Propagating the spirit and utilization of decentralized ecosystems and accelerating the creation of resilient public goods are all part of the purpose and mission of DCF. In that role, we like to highlight blockchain technology’s role in supercharging public goods’ development, proliferation, and funding.
The blockchain industry is a collaborative space, bootstrapped with the idea of building for the common good. The enormous variety of crypto protocols, products, and services is a testament to the groundbreaking innovation and impact such a mindset can bring about. However, although amazing breakthroughs have been made, establishing sustainable schemes for funding public goods is still a work in progress.
What are public goods?
Public goods are products or services that benefit all community members and are offered for free. Education, healthcare, transport infrastructure, and law enforcement are all services that should, in an ideal world, be enjoyed by everyone free of charge. We pay taxes with the expectation that governments will ensure universal access to public goods, as opposed to the private goods we all pay for our individual use.
In a stricter sense, public goods are both non-excludable, meaning no individual can be excluded from using them, and non-rivalrous—their use by one individual does not exhaust their availability or usefulness to others.
Blockchain and Digital Public Goods
In the virtual world, the term public good is often used to indicate open-source software, a decentralized software development model designed to encourage open collaboration and universal access. Such open-source projects have proved to generate considerable economic value, as some, like Linux for example, are considered the backbone of today’s digital infrastructure.
On the other hand, in blockchains where open source is the standard, all sorts of tooling, wallets, explorers, and DEXs can be regarded as public goods. Every blockchain protocol is a community project poised to serve and benefit people across countries, continents, and socioeconomic groups.
It is important to distinguish between three categories of goods:
- Public goods created within and for the blockchain industry
- Public goods that employ blockchain technology to optimize and improve other industries.
- Blockchain as a tool in humanitarian response.
We already outlined the first category above, but we can extend it to include educational initiatives, podcasts and news outlets, security, monitoring, analytics platforms, etc. Generally, every product or service that adds value to an ecosystem and its users and is distributed for free can be assigned here.
However, the other two categories are worth examining more deeply. With its ability to ensure communication, collaboration, and data sharing between operators who don’t know or trust each other, blockchain technology offers unmatched transparency, security, and information integrity. Therefore, it’s not surprising that a growing number of both public and private entities are latching on to its potential.
Use Cases of Blockchain-Powered Public Goods
Blockchains can reduce redundancy, streamline processes, provide a permanent audit trail, and thus decrease audit burdens, just a few of their advantages. They can be used to track the provenance of products, services, and data, to optimize supply chains or fight disinformation and deep fakes. They can help governments build trust by creating verifiable land registries to resolve property disputes or safe and reliable online voting platforms.
Accordingly, blockchain technology has already been successfully integrated into numerous public goods initiatives, accelerating significant improvements. Let’s explore a few examples:
- Japan is using digital collectibles and NFTs to offer digital citizenship and reward its highest-performing mayors.
- Estonia has been building its blockchain infrastructure for years to enforce the integrity of government data and to offer verified processing of e-governance services.
- China utilizes blockchain technology to verify the real-name identities of its 1.4 billion citizens.
- The UK employs blockchain to foster national capability in digital twinning and test decisions before they are implemented for public benefit.
- The government of India deploys blockchain technology for land registration, issuing digital certificates, and customs duty payments.
- Non-governmental organizations use blockchain-powered payment solutions to disburse funds and monitor transactions remotely and in real-time.
There are many more fascinating use cases, which we intend to discuss in future blog posts. Moreover, blockchains are gradually being integrated into industries that were previously considered taboo. Their inherent transparency is generally unsuitable for use cases requiring stringent personal data protection, like healthcare or finance. Still, that is no longer the case with the rapid advancement of privacy-preserving technologies like zero-knowledge proofs (ZKPs) and fully homomorphic encryption (FHE).
Public Goods Funding
Historically, the state offers public goods and is funded via taxes. However, as governments often fail to deliver high-quality services, non-governmental organizations must step in, which usually need to be financed. Generally, public goods are at the will of donations or crowdfunding, which can be irregular, overly competitive, and unpredictable. Therefore, setting up and maintaining a sustainable funding mechanism is an outstanding challenge.
The main problem is that public goods are non-rivalrous and free. No matter how innovative or useful they might be, a developer has no incentive to create, or an investor to fund, such a project when no financial return could be expected. Even though such initiatives benefit millions worldwide, taking a public goods project off the ground has always been difficult and thankless.
Fortunately, blockchain technology comes to the rescue here as well. For years, the industry has been brainstorming new ways to support and incentivize the building of public goods, and it has achieved fascinating progress. Not only that, by integrating blockchain, traditional methods like donations and crowdfunding are becoming more transparent and trustworthy, but novel and more sustainable mechanisms are coming forward. Some of the most popular are:
- RetroPGF or Retroactive Public Goods Funding – a mechanism that retroactively rewards projects and initiatives that have already been proven extremely successful and impactful.
- Quadratic Funding – a scheme where the amount distributed to a project is proportional to the number of donations, as opposed to the total amounts received.
It is essential to note that both mechanisms empower the community by including it in the decision-making process. Moreover, they both strive to incentivize the best ideas and remunerate the most successful and popular applicants. We’ll examine the two mechanisms in more detail in future publications.
It is too early to claim that these mechanisms are adequately scalable. Yet, the one thing that the crypto space has made crystal clear is that nothing persists without incentives. When giving is a sacrifice, it will inevitably fade away. Rather, when you reward voluntary participation in value creation, you reward your biggest fans.
Blockchain tech holds great promise for creating and sustaining public goods, from decentralized open-source tools to humanitarian aid solutions and governance enhancements. While challenges remain in ensuring consistent funding and adoption, innovative mechanisms like RetroPGF and Quadratic Funding provide a glimpse of what is possible when communities come together to incentivize progress.
Looking ahead, blockchain’s role in reshaping public goods is just beginning to unfold. With advancements in privacy technologies, scalability solutions, and novel funding models, the potential impact is limitless. Yet, realizing this future will require ongoing collaboration, experimentation, and a collective drive to innovate for the common good.
DCF’s mission is to advocate for new mechanisms of human cooperation and support the next generation of blockchain-enhanced public goods. Thus, we are determined to keep highlighting the work of disruptors and innovators changing the world for the better. Stay tuned and join us in spreading the word.