Why Public Goods Funding Demands New Economic Primitives

Public goods like RPC endpoints, indexers, and block explorers are used by everyone but funded by no one, leading to chronic underinvestment and centralization. The result is a fragile, oligopolistic infrastructure layer.

• Free-Rider Problem: Protocols capture billions in value while infrastructure providers operate at a loss.
• Centralization Pressure: Only well-funded entities like Infura or Alchemy can sustain the capital burn, creating systemic risk.

Grant committees and VC funding are predictive—they try to guess what will be valuable. This fails in crypto's fast-paced, composable environment where the most critical work is often unglamorous maintenance.

• Innovation Lag: Bureaucratic grant processes (e.g., Gitcoin rounds) are too slow for real-time ecosystem needs.
• Misaligned Incentives: VCs fund for equity returns, not sustainable public utility, creating extractive relationships.

Treasuries like Uniswap's $3B+ or Optimism's $700M+ are trapped capital. Governance processes for allocating these funds are politically toxic and operationally inefficient, failing to fund the underlying stack.

• Governance Paralysis: DAO votes on infrastructure grants devolve into political theater, not meritocratic allocation.
• Value Leak: Protocol fees accrue to the treasury instead of flowing back to the public goods that enable them.

Financialization without redistribution creates perverse incentives. Maximal Extractable Value (MEV) from bots using public mempools and block builders represents a multi-billion dollar leak that could fund infrastructure.

• Uncaptured Revenue: MEV searchers and builders profit from public infrastructure without contributing back.
• Inefficient Markets: No mechanism exists to route a share of this value to RPC providers, relayers, or client developers.

The Problem: Builders of foundational tech (like the Ethereum L2s) capture billions in value, while the underlying public goods (like the EVM) are underfunded. The Solution: Optimism's RetroPGF allocates protocol revenue based on proven impact, not promises. It creates a direct economic feedback loop where successful applications fund their infrastructure.

• Key Benefit: Aligns long-term incentives; value capture funds value creation.
• Key Benefit: $100M+ distributed across 3 rounds, creating a measurable funding track record.

The Problem: Impact is non-rivalrous and hard to finance; traditional grants are one-off and lack composability. The Solution: A primitive for representing and funding impact work as tradeable, fractionalized certificates. Built by Protocol Labs, it turns impact into a financial primitive.

• Key Benefit: Enables secondary markets for impact, allowing upfront funding via future impact sales.
• Key Benefit: Composability allows integration with RetroPGF, DAOs, and prediction markets for programmable impact funding.

The Problem: Small donations have disproportionate signaling power in democratic funding, but lack the capital to compete with whales. The Solution: Quadratic Funding mathematically optimizes for the number of unique contributors, not total capital. Gitcoin Grants has deployed this to fund $50M+ to OSS.

• Key Benefit: ~100x matching multiplier for projects with broad, grassroots support vs. a single large donor.
• Key Benefit: Creates a verifiable on-chain record of community sentiment, a primitive for decentralized capital allocation.

The Problem: Continuous, predictable funding for maintainers is broken; it's either a grant cliff or a patronage model. The Solution: Ethereum's Drips Protocol (formerly Sablier) enables real-time, programmable streaming of funds. Pair this with optimistic assumptions about future work to create sustainable salaries for public goods builders.

• Key Benefit: Transforms grants from lump-sum liabilities into continuous cash flow for developers.
• Key Benefit: Can be revoked if work stops, aligning incentives without upfront trust.