Public Goods Funding in Web3: RetroPGF

by | Sep 25, 2024 | Uncategorized | 0 comments

RetroPFG framework for Public Goods Funding

In our previous blog post, we highlighted blockchain’s potential to supercharge public goods’ development, proliferation, and funding. We also outlined the main challenges in establishing long-term and sustainable mechanisms for investing in public goods, and the innovative models the crypto community is currently experimenting with. Today, we’ll focus on one such model, namely RetroPGF. 

Retroactive Public Goods Funding, commonly referred to as RetroPGF, is a framework for rewarding public goods initiatives which have already been proven valuable to their respective communities. It’s a funding model that remunerates impact and not promises, and that’s what makes it, when properly employed, fairer and more capital-efficient than other existing models. 

Let’s go deeper.

What is RetroPGF?

RetroPGF is a funding scheme designed to recognize past successes and reward projects that have demonstrably benefited the ecosystem. It can be used to support builders, creators, researchers, educators, or simply enthusiasts who consistently spend time and efforts to enrich and enlarge the ecosystem they’re active in.

There are two characteristics of RetroPGF which sharply distinguish it from other funding models:

  1. Community-driven: RetroPGF is inherently a community initiative, fostering a thriving collective by remunerating the well-doers. It recognizes the altruists who volunteer their knowledge and scarce resources to produce community-wide impact, and simultaneously involves that same community in the decision-making process. 
  2. Rewards Accomplishments: Instead of funding ideas for future projects, RetroPGF rewards past project, and even projects that may have occurred sporadically over a long period of time. Put another way, RetroPGF supports projects (and individuals) that have proven their worth.

Distinguishing which projects deserve support

Most startups rely on private investment in exchange for equity, often focusing on potential revenue growth over community impact. At the same time, investing in future endeavors is the riskiest proposition, it frequently fails to produce anything real and useful, and piles of money may well have been lost to overpromising/underdelivering founders.

In the case of public goods, attracting funding becomes even more challenging, since these projects are typically offered for free and lack profit generation. Even after proving successful, such initiatives often struggle to secure financial backing.

RetroPGF attempts to remedy that disparity. It is a reward system based on demonstrated impact and not on refined pitch decks. It mirrors the approach of awarding scientific accomplishments. Just like the Nobel Prize distinguishes past accomplishments proven incredibly impactful across science, humanitarianism, and art, RetroPGF rewards battle-tested and demonstrably successful public goods projects. 

Making RetroPGF work

RetroPGF is an initiative from the community to the community. It manages to overcome one of the main challenges of public goods funding, namely achieving sustainability. Let’s see how it accomplishes that:

  1. Source of funding: Usually, a company or foundation allocates funds to remunerate public goods projects that have benefited the community. Thus, it rewards the same people who help the ecosystem grow and supercharges the success stories.

  2. Candidate Selection: The bigger the impact, the higher the chance to get funded. RetroPGF awards a prize to those who have created the greatest value, brought about the most positive change, and achieved the most considerable impact.

  3. Community Nominations: Who else is better equipped to identify the most community-beneficial initiatives than the community itself? RetroPGF empowers the community members to both nominate and select the winners through a decentralized voting mechanism, thus realizing a true digital meritocracy. Moreover, when a decision is made through crowdsourcing thousands of often competing opinions, coming from people who are not personally invested, but who have a first-hand appreciation of a given product or service, the process promotes unparalleled transparency and trust.

  4. Effect multiplier: With the growth and success of a RetroPGF program, more community members get motivated to bring public goods forth, resulting in enhanced engagement and collaboration. An ever-growing number of public goods will be translated into more development, and consequently more revenue to be directed into funding. That way, RetroPGF becomes the engine of growth and prosperity.

How did RetroPGF come about?

The RetroPGF model was designed and proposed by Vitalik Buterin back in 2021 with the mission of introducing “exit incentives” for public goods initiatives. 

“If you are consistently and regularly investing in public goods, and thus showcasing the value of these projects, then eventually you’re creating an opportunity for private investors to come on board and actually invest in public goods too. Rational expectation for an exit in the future.”

The scheme was later popularized by the Layer-2 chain Optimism, which in July 2024 executed its fourth round of Retro Funding. It has so far rewarded more than 200 projects, distributing over 50 million of OP tokens.

The success of Optimism’s RetroPGF program has been so significant and the network effects it creates so palpable, that it motivated other communities to implement it too. Some of them are:

RetroPGF is just one of the ways in which blockchains have been revolutionizing public goods funding, charity, and philanthropy! It results in an expanding ecosystem that is easier to build on, learn about, and engage with, where the creation of novel applications and the streamlining of innovative ideas are greatly facilitated. An ecosystem where the sustainable funding of public goods makes a full circle and thereby fuels a richer economy.

We at DCF are always on the lookout for effective approaches for boosting sustainable public goods development. We’ll continue to investigate other blockchain-powered and decentralized mechanisms for enhancing social good, and we invite you to join us. If you’re working on a Web3-based philanthropy initiative, make sure to reach out and tell us more.

 

 

We collect minimal information on visitors and never share your information with outside organizations. For detailed information about the categories of personal information we collect and the purposes for which information may be used and which Data Processing Services may have access to this information please click on 'More Information' to refer to our privacy policy. Click the 'X' to close this note and agree to these terms.
More Information