Why Public Goods Need Their Own Tokenomic Models

Public goods like open-source code or climate data are non-excludable, creating a classic economic failure. Traditional funding (grants, donations) is unsustainable and slow.

• Key Insight: Value capture is impossible without a direct incentive mechanism.
• Key Benefit: Tokenization creates a direct, programmable link between usage and funding.

Pioneered by Optimism's Citizen House, RPGF funds projects after they prove their value, solving the coordination problem of what to build.

• Key Insight: Let the market decide value, then reward it. This aligns with Gitcoin Grants and Ethereum's Protocol Guild.
• Key Benefit: Eliminates speculative pre-funding waste and attracts builders who deliver.

Coined by jacob.eth, a hyperstructure is an unstoppable, free-to-use protocol with a fee switch. Tokens capture value from the protocol's permanent utility.

• Key Insight: Value accrues to the token via fees (e.g., Uniswap governance) or seigniorage, not speculation.
• Key Benefit: Creates a sustainable, protocol-owned treasury for long-term public goods funding.

Projects like Regen Network and Toucan Protocol tokenize verifiable impact (e.g., carbon tons sequestered). This creates a liquid market for positive externalities.

• Key Insight: Turns abstract impact into a tradable, auditable asset via oracles like Chainlink.
• Key Benefit: Unlocks $100B+ in climate finance by solving the verification bottleneck.

Public goods like open-source software or climate data are non-excludable, leading to underfunding. Users benefit without paying, creating a tragedy of the commons.

• Vitalik's Quadratic Funding models (e.g., Gitcoin Grants) show promise but rely on recurring donations.
• Pure fee-based models fail as they create barriers to the very adoption the good needs.

Shift from speculative upfront tokens to rewarding proven value creation. Optimism's RetroPGF and Ethereum's PBS are blueprints.

• Retroactive Public Goods Funding (RetroPGF) pays builders for past work, assessed by a decentralized jury.
• Impact Certificates (like Hypercerts) tokenize future impact, allowing upfront funding based on measurable outcomes.

Applying PoS security models to public goods forces a trade-off: staking rewards must come from inflation or fees, which either dilutes holders or taxes users.

• High inflation for validators disincentivizes long-term holding of the governance token.
• Fee extraction contradicts the non-excludable nature of the good, stifling use.

Generate yield for token holders by capturing value from adjacent, profitable ecosystem services, not the core good itself.

• Protocol-Owned Liquidity (POL) generates fees from DEX pools (inspired by Olympus DAO).
• Data Staking allows token holders to earn by securing or validating high-value data oracles (see Space and Time).

Tokens for pure governance (e.g., Uniswap's UNI) suffer from voter apathy and low participation, as they lack direct cashflow rights or utility.

• <10% voter turnout is common, leading to governance capture by whales.
• Without 'skin in the game', token holders lack incentive to govern effectively for long-term health.

Tie governance power and rewards to demonstrated positive impact, not just token ownership. Merge Proof-of-Personhood with contribution metrics.

• Gitcoin Passport scores could weight votes.
• RetroPGF recipients earn enhanced voting power on future funding rounds, creating a meritocratic flywheel.