Why public goods are good — Vitalik Buterin

This article was translated by Cikey, a member of LXDAO’s translation team, and proofread by Ray, and was originally titled Why Public Goods are Good with Vitalik Buterin.

Why public goods are good — Vitalik Buterin

Translation: Cikey

Proofreading: Ray

Guide

——

Vitalik Buterin shares his insights on the future of public goods funding on Ethereum. He envisions a decentralized, sustainable ecosystem for the distribution of funds, automated through modern technology, and open source and public work as potential ways to make money.

Vitalik highlighted the importance of sustainable funding, which he believes will reduce reliance on proprietary solutions and promote an open world based on open source.

Over the next decade, he would like to see an ecosystem shaped by automatic rewards and public participation, so that any beneficial public project can receive the support it deserves.

Want more details? Read the full transcript below?

body

——

The article is about 13,000 words in total, divided into 16 parts, and takes about 40 minutes to read.

1. Introduction

2. Why public goods are important

3. The scope of Ethereum public goods

4. High Definition Democracy

5. Vitalik’s favorite PGF project

6. Leverage points for builders

7. Impact Tracking

8. Retrospective public goods

9. Contractually Guaranteed Income

10. Convex and concave situations

11. Guarantee Contract

12. Optimism RetroPGF

13. Interests in Public Goods

14. The superstructure of public goods

15. Vision

16. Closing thoughts

Introduction

Host Kevin:

Join us on our podcast where we’re bringing together thousands of hackers, dreamers, and doers to build positive and positive digital systems for the world through cryptocurrency. This podcast will be updated every Tuesday and Thursday to bring you the real stories of people in the field. For more information, visit our website at greenpill.network.

Here you can download the Green pill book for free, join our Discord group, and become a member of a greenfield.network chapter in your area.

Today’s special guest is Vitalik Buterin, the founder of Ethereum. In this episode, we’ll dive into Vitalik’s insights on public goods, what they mean to him, and why do he think they are so important?

We’ll also discuss his vision for driving public good funding inside and outside of Ethereum. We’ll also cover what Vitalik’s favorite aspects of public goods funding are in the Ethereum public goods funding space in 2023, the most impactful aspects of public goods funding in this space, and insights into other aspects of Vitalik.

What areas does Vitalik see underfunding in this ecosystem, and where do we need to invest more in order to inject more impetus into public goods funding?

For me, this is a very special podcast episode because in many ways, Vitalik is not only the creator of Ethereum, but also the creator of the value of public goods in the space.

And we don’t just look at it in terms of practicality – the ecosystems that support public goods are destined to shine, and public goods themselves are a treasure trove of great benefits.

As we all know, Vitalik is my idol, and I’m sure for many of you, he’s also a source of inspiration. So it was a particularly exciting opportunity for me to be able to interview the founder of Quadratic Funding and Ethereum to learn more about his contributions in the public goods space.

I think it’s a good record of the current state of public goods funding in the Ethereum ecosystem in 2023. I’m really looking forward to introducing you to our Coordination Network and introducing you to Vitalik.

Valley DAO is an open, global collective dedicated to working for financial support and democratization of governance for synthetic biotechnology to protect the future of our planet. The process of research and entry into synthetic biology is severely constrained by national regulations and bureaucracy, as well as hindrances from intermediate links. But the potential of synthetic biology for the world is enormous – it can create a world in complete harmony with nature. It’s exciting that we can use cells to grow matter like software. The best part is that we no longer need to extract carbon from the ground to grow and sustain civilization. Don’t you think we should fund this? Valley DAO is a believer whose goal is to try to make the Solar Punk World of tomorrow a reality today. So, join Valley DAO today and save the planet together: visit valleydow.bio.

Why are public goods important? **

Vitalik ：

Hello, Kevin

Host Kevin:

Hello Vitalik, thank you for accepting to participate in this podcast with me. I’d like to dive into the issue of public goods financing in the Ethereum space. Can you start by talking about how public goods are important to you and why you emphasize this value in your writing and work?

Vitalik ：

Of course, I think the importance of public goods, both for Ethereum and for any crypto ecosystem, is obvious once you get deep into this space for a while. All of these ecosystems rely entirely on open-source software, protocol research, and something that, once created, benefits everyone in the ecosystem, but it all needs some way to be funded.

In this area, we also see many cases: when a public good version is not developed, it is often replaced by a more centralized, more restrictive, and less user-capable version, and this is often the case. Not only in the Ethereum and crypto space, but I think this is also a prevalent pattern on the Internet and in the offline world as a whole.

For example, scientific research is an area where all societies benefit in general, and if someone develops more efficient solar panels, then everyone can benefit from it – everyone has access to better electricity services. And, again, we all benefit from the advantages of new energy sources over polluting energy sources.

There are so many examples of how there are really very important things that need to be created, and they are very valuable, but they have the property that once created, they are either not created or released at all, or they are created to produce general benefits among users who do not distinguish between paying and not discriminating. Finding effective ways to fund this kind of thing is a very important challenge.

Scope of Ethereum Public Goods

Host Kevin:

While listening to your answers, I can’t help but notice that funding public goods seems to be a practical issue, which is best for the Ethereum ecosystem, but it also seems to be beneficial to society, even beyond the confines of the crypto ecosystem. When you think about Ethereum and public goods financing, are you thinking more about the actual public goods within the Ethereum ecosystem, or do you think this is going to be one of the biggest exports of Ethereum as it scales, and if it becomes the backbone of the internet financial system, it will actually export the resources and mechanisms of public goods funding to the world?

Vitalik ：

Both. I think it’s important to remember about public goods that there are different types of public goods. Almost any public good is directed at a certain community.

For example, the fight against climate change, I think that’s the closest thing we’re aware of to an exception, because basically, unless you’re like Canada, Russia, or Norway, the rise in the temperature of the planet is very bad for you, which pretty much covers most of the globe. But if you think about, for example, translating a blog post about chemistry into Turkish, such a public good is especially beneficial to Turkey, and it is also beneficial to Turkish-speaking communities in other countries, especially to those who care about chemistry.

So I think that every public good is tied to a particular community, and of course at the end of the day, there are some public goods that are very broad in scope, and some that are almost universal in scope, but there are also many public goods that are smaller in scope, but I think both are important.

I think Ethereum’s role in this is obvious, first of all, public goods are critical to Ethereum itself. And the Ethereum ecosystem has a lot of specific properties that make public goods more important than usual. In my opinion, the decentralized nature of the space actually makes it even more anachronistic to have a centralized solution to any particular problem.

The challenge is that if you create a decentralized solution, it’s likely that it won’t have a built-in way to provide a business model for creators per se, so it does become a public good. If it’s decentralized, you can’t set up some kind of mechanism in it to just serve the people who pay for it.

So, in Ethereum itself, I think public goods are extremely valuable. I do hope that the Ethereum community will be a testing ground for these mechanisms, and once these mechanisms are developed and refined here, they can be exported and applied to many other areas. Because I think these areas are basically facing the same type of problems.

High Definition Democracy

Host Kevin:

Basic intuition tells me that when you build a public goods financing mechanism on top of a blockchain, the blockchain attributes you gain – transparency, incorruptibility, globality, and programmable state machines – will be a huge advantage in building public goods financing mechanisms that have the potential to subvert those non-transparent and less arguable state-based financing mechanisms?

Vitalik ：

That’s a good question. I think blockchain in general is a very good infrastructure for implementing the rules system, basically being able to enforce them in a transparent way - everyone can see exactly what the rules are, and everyone gets the assurance that the rules are being followed.

The way these things are performed makes cheating more difficult.

These are all very valuable – I think it’s similar to the democratic voting system, where the key importance is that people can’t cheat and the rules are open.

I think these properties of public goods are very valuable. For example, in a democratic electoral system, where people can’t cheat, and the rules are open and transparent, it’s extremely important.

But I think it’s a similar situation for public goods, and blockchain provides a potential competitive advantage for these issues, which can help blockchain-based public goods funding mechanisms in the future, disrupting traditional funding methods. Do you have any thoughts or visions on this?

Public goods are so diverse, so vibrant, and changing so rapidly that the whole paper-based, four-year approach to elections is completely inappropriate for them. So, I think blockchain is a great fit to be the base for these economic experiments that try to better identify which public goods should be funded and direct resources to them.

Host Kevin:

I think our work in the blockchain-based public goods system can be seen as high-definition democracy. It’s exciting to look at the 300,000 data points we get in each round of Bitcoin grants, compared to voting in local elections every few years in traditional democracies, because we’re able to map with great clarity what people really care about. Quadratic funding isn’t perfect, but it’s a high-definition system where people are genuinely willing to participate.

High-definition democracy is a concept that pops into my head.

I’m not sure if you have anything to add?

Vitalik ：

yes, I think it’s a good framework. I think I may have even used the word in one of my articles a few years ago, or something that sounds similar. Social media, as a version of the current somewhat dysfunctional but potentially improved version of a high-definition democracy, is another metaphor to think about.

Host Kevin:

yes, when it comes to social media and public goods, I don’t know if you’ve noticed, Raid Gill and I launched a quadratic funded version on Lens. Here, every Lens post is a grant project, and every tip is a contribution to public goods funding. We were able to raise $20,000 for anyone who talked about this topic at this year’s ECC in France.

So, my basic instinct is that you might spend 15 minutes a quarter funding your Bitcoin grant, but what if public good funding could be integrated into our social media landscape as a way to increase the value of public goods, rather than just something that gives me a dopamine rush?

Vitalik ：

Yes, I think it’s pretty wonderful.

Vitalik’s Favorite PGF Project

Moderator Kevin:

What are you most interested in in the public goods funding space?

Vitalik ：

The field of public goods funding is basically divided into two parts: one is figuring out where the money is coming from, and the other is figuring out how to allocate the funds.

Both of these questions are tricky, and they are puzzles presented in different ways. In terms of the way capital is collected, I feel like it’s something that is naturally improving in the Ethereum ecosystem. I remember back in 2020, there was a time when you were on the “Bankless” show and you were talking about the state of funding, and the whole show was about how exciting it was to finally have other projects — not just me and the Ethereum Foundation and a couple of others — actually willing to contribute. So far, we’ve not only had equity contributors, but also Optimism, who have basically made a long-term commitment to continue to invest in the capital.

Yes, an almost eternal memory in retrospect.

Okay, so there’s no announcement, so what’s that? Like an Ethereum ETF or something, it promises to invest 10% of its profits in Protocol Guild for a period of ten years.

Host Kevin:

This was recorded on a Sunday night. Wanxiang’s Ethereum ETF announced on Saturday that they will give 10% of the funds to Protocol Guild, which is a great recognition of legitimacy for them. I think this is an excellent source of funding for the protocol guild.

Vitalik ：

Yes, I think it’s fantastic. The biggest thing for me has been trying to transition from a lump sum grant to having a stable source of funding, and I think it’s really great to position yourself as a stable source of funding like Optimism, and VanEck ETF to position yourself as a stable source. So I’m glad that we’re moving towards more progress.

And then I think that the second problem might actually actually be a much bigger and more complex problem, and one of the reasons is that the better this problem is solved, the more people and organizations I suspect will be willing to donate to it. The question is, how do we determine which projects should actually be funded? If there’s a strong, effective, credit-neutral component, you just need to know that if you invest in a public good project, then the people behind it will be compensated reasonably, and that compensation is fair, then a lot of people will probably be willing to automatically airdrop and so on.

Yes, it’s a big challenge. Obviously, quadratic funding and racial funding are two mechanisms that really try to solve this problem.

I think the biggest challenge that I see is basically creating higher fidelity feeds that tell us exactly who contributed to which projects and which projects are upstream of other projects. It might help to better highlight projects that are very important but not so visible, basically trying to find and support things that are two or three steps behind the public eye, reducing the need for people to feel like they need to market themselves and talk about how cool they are in order to get more money. So, really start working on these issues.

I think it’s interesting in the case of Optimism RPGs that they started experimenting with moving to some kind of representation and multi-layered structure. The interesting thing about Hyper CERTS’ work is that it actually standardizes the entire model.

And then, I saw that guy on your show — Max, yes, Max Howald — and my understanding of his project t.xyz was that this was obviously not just a package manager, which is important in itself, but it was also trying to actually figure out the contribution map, what stuff is responsible for or has a contribution or dependency on other things, and actually does a much better job of automatically collecting that information to make it easier for people to fund the ecosystem as a whole, not just individual projects.

So, I think it’s cool that these different puzzle pieces are being developed and that’s a good thing.

What I’d like to see is that standardization is obviously good if we have an open standard for every piece of the puzzle, and then, in addition to pessimistic collaboration between different levels obviously, like you know, if these systems can really be used and built on top of what is created for other stacks, moving forward to have such an ecosystem where people’s contributions to public projects are more normalized and automatically documented and recognized.

Host Kevin:

Let me recap, I asked you what excites you in the area of public goods funding, and then we talked about the difference between funding sources and mechanisms, and it seems that they need to have an impedance match, and funding sources and mechanisms need to grow with each other.

So, in terms of funding sources, Optimism is doing a great job with sustainable revolving funding, and then Protocol Guild and the people who contribute to the Ethereum protocol and they’re making progress on protocol development on VanEk.

On the mechanics side, we talked about retrospective public goods funding, quadratic funding, protocol guilds, and I guess Trent calls self-curated registries, which are all quite interesting mechanics.

And then you talked about the Keynesian beauty pageant problem related to mechanics, the most visible projects are the easiest to get funded, how do we solve that, and then I think you dig a little deeper into open source software funding, and the opportunity to create a dependency graph of all the different open source packages through T.xyz so you can track their impact and be able to fund projects that aren’t as visible in more depth.

Leverage Points for Builders

Host Kevin:

And then you talk about standardization, everybody working together to make funding public goods the norm, just like I’m very interested in understanding what are the most influential points of builders in the Ethereum space, so, for an average builder with software skills, design skills, copywriting skills, or meme skills, where do you think the most influential points are in the Ethereum space to promote public goods funding?

Vitalik ：

An interesting entry point is an area where I don’t feel like there’s a lot of work to be put into at the moment, which is basically leveraging existing data sources on the internet, about people’s contributions. For example, GitHub commit history, research posts, and so on.

The first is to standardize these as datasets, to try to process the data in a format that’s more appropriate for the real problem, basically identifying which project is a dependency on other projects, and which person contributed how much to which project at a given time, which feels like something that anyone can do independently, and you might even be able to validate a concept on your own.

For example, I’m going to use GitHub data to recognize the top contributors to this project, obviously, that’s something that needs to be handled with caution, because any way of measuring people’s activity is going to inevitably overvalue some things and undervalue others, and that’s just the fact that once you’ve embraced the mechanics, you have to gamify, but you also know that the bright side is that the contribution that was made before it became a hot topic, maybe it’s not visible to us, but you know, what parts you can start with where you can reward people who I like, yes, I guess that’s probably what I’m trying to say。 These contributions may not go unnoticed by us. So, you know, you can start with those contributions, and you can reward those contributions that you like.

That’s probably the benefit of building retro - you can fine-tune the details of the mechanics after the fact. I think it’s a good place to start. Then, I’m trying to integrate it into some of my existing systems, like, is it necessary to automatically print hyper certs based on existing records?

Host Kevin:

So, the problem we’re trying to solve is to better track the generation of impact. This makes it easier to build mechanisms for developers to reward this influence.

Vitalik ：

Exactly, if we can standardize a dataset like this – given item X, here are items A, B, C, D, E, and so on, which are its dependencies, and each of them contributes a percentage share to X. Then project Y is also given, the people who contributed directly to it over a specific period of time, and their share. If we have an open dataset like this, then it’s going to be very easy for people to just tap into it and use incentives in the future.

Host Kevin:

This turned into a very interesting introductory experience, and if we had all the Web 2.0 open source software developers who joined the crypto space by getting their contribution to influence instead of buying asset packs (bags), it would be a completely different market strategy and the first experience of those people with cryptocurrencies that were influential and could influence the rest of the world to use cryptocurrency.

I’m wondering, what is the motivation for a project to give back to its open source dependency? Is it just good marketing, or is there something else? Why not just hitchhike? I always come back to this question: how do you solve the free-rider problem when it comes to people actually donating to these projects.

Vitalik ：

How do we solve the pre-order problem? I mean, compensate people who aren’t free riders, that’s what we’re trying to do.

Impact Tracking

Host Kevin:

Is there anything else that excites you when it comes to influence tracking and smarter mechanics?

Vitalik ：

Yes, there’s actually one particularly interesting thing.

When we start thinking about rewarding people’s influence with non-monetary rewards, for example, Taiwan has a gold card program, which is basically a visa that allows you to work in Taiwan for three years, so to speak, a type of residence permit. It has a special focus on digital nomads, and an interesting stipulation of the Taiwan Gold Card is that you are eligible for it if you show that you have been actively contributing to open source for the past eight years.

It’s novel because, usually, we think of the government and immigration authorities as very old-fashioned people, and what they really care about is whether you have a Harvard degree, whether you work for a company like Google, your salary, and so on. But here we see that Taiwan is really innovative in this regard. I think it’s interesting that this is a reward for those who contribute to open source, and at the same time, it’s not a cost for Taiwan, it’s a benefit. In fact, the more accurately they can identify really valuable contributors, it’s not only good for contributors and the world, but also good for Taiwan, because if you can find higher quality contributors, then you’re rewarding higher quality work, and you’re actually attracting higher quality people to you.

This can be replicated within the Ethereum community, and to some extent, Protocol Guild I believe there’s also a rule that if you’re a member of the protocol’s guild, you can get free tickets to the conference, which is a very smart thing to do, because conferences are this very network-dependent commodity, and tickets can cost $800, but if you give the right person a ticket, you’re not just content with saving a hundred dollars, you might actually benefit more. As the saying goes, 80% of the value of a meeting has nothing to do with what the people on stage say, but with the network, the people, and the informal discussions. If you bring the right people, then this is also a value-added for the conference.

So basically, I think it’s an untapped arbitrage opportunity, and if you can identify people who are contributing well to public goods, then in a lot of situations, places, or situations, these people are good to have. If you have a good way of identifying these people, then it’s not just the way to decide who gets the money, but also who is eligible to participate in conferences, events, and maybe immigration to countries, and maybe various virtual forums and so on. This is a very cheap reward because the better you do your job identifying contributors to public goods, the more you are actually identifying people who bring value to your network, increasing the value you provide to all paying participants.

Yes, maybe you also know this situation, which has existed in an informal way since the beginning of human civilization. But actually creating a large-scale formal mechanism to implement it seems to unlock a lot of opportunities. Interestingly, we can basically reuse many of the same “tracks”.

For example, the same infrastructure can be reused for the city and distributed “cooking” projects, both for financial support and to provide such non-monetary rewards. Those who provide monetary rewards, they actually benefit from it, so they are genuinely interested in participating and contributing to this infrastructure, helping to improve its quality. So, I think it’s also an interesting area, and there may be more untapped synergies opportunities.

Retrospective Public Goods

Host Kevin:

Yes, it feels like in a lot of ways, it’s like fulfilling the vision we set out in the Decentralized Society White Paper. But this is just one way to get social capital through your contribution in public goods.

Speaking of the phenomenon of the Internet, I thought we could talk a little bit about “retrospective public goods”.

I’m really, really fascinated by the idea: if in 2033, 10 years from now, there are hundreds of millions of dollars in funding for retrospective public goods, it makes sense to start contributing to public goods from today – based on the assumption that there will eventually be an exit or a huge financial opportunity.

I know it’s a vision that you’ve talked about in the past, how do you see this progress, and in what ways can we support this kind of feedback network-based results to be created for the world? It feels like a very high leverage point to me.

Vitalik ：

Yes, absolutely agree.

I think the key now is to have practice that is frequent and broad enough so that people can start expecting that if they do something worthwhile, they’ll get some form of backtracking reward.

We’ve seen quite a few projects get awarded, but that’s still a relatively minority, relatively large-scale, early-stage iconic, and established projects. If this approach can be scaled up even further, further diversified into the areas it funds, and has a longer history, people will have more confidence that this is something that is here to stay, something that will still be around in three or four years. This will help form an ecosystem in which it becomes one of the factors that really motivates people to contribute.

I feel like we’ve seen that to some extent in quadratic funding, but I think the more diverse the funding sources, the better it is actually for individuals, even from a risk mitigation standpoint. Because if people can get money from multiple sources, the risk of all funding sources disappearing at the same time is greatly reduced.

Host Kevin:

In the field of public goods funding, there is a concept called “antifragility”, which stems from the diversity of funding sources.

For example, if you’re a public goods funder, like Left Harris from “Rocky,” you might get funding from Bitcoin grants, Clear Funds, and retrospective public goods on Optimism. In addition, organizations like Dow Drops are also funding retrospective public goods. And, if Griff and I were friends, I would give the grant directly. Such a diversity of sources of income can create an “anti-fragility” to any single mechanism or project.

Vitalik ：

Exactly, this is another reason why we consider the funding contribution graph, rather than just evaluating each project individually.

For example, consider something further upstream than that, like “Rocky”. Think of the people who created the Keccak hash function, and I believe they got some reward from the RPGF. Such people are critical to the stability of the Internet, just like the fatal flaw 10 years ago. Just like the “Open SSL” folks, even though they may only receive about $4,000 in donations, if you create a text that automatically detects decades, it will show that there are 500 things downstream that depend on you, and you will automatically get a percentage of the money from any of those 500 things. This is effectively a 500x guarantee of funding redundancy for projects that are critical to the Ethereum space or the network as a whole.

Guaranteed Contractual Income

Host Kevin:

This reminds me of an Ethereum Improvement Proposal (EIP-6968) that Zach Cole and I worked on (almost EIP-6969). This is a contract guaranteed income mechanism that allows you to create a reward mechanism for smart contract developers.

Vitalik ：

It’s funny, I’ve thought about this before, and I came up with a similar idea a few years ago.

The main criticism of this mechanism is that it’s too easy to get around, because if I make a contract, the internal protocol rules state that the contract developer can get a 25% rebate, and someone else can simply copy that contract and then offer a 24% rebate to the user. Then users will be more inclined to use the latter version. So, at its limits, it’s not much different from a donation or a tip.

So, it’s like giving a pause in criticism of this idea. The scheme I proposed in EIP-6179 does try some clever tricks that basically try to make the system stronger against forked behavior, even though it’s far from perfect.

But I do think that, in general, you’ve all read my posts, right? Anti-collusion is a tough problem to solve, and if we don’t have a good, protocolable solution, then the next best thing to do is to try to keep the reward mechanism off-chain, or at least at a distance from the protocol logic. That way, if they are found to be abused, then the rewards can be patched in some way.

I do really appreciate the logic behind all of this, and like I said, having a very simple and straightforward mechanism – paying you based on how much people use your library – I think it’s pretty beautiful. But I think it’s really worth thinking about how to come up with a version that minimizes these kinds of problems.

Host Kevin:

Of course, we’re going to take an L2 centralized approach in terms of contract guaranteed revenue, and I want to deploy it on the public goods network, which will obviously attract more developers to the public goods network. My hope for the problem you’ve described is that people won’t use the copy contract, just as they won’t use a forked version of Zcash without a founder’s reward because it lacks legitimacy, it doesn’t have Zooko’s name attached to it, and it doesn’t support all privacy research. My hope is that there will be a legitimacy aspect to choosing the right contract, but we’ll see that when it starts to be implemented.

Vitalik ：

Yes, that’s fair. I think the success or failure of these little JWC things really depends on network effects, and the contract itself doesn’t have any network effects. I think in this case, it’s more like a question of piracy or not, and a lot of times piracy is very possible, and whether people do it or not, it’s just a matter of how they feel about the situation on a daily basis, and that usually changes dramatically because of the behavior of the mainstream media companies and whether they’ve done something stupid, like not being able to access the game at all in certain countries, etc.

yes, I mean I’m definitely in favor of having it as an experiment. I guess, if you were to ask me to find a solution in ten seconds, I’d say, you know, you can defer the release of rewards for 30 days and then set up a governance gadget that has the potential to have, um, well, cut off revenue that flows to individual contracts that look like forks. Or you can try rolling it out uncontrollably and see what the responsiveness issues actually are.

Host Kevin:

Of course, the more laissez-faire approach is to deploy it, and then iterate, which is not unlike what we’ve done with Bitcoin grants, with a slight improvement in civil resistance every quarter through the quadratic funding of events, despite the huge collusion problem.

Convex and concave situation

Host Kevin:

Yes, in your most recent interview with David at Bankless, there was one sentence that stood out. I feel like it might be an unlicensed interview where you say something, but I’ll paraphrase it here, and you say, "In a lot of ways, DAO governance and public good funding are really the same thing. I think you’re talking about it in the context of DAOs public goods. I guess can we mention and dig a little bit deeper, do you remember what you said and what exactly you mean?

Vitalik ：

I remember that, at the end of the day, both of these issues were about the ability of decentralized mechanisms to be able to make arbitrary decisions. The quality of these decisions essentially depends on the effectiveness of the decentralization mechanism itself. And the effectiveness or quality of such decisions cannot be guaranteed by mathematical proof. Nor can they rely solely on the protocol itself for full validation.

So in some ways, this issue is similar to the problem of groups agreeing on something without any simplification considerations. DAOs are actually different aspects of this big problem in the process of making decisions and choosing which projects to receive public goods funding. Although I mentioned later, there are some differences between the two in practice, the main difference being that public goods funding tends to be more likely to be concave.

As an example, imagine a stablecoin like Rye, which follows the dollar, but imagine if there is a crazy situation where the dollar depreciates dramatically after 30 years, Rye as a currency, it has a community, it still needs to remain useful, its users still need it, and even if they originally wanted to track the dollar, they have a deeper need, which is financial security. So, maybe Rye suddenly needs to make a decision, like, like, “Hey, we’re going to decouple from the dollar, and from now on, we’re going to follow some particular version of the CPI or the euro or gold or whatever.” "It’s a very clear, dichotomy-like decision. Sometimes, in such a situation, they really don’t want to compromise and what may be needed is to be able to choose a particular path and stick to it resolutely. But in the case of public goods funding, in general, if there are two projects, it is usually better to flip a coin to decide which project to fund than to split the funds in half between the two projects.

Of course, there are exceptions. For example, if we want to maximize the probability of landing on the moon, giving $50 billion to a randomly selected person in the world might be more likely to succeed than giving $7 to everyone in the world. But most of the things we do aren’t on that scale. And most of the things we do externally have much smaller marginal benefits.

Guarantee Contract

Host Kevin:

I think it’s a good overview of the concave vs. convex decision, and if you search for vitalik.ca and look for “concave vs convex”, you’ll see a visual diagram of the concept, which really helped me understand the concepts. Have you ever heard of the concept that there are mechanisms that can transform democratic decision-making into a more binary form of decision-making? I don’t know if you’ve ever heard of a “guarantee contract”?

Vitalik ：

Yes, I have, it’s a great mechanic.

Host Kevin:

A guarantee contract is essentially a mechanism where you can say, “I’m going to raise money, and if the amount reaches X, it’s going to be fully funded, like we’re going to go to the moon.” "But if it doesn’t happen, then everybody gets their money back. This is a way to migrate between concave and convex decisions. I’m curious to see if more of these tools will be used in the field of public goods funding.

Vitalik ：

It’s really interesting.

I remember Alex Tabarrok coming up with the “Domination Guarantee Contract”, which is a variation of the Guarantee Contract, which is basically that there are entrepreneurs who agree that if the project fails, they will return more than 100% of the money to people. He did an article on Marginal Revolution that I remember as a response to quadratic funding, which basically said, “Hey, actually quadratic funding can be combined with a guarantee contract, or a dominance guarantee contract, which might be better.” ”

Host Kevin:

One of the projects Gitcoin is working on is to take us beyond quadratic funding. The new protocol is called the Allo Protocol, abbreviated as the Capital Allocation Protocol. The plan is to build not only the quadratic financing that we already have, but also votes based on badge holders, votes of faith, dominance guarantee contracts, and more. I’m really excited about the Swiss Army knives with all the different capital allocation mechanisms and started AB testing them. But when you start combining them with each other, it gets even more interesting. You said that someone suggested that we combine QF and guarantee contracts, so this could be something we would try in the future.

Vitalik ：

Yes, absolutely.

Optimism RetroPGF

Host Kevin:

When we go back to the discussion that DAO governance and public good granting are the same issue, perhaps they are related issues, but they are not exactly the same. I wonder if we think that Optimism’s retrospective public goods grant is actually a very clever marketing campaign for Optimism and a way to organize its ecosystem public goods. Are retrospective public goods grants and Optimism creating a new, smart way for Optimism’s public goods grants, and thus a new tool for DAO governance in a way?

Vitalik ：

In a sense, yes. The most interesting thing about Optimism is that, at least as I understand it, the vision is that it starts with Optimism, but eventually supports the broader Ethereum, and then the internet and other broader things.

For example, the funding I mentioned for the IACHT Yak is a broader example, because the IACHT Yak is a hash function that Ethereum relies on, but it’s also absolutely useful for Optimism itself. So I think it’s a model that can be easily replicated by other Layer 2 or other types of projects.

Host Kevin:

Now that we have a number of Layer 2s with billions of dollars in finances, it would be a fantastic way to use blockchain to solve the “more than enough” problem if they were all competing to fund their ecosystems and world public goods in order to gain market share.

Vitalik ：

It’s amazing.

Interests in Public Goods

Host Kevin:

As we get to the second half of the hour, I might start asking some open-ended questions to see if we can explore some interesting topics. What do you think people are overlooking when it comes to funding public goods in the Ethereum space, and what are you doing right?

Vitalik ：

I think the right thing for ecosystems is to push for a shift to have a diversity of different funding mechanisms and let them operate autonomously for a long time. This includes things like RPGFs, but also actions by the Ethereum Foundation, such as not focusing on expanding the foundation itself, but focusing on cultivating organizations that can grow independently, almost like mini-foundations focused on more specific goals. People are consistently willing to put money into the funding pool, and I think that’s very valuable, very good.

For example, HyperSearch and Tea are really trying to systematize the problem and push it to escalate on a larger scale, which is a good thing, although we do need more of that. I’m wondering what we’re missing, I can’t think of it yet. This is a very positive answer.

Super Structure of Public Goods

Host Kevin:
We set up these self-running matching pools, as well as the Ethereum Foundation, which was founded with a subtractive mindset. It seems like we’re envisioning a future of public goods funding that is more of a superstructure – one that can be trustless, without human intervention, and without relying on anything like Kevin Awoki of Gitcoin or any central intermediary. Is this the direction you’re interested in?

Vitalik：

I think student participation is always necessary, but it would be very valuable if funding activities could run as automatically as possible, like the legal system, and people could rely on it to exist and function. While the legal system has a lot of problems and requires expensive specialists to perform basic functions, it does it right in that it is relatively fragmented. Compared to other aspects of government, the legal system is close to an ideal autonomous structure. It would be surprising if public goods funding could reach this level, even taking modern technology a step further.

Vision

Host Kevin:
Yes, it would be great if public goods funding could become as decentralized as the legal system, not dependent on the will of individuals or small groups, but running on its own like a well-functioning machine.

From the time we looked at Bitcoin grants and quadratic funding together, our hope was that there would be funding events every quarter, and eventually people could expect these activities to work on time like clockwork, so that people could work on public goods instead of looking for jobs or doing ICOs. It’s not just Gitcoin right now, but it’s also Optimism, Giveth, Clr.fund, and many other great projects that reward public good grants, and it will be very interesting to see us cross that threshold because public good grants are deeply embedded in the foundations of our culture and community.

Vitalik：

If we were extremely successful in funding public goods, what would the world look like in 10 years?

We’d like to see a greater variety of public goods, and if there’s infrastructure that’s valuable to Ethereum, the wider internet, or even the world beyond the internet, people would expect that if they start contributing and using it, some sort of reward will start pouring in almost automatically. This will lead us to see fewer proprietary solutions and more open-ended problem solving.

Hopefully, we’ll see a crypto space that relies less on centralized actors and more on well-built, open software, whether it’s a simulated wallet, a client service, or someone providing data. I’d like to see more potential companies, and even governments try to use similar systems to some extent.

Closing Thoughts

Host Kevin:

The last question is open-ended. Is there anything I didn’t ask that you’d like to say?

Vitalik：

I think one of the very valuable things that we should be trying to push for as an ecosystem over the next few years is to try to automate these funding sources more and be a long-term guarantee, not just a one-time grant. Is it possible to get to the point where every layer 2 protocol, not just Optimism, for example, dedicates a portion of its funds to public goods funding tools, which can then automatically override everything related to Rollups in particular, and everything related to the Ethereum ecosystem more broadly. As the quality of the data sources gets higher, can we achieve a more neutral approximation where the funding sources can really make a long-term commitment and try to reliably flow some more resources or capital into those streams on a quarterly basis.

Host Kevin:
Okay, thank you so much Vitalik for joining us on the podcast, thank you so much for listening. This is the end of our program.