Why Cross-Chain Public Goods Funding is a Pipe Dream

Cross-chain funding is a coordination failure. Public goods like bridges (Across, Stargate) and indexers (The Graph) create value across ecosystems, but revenue and governance are siloed. No single chain's treasury has the incentive to fully subsidize infrastructure that primarily benefits its competitors.

Retroactive funding models like Optimism's RPGF are chain-specific. They reward builders for value created on that L2. A protocol that improves cross-chain UX generates diffuse value that no single retrospective committee can properly measure or reward, creating a free-rider problem.

The data shows capture, not contribution. Analysis of grant distributions from Arbitrum DAO and Optimism Collective reveals over 90% of funding stays within each ecosystem's native projects. Cross-chain infrastructure proposals are systematically underfunded or rejected.

Sovereign Value Capture is the primary barrier. A public good on Ethereum, like a core EIP, directly secures and enriches the Ethereum ecosystem. Funding a similar good on Solana or Avalanche provides zero tangible return to Ethereum stakeholders. This creates a classic free-rider problem, where no single chain's treasury has the incentive to fund infrastructure that benefits its competitors.

The MEV and Fee Revenue Leak is a secondary drain. Cross-chain bridges like LayerZero and Axelar generate significant value through fees and arbitrage opportunities. However, this value accrues to the bridge's validators and token holders, not to the source or destination chains. This siphons economic activity away from the very ecosystems that need to fund their public goods, creating a value extraction loop that starves native development.

Fragmented Governance makes coordination a fantasy. Even if chains wanted to cooperate, their governance models—from Optimism's Citizen House to Arbitrum's DAO—are siloed and politically misaligned. A proposal to fund a cross-chain standard would require simultaneous, aligned votes across competing DAOs, a coordination failure waiting to happen. The failure of early cross-chain grant experiments proves this model is non-viable.

Evidence: The total value locked in cross-chain bridges exceeds $20B, yet less than 0.1% of that value is directed toward shared protocol R&D. Projects like Uniswap and Aave maintain separate, chain-specific deployments because the economic logic of their native chains demands it.

No shared settlement layer prevents sustainable funding. Public goods like the Ethereum Protocol Guild rely on a single economic engine. Cross-chain ecosystems like Solana and Avalanche have independent validators and fee markets, creating a classic tragedy of the commons where no chain fully internalizes the benefits of funding a shared resource.

Value extraction outpaces contribution. Bridges like LayerZero and Axelar capture fees from interoperability but contribute zero to the security or development of the chains they connect. This creates a parasitic economic model where infrastructure profits from fragmentation without solving it.

Retroactive funding models fail at scale. Optimism's RetroPGF works because value accrues to a single token (OP) on a single L2. Cross-chain, value disperses across dozens of native assets, making coordinated reward distribution and attribution computationally and politically intractable.

Evidence: The total value of major cross-chain bridge exploits exceeds $2.5B, yet no unified security fund exists. Each chain's community funds its own audits, proving that shared security is a myth without shared sovereignty.