSS, and pro bono projects.
Given this, it's no surprise that many of the best and brightest "big guy" BUILDers, even those who don't have the ultimate goal of making money, end up compromising and taking a for-profit path . For many, it's not all about wealth, it's about fairness. Why try to build a free software that other people can make huge profits from, while doing yourself no favors?
So... what happens if, suddenly, public goods programs can be withdrawn? Exit depends on how much public goods the project creates, not just how much profit it makes. Are we seeing active investment and innovation in technologies that bring the greatest benefit to the community? For those nonprofits, can we help them thrive instead of watching them languish on the edge of existence?
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Note: This part is Vitalik Buterin's conception of public product financing DAO with retroactive effects.
How to operate a public product financing DAO with retroactive effect?
The core principle behind the concept of financing public goods with retroactive effect is actually quite simple: it is easier to agree on something that has been proven to work than it is to agree on something that will work in the future. Agreeing on something that has been proven to work is often a source of disagreement, but even then is a disagreement in itself, and thus still available through some existing voting mechanisms (such as quadratic voting, or even regular voting) Nice top-level judgments, but more challenging to agree on something that will be useful in the future. The best thing we can do for a for-profit industry is to build an ecosystem where people can create startups and attract investors to invest in them, and ultimately pay off at the right time. Therefore, rather than completely reinventing a new mechanism, it is better to create an identical mechanism, but this mechanism is a "version for public goods".
A Decentralized Autonomous Organization (DAO), let's call it a "Results Oracle", which provides funding for nonprofit projects. In the long term, Results Oracles could be funded through protocol fees (for example, a sorter auction is a candidate if implemented by the L2 project). However, unlike other public product financing DAOs, Results Oracle can retrospectively fund projects, as long as a project is identified by Results Oracle as "has begun to provide value", then this project can be rewarded.
In fact, this "Oracle (oracle machine)" design is a very complicated problem, and many problems have actually existed for a long time, such as naive methods such as token voting (see Vitalik Buterin's two articles "Notes on Block Governance" and "Governance, Part 2: Plutocracy Is Still Bad"), so we're better off tackling it iteratively. A simple early release, probably from a carefully selected group of ~20-50 skilled long-term contributors in the ecosystem implementing the initiative. This plan will improve over time as our understanding of decentralized governance improves.
The Results Oracle can send rewards to any address. Here are some possible ideas of which addresses it could send rewards to:
An independent individual or organization: mainly responsible for realizing the project;
A smart contract: which stipulates a fixed token distribution plan, such as the distribution of tokens to different individuals and/or organizations according to the contribution time and/or contribution funds to the project;
A project token: its supply is distributed to one or more individuals and/or organizations that contribute time and/or money to the project, and the project token is tradable.
In the first and second case, the Results Oracle will only send funds to the recipient. They can all be implemented in terms of token distribution schemes and contracts, namely: accept funds and immediately redistribute funds to recipients according to a specific distribution.
The third scenario, Project Tokens, is a more radical idea — essentially, creating a prediction market for the projects that the Results Oracle intends to fund. The Results Oracle can use its own funds to set a price floor for the token: if the Results Oracle allocates a certain amount of rewards (say $X) and the project has a total token supply of N, then it issues a pending A commission order order to buy the entire supply of a token at a price of "X/N".
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Above: Example price trajectory
Since anyone can create project tokens and token distribution schemes for anything, the level of contribution within a project may diverge, resulting in multiple competing token distribution schemes (or project tokens) for the same project. In this case, the Results Oracle must decide which project has value and which project token or which token distribution scheme better evaluates the contribution. Frankly, this situation (judgment) is completely avoided at present, so you can only hope that it will be required in special cases.
Thank you Vitalik Buterin!
Financing at the seed round stage
Above, we proposed a multi-level ecosystem, but if you want to quickly build a brand new ecosystem, the most difficult thing is the initial stage, so how to help the ecosystem at this stage? In fact, there are three strategies that can be adopted:
Raise funds through projects and foundation grant programs;
Sell the project’s public product tokens on Uniswap;
in conclusion
in conclusion
The non-profit model may be more suitable for maintaining an already built code base, but startup projects are very difficult in the early stage, the vast majority of startups do not have any form of exit mechanism, and it is even more difficult for free open source software (FOSS) projects up. These projects are usually driven slowly by a small group of highly dedicated people who are willing to work because they really love it. On the other hand, donations are not a stable enough source of funding for the team to effectively evaluate subsequent development paths. What's more, grants are not enough to provide a competitive salary, to work on a project just because you love it - this "just cause" doesn't get you enough money to pay the bills.
People are always willing to advocate dedication, and even praise those who give as heroes, but they have created great value, and even each of us has become an "enthusiastic user" of the products they develop. Given that, shouldn't we expect them to get paid too?
By providing an exit mechanism for open source software (OSS) projects, we can actually attract more investors to provide financial support for "heroes". Isn’t it a good thing that open source projects can now be profitable by working backwards from “launch”?
