WTF is Retro Funding
Continuing our exploration of funding models and their role in different stages of the builder lifecycle, this article unpacks the role of Retroactive Public Goods Funding (RetroPGF) in sustainable ecosystem growth.
Retroactive Public Goods Funding, commonly known as Retro Funding, rewards proven impact, not predictions.
Instead of giving grants upfront, Retro Funding supports work that has already provided proven value. It not only ensures that top-performing builders get the rewards they deserve but also helps surface underrecognized innovators whose contributions might otherwise go unnoticed. Built on the principle “impact = reward,” it encourages long-term contributions by providing high-value projects with the backing they need to scale.
Retro vs. Proactive Funding
Most traditional funding models are proactive - they provide capital before work is completed based on proposals, pitches, and predictions of future impact. Proactive funding (like grants, venture capital, or seed investments) bets on potential, requiring funders to evaluate ideas rather than results.
While proactive funding is essential for getting new projects off the ground, it faces inherent challenges:
- It requires speculating about future outcomes
- It often favors those who are better at pitching than building
- It can lead to capital being allocated to projects that never deliver value
Retro Funding flips this model by evaluating and rewarding work after it's been completed and its impact can be measured. This creates a more efficient allocation of resources and stronger alignment between funding and actual value creation.
This article provides an in-depth overview of Retroactive Public Goods Funding, examining its design considerations, use cases, and the lessons drawn from its implementation across multiple ecosystems.
Early Origins
In 2021, Vitalik Buterin and Optimism formalized the idea of Retroactive Public Goods Funding to address a core problem: Public goods lack sustainable funding models.
Unlike private goods, which generate revenue through direct sales or subscriptions, public goods are available to everyone, regardless of contribution. This causes novel funding challenges including:
- No Built-In Revenue: These tools often can’t charge users directly, instead depending on grants or donations which are unreliable.
- The Free-Rider Problem: Though many people benefit from and rely on public goods, many do not contribute financially, leaving infrastructure underfunded.
- Evaluation Barriers: Funders often have difficulty identifying impactful projects at early stages. Without clear financial signals, funding tends to go to projects that are easier to evaluate or promote rather than those delivering the greatest long-term impact.
Retro Funding solves these issues by reducing speculation and wasted capital, aiming to establish a system where funding is distributed in direct proportion to real-world value.
Optimism was the first to bring this concept to life, launching the initial Retroactive Public Goods Funding rounds and introducing the groundbreaking idea of channeling sequencer fees into public goods. This innovation set into motion a sustainable cycle, where well-funded public goods fuel development, generate revenue, and reinforce future growth.
Since then, Retro Funding has gained momentum and is sparking new funding experiments across many ecosystems. Alongside Optimism, major players like Gitcoin and Filecoin are actively driving innovation in the space - a subject we’ll explore later.
How Retro Funding Works
Funding for completed work isn’t a new concept; most people get paid this way through salaries, contracts, or royalties. Retroactive Funding brings a similar logic to public goods, offering rewards based on contributions rather than promises.
In a typical Retro Funding round, a funding pool is established for rewarding impactful work. Projects then either apply or are nominated to apply based on pre-defined evaluation criteria. A group of qualified badgeholders are tasked with reviewing their impact. These are trusted evaluators who are either appointed, elected, or nominated by the community. Based on their assessments, the funds are allocated proportionally to the projects deemed to have had the greatest impact.
Comparing Impact Evaluation Methods
Impact can be evaluated through data-driven metrics or subjective assessment, with each approach offering distinct advantages, trade-offs, and appropriate use cases. To understand when each approach works best, let’s look at their key strengths and weaknesses:
Metrics-based Evaluation
Retro rounds with metrics-based evaluation use pre-defined, quantitative indicators to assess a project’s impact. These indicators might include measurable outputs like GitHub commits, protocol usage, TVL (total value locked), number of users onboarded, community growth, or other ecosystem-specific goals.
Suitable for:
- Ecosystems with mature infrastructure and reliable data sources
- Situations where alignment with ecosystem KPIs is a priority
- Large rounds requiring scalable and efficient evaluation processes
- When reducing bias or subjectivity is critical
Weaknesses:
- Can overlook qualitative impact
- Easy-to-measure metrics may skew results over other metrics such as those covering growth or novelty
- Contributors may optimize for what is measured rather than what is meaningful
- Metric selection can introduce bias if not governed carefully
Project-Based Evaluation
Retro rounds with project-based evaluation rely on human judgment and badgeholder deliberation. Evaluators review the context of each project, such as community voting and sentiment, the project’s role in the ecosystem, and less measurable contributions (e.g., mentorship, governance participation, or cultural contributions). The projects are then scored based on this information.
Suitable for:
- Early-stage ecosystems or experimental rounds where reliable metrics are not yet available
- Ecosystems focused on values like inclusivity and decentralization
- When contributions are multifaceted or not easily quantifiable
- Rounds where the goal is learning, narrative-building, or relationship formation
Weaknesses:
- More susceptible to bias, popularity contests, or personal networks
- Harder to scale without standardized frameworks
- Time and labor-intensive for evaluators
- Inconsistent scoring between badgeholders without calibration or voting guidelines
There is no one-size-fits-all method. Retro Funding programs should tailor their evaluation model to their ecosystem’s maturity, data availability, and goals for each round. Over time, combining quantitative signals with qualitative judgment tends to produce more balanced, equitable outcomes. The key is to make the trade-offs explicit and build flexibility into the funding model so it can evolve with the ecosystem.
The Complementary Power of Retro in Multi-Stage Funding
One of the biggest strengths of Retroactive Funding is how well it complements proactive funding. Proactive grants help new ideas get off the ground, while Retro Funding identifies which ones delivered real value. This cycle creates an iterative loop, informing better decisions over time.
As funding ecosystems continue to mature, a multi-mechanism approach becomes necessary to create a comprehensive funding ecosystem that nurtures projects from inception through maturity.
- Project Discovery: Proactive incentives like Quadratic Funding excel at surfacing promising new projects and onboarding builders. QF leverages community wisdom to allocate smaller grants across a diverse range of initiatives, helping identify potential future impact.
- Project Retention: Retroactive Funding becomes essential for builder retention by rewarding proven impact. By allocating resources based on measurable contributions, Retro Funding ensures that successful builders continue to create value over the long term.
- Project Growth: Growth-oriented projects require bigger grant sizes through mechanisms like direct funding or direct-to-contract incentives that help them scale their impact and reach. Projects that perform well in Retro Funding rounds serve as strong candidates for these larger investments, as their proven impact acts as a reliable marker for projects ripe for substantial growth funding.
This progressive approach creates a natural pipeline that supports builders as they evolve, while efficiently allocating capital based on demonstrated value rather than speculative promises.
Staged Funding in Leading Ecosystems
Optimism demonstrates this model effectively, pairing a dedicated Grants Council for upfront funding with Retroactive Public Goods Funding rounds that assess impact after the fact. The Optimism Grants Council provides proactive funding to early-stage projects through an appointed group of community members who evaluate applications. Meanwhile, their Retro Funding program, managed by the Optimism Collective through a badgeholder system, rewards builders who have already contributed significant value to the ecosystem.
Gitcoin's evolution with Grants Round 23 (GG23) represents another important milestone in public goods funding. Their multi-mechanism approach is transforming how the Ethereum ecosystem supports its builders by ensuring early-stage innovators get discovered through Quadratic Funding while mature projects receive Retroactive Funding based on their proven impact. This approach empowers builders not just to start, but to scale and sustain meaningful contributions to the ecosystem.
By combining early-stage discovery with long-term rewards, Gitcoin is creating a more complete funding pipeline, reflecting a deepening understanding of how public goods funding can mature alongside the communities it serves.
Retro Funding in Action: The Best Times to Use It
Retro Funding has the potential to transform how ecosystems back their highest-impact projects. Here are some early implementations:
Rewarding and Reorienting Builders for Long-Term Impact
It's not rare to see impactful contributions from unsung heroes who have created value with little to no funding. Directly tying impact to reward ensures they get the recognition and resources they need to continue strengthening the ecosystem. It can also shift the ecosystem’s culture by encouraging builders to focus on meaningful contributions over feeling the need to perfect pitches and chase grants.
Example: Solana
Solana’s first Retroactive Public Goods Funding round was met with excitement from both the community and project owners. Builders expressed appreciation for the process, with some surprised to receive funding, calling it a great way to back those who missed previous grants.
Read more
Supporting the Maintenance of Public Goods
While building public goods is often fueled by excitement and innovation, maintaining them lacks the same incentives and is frequently underfunded. Retro Funding helps bridge this gap by rewarding long-term contributions and incentivizing the ongoing support for essential infrastructure.
Example: Filecoin
Filecoin’s FIL-RetroPGF-2 amplified impact rewards by encouraging recipients to support their own dependencies in the hopes of creating ripple effects and extending the funding to maintainers and core tools across the ecosystem.
Read more
Rewarding Across Different Impact Areas
While Retro Funding often targets specific impact areas, projects can generate value across multiple domains. Expanding impact measurement beyond single categories is an easy way to reward a broader range of contributions.
Example: Celo
CeloPG used Gitcoin’s EasyRetroPGF app for their Citizen’s Retro program, which rewarded contributors who made an impact across multiple areas: R&D, Governance, and Community & Adoption. The highest rewards went to those engaged in both technical contributions and governance.
Read more
Evolving Through Experimentation: Lessons from Notable Organizations
Many ecosystems have contributed to the emergence of Retroactive Funding as a powerful model across Web3. Let's explore how some of these ecosystems are shaping its evolution through their distinct approaches.
Optimism: From Subjective Assessment to Data-Driven Impact
Optimism's journey with Retroactive Public Goods Funding since 2021 tells a story of continuous refinement in search of greater objectivity and fairness. Now in its sixth round, Optimism's program has evolved into a cornerstone of sustainable ecosystem funding, with a focus on:
- Increasing Objectivity
Early stages relied on subjective evaluations from a small group of appointed badgeholders, but that raised questions about representation. Later rounds integrated peer nominations, and expert guest evaluators to create more balance.
In Round 3, they enabled more consistent evaluation by articulating a definition of "Profit" (their term for positive-sum impact) inspiring subsequent rounds with even greater objectivity through metric-based evaluations, GitHub-based metrics, and community-generated attestations.
As evaluation evolved, so did their voting strategy. Quadratic voting in early rounds revealed the risk of producing popularity-driven results. In response, they adopted a quorum-median model in Round 3. Since this round, Gitcoin has been instrumental in their evolution, collaborating with the Optimism Foundation to create a dedicated voting interface.
- Funding Strategically
Optimism’s initial rounds cast a wide net. The first two rounds followed an open-ended distribution across public goods. Later rounds have been more focused, with Round 5 targeting OP Stack-related projects and Round 6 narrowing in on governance-related initiatives.
Optimism is set to transition in 2025 to continuous Retro Funding, where projects are evaluated and rewarded on an ongoing basis. This evolution from fixed rounds to dynamic, year-round funding shows how iterative design can lead to sustainable models.
Gitcoin: Building Tools for Ecosystem-Wide Adoption
Gitcoin's contributions extend far beyond their own ecosystem. What began as a collaboration with Optimism to develop metrics-based voting tools has evolved into a mission to democratize access to Retro Funding for any Web3 community by:
- Lowering Barriers
After supporting Optimism with their Retro Funding program, Gitcoin responded to the increased demand for Retroactive Funding by creating the Easy RetroPGF app - an open-source toolkit that empowers any EVM-compatible chain to implement rounds without reinventing the wheel. Ecosystems like Celo and Filecoin have leveraged it to create their own customized Retro rounds.
- Simplifying Metrics-Based Evaluation
Gitcoins newest Retroactive Funding tool incorporates metrics-based evaluation. Voting is as simple as applying weights to the metrics considered most impactful, significantly lowering effort while bringing more transparency and analytical rigor to funding decisions. The application launches with Gitcoin Grants round 23, running from March 17 - April 23, 2025.
Through these continuous improvements, Gitcoin is not just building tools but establishing new standards for how public goods can be sustainably funded across Web3.
Filecoin: Customizing Retro Funding for Ecosystem Needs
While initially inspired by Optimism's Retroactive Public Goods Funding model, Filecoin has quickly become a laboratory for innovation, tailoring each round to meet ecosystem needs. Beginning their Retro Funding journey in early 2024 with help from Gitcoin's EasyRetroPGF app, Filecoin didn't simply adopt existing models - they evolved them:
- Incorporating Community
In FIL-RetroPGF-2, Filecoin introduced a distinctive Project Showcase phase that created space for projects to present their work and gather community feedback before formal evaluation began.
Perhaps most notably, Filecoin incorporated Futarchy into their round, allowing community members to bet on specific impact outcomes and providing badgeholders with an additional signal when making allocation decisions. This willingness to rapidly experiment has established Filecoin as an important contributor to the ongoing evolution of Retroactive Funding approaches.
As ecosystems like these cross-pollinate ideas, Retro Funding is shifting from isolated trials to a more unified and effective strategy for long-term public goods support.
From Retro to Real-Time: The Rise of Impact Funding
Funding digital public goods has historically been inefficient, often relying on subjective assessments, slow decision-making, and limited support for long-term sustainability. Traditional Retro Funding addresses some of these issues by rewarding past contributions once their value becomes clear, and works well for mature ecosystems where projects have a track record and impact can be assessed over extended timeframes. But early-stage ecosystems need speed, adaptability, and ongoing support.
Metrics-Based Retro Funding not only introduces predefined impact metrics and transparent reward distribution. It can be automated to enable a more dynamic, responsive system, with the ability to reward projects based on immediate impact over defined time periods, whether that's a week, month, or quarter. This flexibility makes it adaptable to different stages of ecosystem development and project lifecycles.But what’s next in the evolution of this mechanism?
Building on this vision, experiments like Polygon and Gitcoin’s Memecoin Battle Royale are using leaderboards to track quantitative metrics (eg. market cap, volume, and community growth) and automating reward distribution. These models allow funding to flow continuously based on real-time impact data, making them especially useful for fast-moving or early-stage ecosystems.
As this evolution unfolds, it raises an important question: Is Metrics-Based Retro Funding the next stage in the Retro Funding journey, or does it represent a new category altogether: one better framed as ‘impact funding’?
Looking Forward: Building Confidence in Funding Systems
Retro Funding isn’t just a new way to fund projects. For builders, it means less uncertainty and more opportunities to sustain their work. It acknowledges contributions that might have been overlooked and creates a stronger foundation for long-term participation. Through experimentation, the process is becoming more transparent, efficient, and aligned with what ecosystems actually need.
The more these processes are tested and refined, the more confidence builders will have that their contributions will be rewarded when they prioritize impact.
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