The Future of Funding: Retroactive Public Goods for Regeneration

Successful protocols generate billions in MEV and fees, but the core infrastructure they rely on (clients, RPCs, indexers) starves. This is a classic free-rider problem.\n- Ethereum L1 has paid ~$40B+ in fees to validators, with minimal native allocation to core devs.\n- Solana, Avalanche, and other L1s face identical sustainability crises for their foundational public goods.

Regenerative RetroPGF hardwires funding into protocol mechanics, creating a perpetual flywheel. Inspired by EIP-1559's burn and Cosmos SDK's fee distribution.\n- Direct treasury funding from a percentage of sequencer/validator fees or MEV.\n- Programmable on-chain allocation via smart contracts, removing governance bottlenecks.\n- Creates a predictable, protocol-native revenue stream for essential services.

Traditional RetroPGF rounds are slow, high-overhead, and prone to social bias. They fail at dynamic, real-time valuation of work.\n- Gitcoin Grants rounds occur quarterly, missing urgent needs.\n- Voter fatigue and plurality voting lead to suboptimal fund distribution, often favoring marketing over deep tech.

Leverage verifiable contribution graphs and on-chain activity proofs to automate impact scoring. Builds on ideas from Optimism's AttestationStation and Hypercerts.\n- Contribution NFTs or Soulbound Tokens (SBTs) as immutable proof of work.\n- Algorithmic impact scoring based on downstream usage (e.g., library downloads, contract integrations).\n- Enables continuous, meritocratic funding instead of episodic popularity contests.

Developers are forced to chase short-term grants or token incentives, misaligning with long-term protocol health. This leads to protocol risk from under-maintained infra.\n- Layer 2s compete for users but under-invest in shared security and interoperability tooling.\n- Cross-chain bridges and oracles remain critical single points of failure due to funding gaps.

Coordination mechanisms where multiple protocols co-fund shared infrastructure, recognizing mutual dependence. Analogous to joint ventures in TradFi.\n- Multi-signature endowment funds governed by contributing protocols (e.g., an L2 Collective).\n- RetroPGF as a service where protocols like Optimism, Arbitrum, Base fund a shared RPC/Indexer network.\n- Aligns economic survival of public goods with the collective success of an ecosystem.

RetroPGF's value is a function of governance quality. If Sybil attacks corrupt the voting mechanism, funding flows to extractive, not regenerative, work. This creates a negative feedback loop where bad outcomes degrade trust in the mechanism itself.

• Attack Vector: Low-cost identity collusion via airdrop farming syndicates.
• Consequence: Misallocation of $100M+ funding rounds to phantom projects.
• Precedent: Early Gitcoin Grants rounds required constant Sybil defense iteration.

Quantifying the 'regenerative impact' of public goods is fundamentally subjective. Without credible, on-chain metrics, funding decisions revert to social consensus and popularity, mirroring traditional grant flaws.

• Core Problem: No standardized framework for measuring externalities (e.g., CO2 sequestered, dev hours saved).
• Result: High variance in grant sizes for similar work, causing contributor attrition.
• Required: Oracle networks like Chainlink or UMA for verifiable impact data.

RetroPGF is capital efficient but temporally inefficient. Builders must operate for months or years without guaranteed compensation, creating a high barrier to entry. This biases funding towards already-funded teams or venture-backed projects.

• Contradiction: Requires altruistic pre-funding in a competitive, capital-rich ecosystem.
• Risk: Top talent opts for predictable VC funding or protocol treasury grants.
• Mitigation: Hybrid models like Optimism's Advancing Grants for upfront capital.

The entities controlling the RetroPGF treasury and process (e.g., Optimism Foundation, Arbitrum DAO) become de facto central planners. Their influence over voter selection and category design can subtly steer funds to align with their core protocol roadmap, not the ecosystem's best interest.

• Mechanism: Control over voter badge allocation and funding round categories.
• Outcome: Funds become a business development tool, not a neutral good.
• Evidence: Early rounds often favor direct protocol infrastructure.

Introducing retroactive airdrops and points programs creates a derivative market for future RetroPGF rewards. This shifts builder focus from creating value to gaming the next round's metrics, optimizing for signal over substance.

• Market Creation: Prediction markets on Polymarket or Metamask on round outcomes.
• Perverse Incentive: Metrics washing instead of real development.
• Erosion: The 'public goods' ethos is replaced by financial engineering.

Every major L2 and L1 (e.g., zkSync, Starknet, Base) launching its own RetroPGF program fragments the funding landscape. Projects face administrative overhead applying to dozens of rounds, and the total addressable funding per project shrinks.

• Fragmentation: 10+ independent RetroPGF programs with different rules.
• Dilution: $200M total funding spread across 20 chains is less effective than a coordinated pool.
• Solution Needed: Cross-chain coordination layers like Hyperlane or LayerZero for unified impact accounting.

Protocols generate billions in fees but historically fund their own infrastructure via inflationary token emissions, creating a value extraction loop. This subsidizes competitors and misaligns long-term incentives.

• Key Benefit 1: Aligns funding with proven value creation, not speculative promises.
• Key Benefit 2: Creates a sustainable flywheel: better infra → more usage → more fees → more funding.

Mechanisms like Ethereum's PBS for validators provide the blueprint. Apply this to funding: automatically divert a percentage of protocol revenue or MEV to a curated list of essential public goods.

• Key Benefit 1: Creates a predictable, algorithmic funding stream detached from governance whims.
• Key Benefit 2: Turns public goods into a yield-bearing asset class, attracting private capital.

While Gitcoin Grants proved demand, its reliance on sporadic donor matching is not capital-efficient for core infrastructure. The future is hybrid models: QF for discovery, retroactive for scale.

• Key Benefit 1: QF surfaces high-impact, underfunded projects (e.g., cryptographic libraries).
• Key Benefit 2: Retroactive grants (like Optimism's RPGF) provide scale for proven work (e.g., core client teams).

Funding mechanisms will tokenize, creating governance tokens for public goods ecosystems. Holders vote on fund allocation, capturing value from the ecosystem's growth, similar to Index Coop but for infrastructure.

• Key Benefit 1: Liquidity and composability for public goods funding.
• Key Benefit 2: Aligns speculators with long-term ecosystem health, creating a powerful advocacy class.

Weekly governance votes for grant approvals don't scale. The solution is specialized allocator DAOs with delegated expertise (like Rabbithole or Metagov) paired with streaming vesting via Sablier or Superfluid.

• Key Benefit 1: Professionalized, high-velocity capital allocation.
• Key Benefit 2: Continuous funding streams improve builder runway and reduce administrative overhead.

Move beyond GitHub stars. Fund based on verifiable on-chain usage metrics: transaction volume facilitated, gas saved, dependencies. Projects like Socket (formerly Biconomy) and Wormhole are prime candidates for this data-driven approach.

• Key Benefit 1: Eliminates political grant-making; funds are earned, not begged for.
• Key Benefit 2: Creates a competitive market for builders to optimize for real utility.