Blockchains Are Revolutionizing Public Goods Funding

I asked someone the other day why he was building in crypto. His response: “To make a lot of money. Why else?” Jaded. I used to brush those people off to the side thinking they just don’t get it.

Last month, I was selected to talk at the New Voices stage at Consensus 2024 about public goods funding, a tiny niche of crypto that I had dedicated the majority of my Web3 career to pursuing. I knew so much about this topic and was eager to share it with the world. But as I started writing it all down on paper, it all felt too intangible. Do any of us get it?

Sophia Dew, tech lead at the Public Goods Network, was a speaker on the “New Voices” track at Consensus 2024.

I started drafting my talk, explaining how money powers incentives and therefore powers how world-changing innovation enters the world. When government funding for research took off in the 1950s, it led to breakthroughs in science, medicine and technology. Similarly, the growth of venture capital over the past few decades, led to the acceleration of startups and innovative companies. My argument: crypto is powering a bottoms-up scalable way of distributing funding into areas that need it most. At least, this is the hope. However, trying to find mainstream, tangible examples has been few and far between.

Of course, that’s not to say there aren’t any. I know several passionate projects that are making this a reality, such as GainForest, tackling deforestation through a transparent and automated system that distributes funding directly to locals who show proof of conservation efforts. Or VoiceDeck, enabling journalists to receive retroactive funding through community-driven decision making. I was part of several quadratic funding rounds on Gitcoin that distributed millions of dollars in matching funds to projects based on the number of unique donors. These projects inspired me for what blockchain could do for the world. Yet, at the same time, I was disheartened that this was just a tiny, tiny, tiny sliver of what the focus of this industry is all about.

I spent the latter half of last year leading the technical development and adoption of Public Goods Network, a Layer 2 blockchain aimed at creating sustainable and durable funding for public goods through sequencer fees. We were competing with a lot of other blockchains to incentivize builders, fill up blockspace, and grow out our ecosystem. The most effective tactic available was money. Ecosystems were racing to allocate capital in the hopes of increasing the overall value of the chain.

Some of these programs were effective — such as Optimism’s RetroPGF. This mechanism retroactively funds the most impactful projects based on the collective wisdom and decision making of the community. RetroPGF was the first large-scale, mainstream funding mechanism I witnessed of how crypto is now powering a coordinated, transparent, and tamper-proof way of distributing funding into areas that need it most.

In my opinion, this was a crazy-successful experiment. Each round was run like a scientific experiment, with hypotheses and control variables, so that they get better and better at accurately assessing and rewarding impact every time. Soon after, other blockchain ecosystems followed suit, such as Filecoin and Celo, who ran RetroPGF rounds for their communities earlier this Spring.

As exciting as this was, I still wondered why the main adopters of these funding mechanisms were other blockchain ecosystems. Was everything this niche of crypto doing just for improving blockchain grant programs?

My answer: yes and no.

Public goods funding mechanisms are typically dismissed as simply DAO tooling or a social good initiative. However, in the race to scale and capture market share, these mechanisms have become a competitive advantage. Blockchain ecosystems are dogfooding these novel tools and protocols at an unprecedented speed. As these open-source tools get better, it becomes easier for any ecosystem (not just blockchains) to fund what matters to them.

Onchain ecosystems are made up of thousands of people from all around the world who are designing novel forms of economic and governance structures around their shared goals. This is a big deal. For the history of humankind, these systems were designed top-down. But now, blockchain enables bottoms-up global networks to design systems that align with their values.

We are building technology that has the potential to completely revolutionize how capital flows through society and how power and money is concentrated. While right now, blockchain-based funding mechanisms are still in their infancy, as the industry matures, we will begin to see ecosystems rivaling the size of nation-states, rally incentives and allocate capital towards areas that need it most.

To those trying to grow an ecosystem, I encourage you to run experiments and share your learnings publicly. Collective knowledge is how we as an industry can realize these goals faster.

To outside speculators, I urge you to thoroughly examine the governance and economic models powering these blockchains. Are tokens being distributed in ways that benefit an entire ecosystem, or just a centralized group of decision makers? Understand the levers and drivers that power these systems and recognize that your decisions have an impact on how they are designed.

I know when people talk about blockchains potential for rewriting economies and governance systems, it’s often dismissed as an intangible and futuristic goal. But it’s not — it’s happening right now. And, it’s being supercharged through some healthy blockchain competition.