Direct to Contract Incentives route funding directly to smart contracts rather than individuals or teams. If a contract provides value — facilitates transactions, creates matches, processes attestations — it can earn funding automatically based on usage, performance, or programmable logic. This reframes funding from "who should we fund?" to "what code created the value?"
How It Works
The mechanism removes human intermediaries from the allocation decision by measuring contract-level value creation.
- Contracts are instrumented for usage tracking — gas consumption, transaction volume, user count, or other performance metrics
- A treasury or funding pool is established with allocation protocols tied to contract performance
- Smart contracts measure value created by each target contract over a defined period
- Funds flow automatically to contracts that meet or exceed performance thresholds
- Optional governance can adjust parameters, add new contracts, or update metrics
Advantages
- Automates value-dependent funding allocation with minimal subjective judgment
- Supports repeatable infrastructure utility — the same contract gets funded as long as it delivers value
- Enables cross-ecosystem incentive composition
- Removes political dynamics from infrastructure funding
Limitations
- Cannot recognize offchain or relational labor
- Ineffective for pre-launch initiatives lacking onchain activity
- Unsuitable for nuanced qualitative assessment
- Limited in contexts requiring discretionary judgment about impact
Best Used When
- Infrastructure underpins multiple systems and can be measured by usage
- Services have programmable interfaces with clear onchain footprints
- Contract-level attribution surpasses contributor-level tracking
- Automated, objective reward systems are preferred over committee decisions
Examples and Use Cases
Quadratic Funding Matching Contracts
Matching contracts in QF rounds earn revenue proportional to the volume of matches they facilitate — the more value routed through the contract, the more it earns.
Oracle and Relayer Incentives
Oracle relayers and zero-knowledge proof generators receive automated compensation based on the number of proofs or data feeds they process.
Identity Infrastructure
Credential issuers in identity systems earn rewards based on the number of verifications processed, creating sustainable funding for privacy and identity infrastructure.