Exploring the Design Space: Inflation Funding, MicroTransactions, and More
In ERC 1789, I advocate for aggressively increasing funding for the Ethereum commons.
In this “moonshot” ERC, I advocate for inflation funding (as a starting point, 20% of the issuance rewards) to go to an organization, which fits our community values, to fund ETH 1.x, ETH 2.0, and other worthwhile projects.
While you can read the EIP for more on why I think inflation funding is worth pursuing, the TLDR is that:
- Ecosystem stewardship is important.
- New, better funding mechanisms exist.
- It is possible to decentralize fund administration.
The narrow goal of the EIP was 20% issuance going to projects building great, mission-critical software, the broader goal was as follows:
My goal for this ERC is to establish a strong argument for Ecosystem Stewardship. It is the most important driver of long-term value creation in the Ethereum space, and open source communities more broadly. Rewarding maintainers of Ethereum is critical. I am willing to die on this hill.
The Ongoing Fight For Open Source
There is a rich cultural legacy here, dating back 50 years. The baton passed from Richard Stallman and the Free Software Foundation, to Eric Raymond and Linus Torvalds battling for operating system dominance in the 90s, to Mozilla and Linux, and countless other software projects we use daily on the internet.
If you haven’t already seen the movie Revolution OS, I recommend adding it to your queue (It’s free on Youtube). We are truly standing on the shoulders of giants.
In this rich history, we’ve seen OSS become core infrastructure for the internet we know and love today. However, there are still problems in OSS that need solving to take it to the next level. Namely, it needs to be sustainable.
I believe that the blockchain space is poised to inherit this mantle. I will explore this in an upcoming post, but here’s TLDR: the blockchain internet will allow new (better) funding models for open source.
Exploring the OSS Funding Design Space
Sustaining Open Source Software has been a tragedy of the commons problem for generations. There’s nothing new under the sun, and the design space has been explored many times over since the 1990’s. Here are many ideas from the fantastic SustainOSS community:
To learn more about the pros and cons of each of these methods, I invite you to checkout “Lemonade Stand — A handy guide to financial support for open source.”
Future Open Source Funding Models
I’m not writing this piece to talk about the past efforts. I am writing it to explore the design space of open source funding in the blockchain-era internet. In order to frame how I think this design space is fundamentally different, I’d like to offer an analogy.
We send 1000x more information to each other today than we did 30 years ago. The reason for this is that the internet (which enabled computers to send information over a global network), allowed a ton of new use cases — emails, instant messaging, message boards. I believe that 30 years into the future, we will transfer financial value with 1000x more frequency than we do today.
This value will be created, destroyed, and transmitted in a more distributed fashion than a generation past.
It is this design space that I encourage others to explore with me. Armed with this knowledge, I invite you to again look at my proposal for EIP 1789:
1. Ecosystem stewardship is important.
I believe that the case for ecosystem stewardship’s importance is open & closed. The value that ETH 2.0 developers and ETH 1.x developers are bringing is clear (usability, scalability, security).
It’s clear that they shouldn’t be working on ICOs. They shouldn’t be raising VC funding — they should just be focused on building great, mission-critical infrastructure for the Ethereum ecosystem.
2. New, better funding mechanisms exist.
I have spent 2 years at Gitcoin exploring this design space of funding mechanisms for open source, including bounties, grants, ad-based models, and more. I’ve also been an active member of the SustainOSS Community for the last year. I’ve seen YOLO Grants. I’ve seen exploits. I’ve seen popular projects sunset. I’ve read Lemonade Stand, a handy guide for funding open source frontwards, backwards, and upside down.
With this history, I have come to the conclusion that inflation funding is the right approach for the Ethereum ecosystem.
It does not take much self-awareness to realize that not everyone in the community has the benefit of this experience. Nor do they have the trappings of following Open Source Sustainability in the fiat world. There are many ideas we can explore, together.
Come along; Let me present the most promising to you.
Proposal 1: Inflation Funding. I believe that the numbers for EIP 1789 style inflation funding are 10–100–1000. A 10% increase in inflation (2ETH per block → 2.2 ETH per block) could bring in $100m per year and employ 1000 senior software engineers. (all of these numbers are bear-market numbers)
Further information about the inflation funding proposal can be found here.
That said, Inflation Funding has problems, and I have no intention of papering over them:
- How is issuance decided, administered, and governed? How do we prevent creating an entrenched oligarchy? More to come here, below.
- Software development is inherently abstract, and so proving value propositions formally is very hard. As such, bringing accountability to those who are deciding funding is an important design problem to solve.
- The coordination of who controls these funds (if anyone) before they are sent to developers is the trickiest part.
It’s possible we could de-risk the problems of issuance by only provisioning inflation funding for a test period. Such a test period would be specified as a relatively small amount of ETH (say, 500 ETH total), for a short amount of time (say, 2 months). Doing so would allow the performance of Inflation Funding administrators to be subject to review by the community before the next scheduled hard fork.
If these problems can be solved, then Inflation Funding seems well positioned to be an important addition to make to the Ethereum protocol which could set Ethereum up for success for 50+ years.
To learn more + join the conversation, join the Inflation Funding Working Group telegram group.
Proposal 2: Micro-donations to Wallets. There must be something in the Ether (pun intended), because last week Vitalik himself came up with a proposal to fund the commons with optional micro-donations of 1 gwei/gas fee for tx.
The numbers look like this:
The $2M assumed 100% compliance and current prices, so 40b gas/day * 1 gwei * $137/eth * 365 days = $2000200/year.— Vitalik Non-giver of Ether (@VitalikButerin) March 8, 2019
It’s worth noting that others in the ecosystem are skeptical of these numbers. For the stake of argument, let’s say that these numbers would work. $2mm per year is 1/50th of what inflation funding could bring, but it sure is a good start. To find out more about Vitalik’s proposal, go here.
Microdonations has problems too. Specifically I wonder,
- How many people just turn off the fees? How many will simply fork the wallets to create no-fee versions?
- Can all projects that should be funded be funded with micro donations? Or just wallets?
- if multisend() support is needed, and how will it be implemented? How do you manage the gas costs of sending 1 wei at a time?
To learn more + join the convesation, join the Ethereum Ecosystem Funders telegram group.
3. Fund administration should be decentralized
As native funding mechanisms gain steam, we’ll need to answer how those funds are managed and organized by the community. We’ll explore a few models which have come out in early 2019, itself.
2019 is the Year of MolochDAO. Ameen Solomani, and others, have been advocating for a MolochDAO — a minimum viable DAO that gives grants to open source.
1/ Over the last year, several of us have worked in our spare time to design and build a grants-DAO/Guild called 👹 Moloch 👹. If everything goes as planned, Moloch will launch in 1 month at @EthereumDenver. https://t.co/a5rysitYeW— 👹 Ameen Soleimani (@ameensol) January 14, 2019
As of right now, MolochDAO has raised $175k. Considering the above proposals (inflation funding, micro-donations) are just at the drawing board, MolochDAO is doubling as a funding mechanism and as a way to distribute the capital fairly. Ameen sees great upside for this project.
7/ This may sound crazy, but by the end of 2019 it’s possible that Moloch has $100M+ in the Guild Bank and has issued up to $5M in grants. If The DAO was any indication, the ETH community are pragmatic and willing to coordinate.— 👹 Ameen Soleimani (@ameensol) January 14, 2019
2019 is the year of DAO.https://t.co/iHHCKkQWJ4
It’s worth noting that Ameen doesn’t seen MolochDAO as a tool that can be used to administer sustainable core funding long-term, but it’s a starting point today.
Enter Gitcoin Grants & CLR matching. There is momentum in the Open Source crowdfunding, in the form of Gitcoin’s most recent offering, Gitcoin Grants. (disclosure: I am a founder of Gitcoin).
Three weeks ago, we announced a matching campaign to allocate $25K in OSS across 25 Ethereum infrastructure projects. We’re excited to announce the (radical) results!— Vivek Singh (@vsinghdothings) February 22, 2019
Public goods (like OSS) are important. Let’s grow open source, together. https://t.co/kNlAzKqwid
Gitcoin Grants has seen $55k in total contributions as of press time, and just announced a second round of CLR matching worth $50K. The idea? Combine crowdfunding donations (community donations) with much larger pools of matching funds which are allocated based upon where donations go.
This builds on recent research done by Vitalik Buterin, Glen Weyl, and Zoe Hitzing into Liberal Radicalism, a crowdfund-matching algorithm that weighs many small contributions as higher signal than some large contributions. Glen Weyl claims that CLR is the “mathematically optimal” way to fund projects that the community cares about.
ETHMagicians Business Models Ring
If you’ve gotten this far, I assume you’re interested in both funding and distribution mechanisms for the Ethereum network.
I am also on the ETH Magicians Business Models Ring. We’ve been mapping out potential business models in web3, and adding them to a Github Repo:
I am *so proud* of the @EthMagicians ‘s business models ring. Check out all this great content being created! 📚 👇— Ξwoki, GITer of Coins (@owocki) March 5, 2019
We are decentralized cartographers of the emergent design space of *business models* intersecting with *open source money*! 🗺👇https://t.co/QIssjevmkA pic.twitter.com/xdenwuGlJ8
Towards Thriving Open Source Ecosystems
It is so much fun to explore this design space. It’s extremely hard, but it’s also extremely worthwhile.
We choose to go to the Moon! We choose to go to the Moon…We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win, and the others, too. ~ JFK
As many of you know, I am involved in each of the above projects in different capacities.
When I am choosing how I want to spend my time, I am rating each of the projects on four criteria:
- Funding Potential
- High Time Coding
- Alignment with Values
Here’s what I think that looks like. Criteria are on the Y axis, Projects are on the X axis:
I believe that Inflation Funding has, by far, the highest potential, and I believe that microdonations are a worthwhile experiment. Along the way, we’ll need to find the right distribution vehicles, like Gitcoin Grants and MolochDAO.
We’re excited to track this course to grow open source, and we hope you are too. Let’s get to work.
- Join these initiatives: (EIP 1789, MicroDonations, MolochDAO, Gitcoin Grants, ETHMagicians Biz Models Ring)
- Join the Ethereum Ecosystem Funders telegram group
- Join the Inflation Funding Working Group telegram group.
- Join the ETHMagicians Business Models Working Group telegram group.