The Future of Public Goods: QF as a Layer 2 Primitive

Every dollar of matching funds is diluted by the cost of Sybil defense. Current solutions like Gitcoin Passport create friction and centralization, imposing a trust tax on the entire system.

• Cost: ~10-30% of matching pool value lost to verification overhead.
• Friction: User drop-off from complex identity proofs.
• Centralization: Reliance on a handful of attestation providers.

Matching funds are locked in slow, discrete rounds (e.g., quarterly), creating boom-bust cycles for projects. Capital sits idle for months, failing to compound or generate yield.

• Idle Capital: $10M+ matching pools sit static for ~90 days.
• No Yield: Lost opportunity for DeFi integration.
• Project Instability: Feast-or-famine funding cycles hinder long-term development.

From donation to disbursement, the process is a series of manual, off-chain steps vulnerable to manipulation and error. There is no verifiable, on-chain proof of correct distribution.

• Manual Processes: Admin keys control final payouts.
• No Proof: Cannot cryptographically verify the QF algorithm was executed correctly.
• Slow Disbursement: Projects wait weeks for funds after a round ends.

QF exists as isolated applications (Gitcoin, clr.fund) rather than a shared primitive. This prevents composability, fragments liquidity, and forces each project to rebuild Sybil defense and governance from scratch.

• No Composability: Cannot be natively integrated by other dApps or DAOs.
• Fragmented Liquidity: Dozens of small, isolated matching pools.
• Repeated Work: Every implementation solves the same hard problems independently.

Capital allocation on-chain is dominated by whales and mercenary capital, which stifles innovation and community-driven projects. Traditional grant programs are slow, opaque, and centralized.

• Sybil attacks and collusion distort 1p1v models.
• High coordination costs prevent small donors from having meaningful impact.
• Lack of composability with DeFi and other on-chain activities.

Embedding Quadratic Funding directly into L2 state transition logic turns it into a trustless, automated public good. This enables on-chain treasuries and retroactive funding to become native operations.

• ZK-proofs (e.g., Semaphore) enable private voting and sybil resistance.
• Programmable matching pools from protocol revenue or MEV.
• Composable with DeFi: Matching funds can be yield-bearing assets in Aave or Compound.

Optimism's Retroactive Public Goods Funding demonstrates QF principles at L2 scale, distributing tens of millions in OP tokens to ecosystem contributors. It's a blueprint for a self-sustaining protocol economy.

• Vote delegation to domain experts reduces voter fatigue.
• On-chain attestations (like EAS) provide verifiable contribution records.
• Creates a flywheel: Better public goods → more usage → more sequencer revenue → more RetroPGF funding.

Clr.fund implements a fully on-chain, decentralized QF protocol using MACI (Minimal Anti-Collusion Infrastructure) and zk-SNARKs. It's the canonical example of QF as credibly neutral infrastructure.

• End-to-end verifiability: Every vote and tally is cryptographically proven.
• Collusion resistance: MACI prevents bribery and coercion.
• L1-agnostic: Can be deployed as a primitive on any EVM chain or L2.

Inspired by Jacob Horne's Hyperstructures, the end-state is a QF primitive that runs forever, is unstoppable, and generates its own surplus. Think Uniswap for public goods funding.

• Fee switch integration: Protocols like Uniswap or Optimism can direct fees to a QF contract in perpetuity.
• Automated, permissionless rounds: No central committee to start or stop funding.
• Value accrual to the primitive itself, creating a sustainable ecosystem asset.

QF as an L2 primitive enables new coordination markets. It's not just about grants; it's a coordination layer for work, similar to how Curve coordinates liquidity.

• Bounties & Grants become composable: Funded projects can auto-deploy on L2 rollups.
• Attestation graphs (using Ethereum Attestation Service) create a portable reputation layer.
• Enables on-chain "Cities" where public goods are automatically funded by their economic activity.

Layer 2s must integrate native, low-cost identity proofs like Semaphore or World ID to prevent collusion. The cost of generating a Sybil attack scales with the L2's success, creating a perpetual cat-and-mouse game.\n- Attack Cost: Must remain > 10x the potential grant profit.\n- Latency Penalty: Identity checks add ~100-500ms to transaction finality.

Each L2 running its own QF round (Optimism, Arbitrum, zkSync) fragments donor capital and project attention. This creates grant silos where a project on Chain A cannot tap into the matching pool of Chain B.\n- Capital Efficiency: Matching pools operate at <50% of theoretical efficiency.\n- Protocol Risk: Forces projects to deploy and manage funds across multiple, non-composable environments.

QF rounds that pull price feeds for cross-chain contribution matching (e.g., donations on Base matched from Optimism treasury) introduce a critical oracle dependency. Manipulating the Chainlink or Pyth price feed for the governance token could drain the matching pool.\n- Attack Surface: Single oracle failure compromises the entire round.\n- Time Delay: Price staleness during high volatility creates arbitrage for attackers.

A sovereign L2 with built-in QF becomes a high-value target for regulatory enforcement. Authorities could compel the sequencer operator to censor specific grant rounds or freeze matching funds deemed non-compliant. This turns the L2's legal jurisdiction into a centralizing force.\n- Compliance Overhead: Adds 20-30% operational cost for legal KYC/AML.\n- Censorship Risk: A single legal order can blacklist entire project categories.

While QF dilutes large donors' influence, a coordinated group of whales (a16z crypto, Paradigm) can still game the system by splitting capital across thousands of Sybil-resistant identities. The cost of coordination is falling with privacy-preserving tools like Tornado Cash and Aztec.\n- Collusion Budget: $1M+ for a sophisticated attack on a $10M+ matching pool.\n- ROI Threshold: Becomes profitable for grants influencing >$100M in protocol treasury flows.

To achieve the low fees and fast finality required for a seamless QF experience, L2s rely on centralized sequencers (e.g., OP Stack). This creates a single point of technical failure. A sequencer outage during a grant round's final hour can invalidate millions in matched funds and destroy trust.\n- Uptime SLA: Requires >99.9% sequencer availability.\n- Finality Risk: Users cannot force transactions to L1 during an outage, freezing all contributions.

The core problem of QF is sybil attacks. The solution is integrating it with proof-of-personhood or social-graph protocols like Worldcoin or Gitcoin Passport. This transforms QF from a simple aggregator into a verifiable reputation and coordination primitive for the entire stack.

• Enables trust-minimized subsidy distribution for protocols and dApps.
• Creates a portable identity layer for governance, airdrops, and access control.
• Unlocks novel economic models where contribution, not capital, is the key signal.

Static, round-based QF is inefficient. The future is a continuous, composable subsidy engine baked into the L2's execution environment. Think UniswapX's Dutch auction logic, but for public good matching.

• Allows any dApp to trigger a QF round as a function call for its own ecosystem needs.
• Enables real-time subsidy curves and cross-protocol matching pools (e.g., an L2's sequencer revenue auto-funding its developer grants).
• Creates a positive feedback loop where protocol success directly funds its dependencies.

Matching pools are idle, non-productive capital. The solution is to make them yield-generating DeFi primitives via restaking or structured products (e.g., EigenLayer, MakerDAO sDAI). This turns a cost center into a revenue engine.

• Dramatically lowers the overhead for large-scale funders (DAOs, Treasuries).
• Generates sustainable yield to perpetually grow the matching pool, creating a flywheel.
• Attracts institutional capital seeking impact + yield, moving beyond philanthropic grants.

Prospective funding is guesswork. The superior model is retroactive funding for proven value, as pioneered by Optimism's RPGF. QF on L2s can automate this, creating a canonical attribution layer for value creation.

• Solves the oracle problem for impact by using on-chain activity as the data source.
• Incentivizes shipping over signaling; builders are paid for measurable outcomes.
• Can be applied to infrastructure, security research, and content creation with verifiable metrics.