The Future of Public Goods: Autonomous On-Chain Ecosystems

Grants pay for promises; RPGF funds proven impact. Protocols like Optimism and Arbitrum have allocated $500M+ to projects that have already delivered value. This flips the incentive model from proposal-writing to execution.\n- Eliminates Grant Theater: Teams build first, get paid later based on measurable outcomes.\n- Community-Led Allocation: Uses mechanisms like conviction voting or citizens' house to distribute funds.

Why beg for grants when your protocol can own its economy? Projects like Uniswap (fee switch), Cosmos (interchain security), and EigenLayer (restaking) generate sustainable, on-chain revenue streams. This revenue autonomously funds core development and public goods.\n- Sustainable Treasury: Protocol fees create a perpetual funding flywheel, independent of VC or foundation whims.\n- MEV Redirection: Builders like CowSwap and Flashbots demonstrate how value extraction can be captured and redistributed to users and developers.

A hyperstructure is an unstoppable, free-to-use protocol with built-in, permissionless value accrual. Think ENS or Uniswap v3. Their economic models make traditional grants obsolete. Fees or rents generated are programmatically allocated back to maintainers and contributors via smart contracts.\n- Zero Governance Overhead: Funding is automatic, transparent, and codified.\n- Infinite Runway: As protocol usage grows, so does the treasury for ecosystem development, creating a powerful positive feedback loop.

The Problem: Public goods funding is a coordination failure, relying on grants and donations. The Solution: The Superchain creates a network of L2s that share a portion of sequencer revenue, which is then distributed via Retroactive Public Goods Funding (RetroPGF) to developers who provided proven value. This creates a closed-loop economy.

• $700M+ allocated across RetroPGF rounds to date.
• Creates a direct financial incentive to build infrastructure and tooling that benefits the entire ecosystem.

The Problem: Blockchains lack a native, sustainable economic engine beyond simple transaction fees. The Solution: EIP-1559's fee burn and the ethical capture/redistribution of MEV (e.g., via Flashbots SUAVE or CowSwap) transform Ethereum into a value sink. The network's security budget and public goods funding become tied to its own economic activity.

• ~3.5M ETH burned since EIP-1559 launch.
• MEV represents a $500M+ annual market ripe for redistribution.

The Problem: DAOs are often governance theaters with treasuries of volatile native tokens, lacking sustainable yield. The Solution: Protocols like Lido accrue Protocol-Controlled Value (PCV) through staking fees, creating a perpetual, on-chain revenue stream governed by token holders. This treasury can fund development, grants, and strategic acquisitions autonomously.

• $30B+ in staked assets under management.
• Generates ~$300M annual protocol revenue for the DAO treasury.

The Problem: Applications on shared L1s compete for block space and cannot capture the full value they create. The Solution: The Cosmos SDK enables purpose-built app-chains with native tokens that capture 100% of transaction fees and MEV. This funds security (via validator staking rewards) and development directly, aligning all participants.

• ~$50B combined market cap of Cosmos ecosystem tokens.
• dYdX migrated from L2 to its own Cosmos chain to capture full fee revenue.

Autonomous systems rely on external data (price feeds, RNG, real-world events). A single corrupted oracle can trigger cascading failures across the entire ecosystem.\n- Single Point of Failure: Exploits like the $100M+ Mango Markets attack show the risk.\n- Data Manipulation: Adversaries can front-run or manipulate the data source, not the contract logic.

Automated revenue capture (e.g., MEV from DEX arbitrage) intended to fund public goods can be extracted by sophisticated searchers and builders, centralizing power.\n- Extraction Over Contribution: Profits flow to Flashbots, Jito Labs, and private order flow auctions, not the commons.\n- Protocol Capture: The entities controlling the automated infrastructure become the de facto governors.

Smart contracts are immutable, but the world isn't. An autonomous system's rules cannot adapt to unforeseen regulatory shifts, market black swans, or novel attack vectors.\n- Governance Paralysis: DAO votes are too slow for emergency responses (see the $190M Nomad Bridge hack).\n- Code is Law, Until It's Not: Legal systems will intervene, creating a clash between immutable automation and mutable jurisdiction.

Without careful mechanism design, automated resource allocation leads to over-exploitation. Think yield farming mercenaries, but for perpetual protocol subsidies.\n- Incentive Misalignment: Actors optimize for extractable yield, not ecosystem health (see early Curve wars).\n- Sustainability Collapse: Automated treasuries can be drained faster than value is created, leading to a death spiral.

Automated ecosystems are compositions of dozens of protocols (Chainlink, Gelato, EigenLayer). The interaction risk between these systems is combinatorial and untested.\n- Systemic Contagion: A failure in one automated component (e.g., a keeper network) can propagate silently.\n- Audit Impossibility: No single entity can fully model the risk surface of the entire automated stack.

Automation requires constant on-chain transactions, privileging those who can afford high, predictable gas fees. This creates a tiered system where only wealthy actors can participate in governance or revenue capture.\n- Censorship by Cost: Public good proposals can be outbid by private, profit-driven transactions.\n- L1/L2 Centralization: Automation migrates to cheaper chains, consolidating power and liquidity on a few L2s.

Retroactive public goods funding (like Optimism's model) creates political gamesmanship and centralizes power in committees. The real solution is protocol-owned value flows that fund contributors in real-time, without committees.

• Eliminates governance overhead and subjective voting
• Aligns incentives via continuous, automated revenue splits
• Examples: L2 sequencer fees funding core devs, MEV auctions funding protocol R&D

Treat the protocol as a sovereign economy. Its native token is the currency; its blockspace and services are the taxable economic activity. This creates a self-funding flywheel for core infrastructure.

• Sustainable Treasury: Protocol revenue (e.g., fees, MEV) automatically funds mandated public goods
• Credible Neutrality: Removes human bias from funding decisions
• Key Example: Ethereum's EIP-1559 burn could be partially diverted to a grants contract instead of full destruction

Maximal Extractable Value (MEV) is inevitable. Instead of fighting it, autonomous ecosystems capture and redirect it to fund public goods. This turns a systemic weakness into their greatest sustainable revenue source.

• On-Chain Auctions: Sell block-building rights, funnel proceeds to dev pool
• Example Models: Flashbots' SUAVE, CowSwap's CoW DAO treasury
• Result: $100M+ annual potential for Ethereum core development, funded by the very activity that challenges it

Founder-led grants programs are a central point of failure. The end-state must be a fully autonomous, code-mandated funding mechanism that operates even if the founding team vanishes. This is the ultimate stress test for sustainability.

• Immutable Rules: Funding logic is hardcoded, not managed by a multisig
• Attacks the Bus Factor: Ensures project survival beyond initial team
• Key Tech: Smart contracts with irrevocable logic, like Ethereum's validator reward distribution