# We Need More Retrospective Funding on Crypto Rails

## Introduction

Public goods take new forms in our increasingly digital society.

Open source software (OSS) is a leading example of a critical digital public good, underpinning everything from core internet protocols like HTTP to fun contests like [Joke Races](https://www.jokedao.io/).

Despite the significant societal value they generate, open source software projects often wrestle with a universal challenge: acquiring sustainable funding.

This post lays out a thesis for why open source software is uniquely positioned to benefit from a new flavor of grantmaking: **retrospective funding on crypto rails**.

"Retrospective funding" means rewarding projects for work that's already been done, while "crypto rails" means building on the unique advantages that blockchain-based grantmaking and coordination technology offer.

What started out as an [experiment in 2021](https://vitalik.ca/general/2021/11/16/retro1.html) is gaining real momentum. Various crypto networks are making headway in efficiently funding their own public goods and providing meaningful income to open source contributors.

If the thesis for retrospective funding on crypto rails proves true, it could transform grantmaking: first becoming the dominant funding method within crypto ecosystems, then extending to all forms of digital public goods, and ultimately influencing the funding of physical world public goods.

## Rewarding Proven Success
Forecasting the success and broad adoption of software projects often feels like a game of chance. Many factors, including market readiness, technical robustness, and community adoption, are difficult to predict accurately.

Retrospective funding is a viable alternative, enabling us to support projects that have already established their value and demonstrated significant impact.

Retrospective funding operates on a simple principle: reward projects for the value they have already provided. Unlike prospective funding models that bank on potential and predictions, retrospective funding relies on concrete evidence of success. This evidence can manifest in various forms, such as widespread usage, active community contributions, or notable advancements in the respective field.

## Fine-Tuning Impact Metrics

Measuring impact requires different instrumentation at various ecosystem levels, progressing from the most upstream (e.g., research) to the most downstream (e.g., end-user experiences):

- Research: This is the Layer 0, where individuals and teams give birth to inspiring ideas. Measuring success at this level has traditionally been based on citations, a lagging and flawed indicator. It's also important to look at research concepts that have influenced and ignited the passion of builders in the software development ecosystem.

- Core Infrastructure: These are the foundational elements upon which software ecosystems are built. Good infrastructure is invisible when it's working but causes widespread pain when it's not. The success of infra projects can be measured by the reliability and performance improvements they offer, or by the number of other projects that depend on them.

- Tooling and Middleware: These projects form the connective tissue between the core infrastructure and end-user applications. Their success can be gauged by factors such as how much they enhance developer productivity, how commonly they are integrated, or how they simplify workflows.

- Adoption and End-User Experience: This is the most downstream level, where quality of educational resources and end-user experience are most relevant. Effective resources in this area are essential for growing the size and diversity of users in an ecosystem. Their impact can be assessed by the rate of new user acquisition, community growth, or engagement on social media.

Quantifying impact at diverse scales and across varied ecosystems presents a significant challenge. Creating an overarching impact metric, akin to "internet GDP," right from the outset is a formidable task. Moreover, any such universally applicable metric would still require support from a robust network of data collection and analysis (telemetry).

It's more pragmatic to approach this as a collective intelligence issue. We should strive for a broad and adaptable toolkit for measuring impact. These tools can then be fine-tuned to the unique needs and characteristics of individual communities.

Such an approach allows us to respect and account for the diversity and specificity of different projects and communities. It's a strategy that embraces complexity and diversity, and in doing so, potentially enables a more accurate and nuanced understanding of impact in the realm of open source projects and digital public goods.

## Embracing Decentralization
Many leading open source projects are decentralized in nature. They not only have access to a global pool of contributors and users, but they also promote diversity of thought, innovation, and distributed problem-solving.

Nadia (Eghbal) Asparouhova has a useful mental model for categorizing open source software projects, from solo "toys" to large "stadiums," and from close-knit "clubs" to expansive "federations."

[Placeholder for Nadia's 2x2]

While each type of project has unique dynamics and needs when it comes to funding, "clubs" and "federations" are typically farthest out on the decentralization axis and therefore face a unique set of challenges when it comes to funding and incentivizing positive contributions.

Traditional funding models can conflict with the decentralized ethos of such projects. They usually necessitate the establishment of formal organizations to receive and distribute funds, which can add considerable administrative overhead. This overhead can divert resources away from the actual development work. Moreover, the need for a formal organization can create barriers to entry for smaller projects or individual contributors that lack the capacity or desire to navigate this complexity.

By contrast, crypto funding models present a compelling alternative. They both embrace the decentralized nature of open source communities and reduce the organizational overhead associated with receiving and distributing funding.

Most obvious is that crypto makes it easy to receive and distribute funding across borders. It allows for seamless global contributions and distributions, breaking down geographical barriers. These aspects align well with the global and diverse nature of many open source communities.

## Programmable Splits and Other Tricks

Crypto funding models also facilitate programmability.

Programmability in this context means that rules can be pre-defined for how funds are split or otherwise distributed amongst a group of contributors.

Once a split is established, a funder can simply send money to single address and it will automatically be distributed pro-rata according to a predetermined, auditable formula. The formula could leverage metrics such as contributions to a codebase or a set of parameters defined by the community. This introduces a simple, transparent way to reward contributors, and moreover, it automates what would otherwise be a complex and time-consuming process.

For example, the Protocol Guild has effectively used a splits mechanism to distribute more than $10 million to over 100 developers working on Ethereum's core infrastructure. Here, the mechanism effectively recognizes and rewards the individual contributions of a diverse set of developers, fostering a culture of meritocracy.

https://twitter.com/ProtocolGuild/status/1600549804236341248?s=20

Programmable funding mechanisms extend beyond the realm of individual projects. They enable easy and fair distribution of funds within or across projects through community voting mechanisms. Platforms such as [Gitcoin](https://www.gitcoin.co/) and [Optimism RPGF](https://app.optimism.io/retropgf) are two leading examples in the Ethereum ecosystem. They both rely on large communities of voters to allocate millions of dollars of funding to a range of open source projects. In doing so, they have reshaped the norms and expectations of the community and how people think about contributing to the ecosystem.

Recurring streams of retrospective funding suddenly give every open source project a revenue model.

## Permissionless Monitoring

Crypto funding aligns nicely with the open source ethos of transparency and accountability, as financial flows are publicly visible on-chain.

If a project uses a treasury management tool, like a [Safe](https://safe.global/), anyone who cares about the organization can see where funds are coming from and where they are going. Such transparency builds trust within the community, reassure funders that their contributions are being used effectively, and demonstrate the project's financial sustainability to potential supporters. In doing so, they have reshaped the norms and expectations of the community and how people think about contributing to the open source ecosystem.

Public repositories on platforms like GitHub provide an additional--albeit incomplete--picture of the work that's happening on a project. They offer a structured view of a project's development progress, showing the frequency and volume of code commits, contributor counts, and the nature of collaborations among contributors. Furthermore, issues and pull requests provide insight into community engagement, illustrating the vibrancy and responsiveness of the project's user base.

[Placeholder for graphic on OS Observer screenshot here]

Package dependency trackers reveal the degree to which other projects rely on a particular open source project, reflecting its importance within the broader software ecosystem. Smart contract calls can signal how important a given protocol or implementation is to an ecosystem.

All this is just scratching the surface. The open source nature of these projects presents the opportunity for innovative, community-driven metrics. Communities can define their own success metrics, aligning them closely with their own unique goals and data feeds.

## Plural Impact Evaluation

All impact evaluation models are wrong, but some may prove useful.

No single metric can capture the full impact of an open source project. This is where the power of pluralistic impact measurement comes into play. By combining different metrics, we can achieve a more comprehensive and nuanced understanding of a project's value and impact.

Pluralistic assessment can provide crucial insights for retrospective funding decisions, ensuring that funding allocations are based on demonstrable success and wide-ranging impact.

Moreover, as pluralistic approach extends to any analysis of return on investment (ROI). By combining a project's impact data with its on-chain financial data, communities can derive their own ROI benchmarks. This not only informs stakeholders about the efficiency and effectiveness of their contributions but also fosters transparency and trust within the community.

Open data sets pave the way for plural ROI measurements. Different stakeholders can leverage the same data to compute ROI from their unique perspectives, creating a diverse array of interpretations that showcase the multi-faceted impacts of projects.

## Speedrunning Public Goods Funding

Retrospective funding on crypto rails not only provides a dynamic solution to the enduring challenge of sustainable open source funding but also holds potential to transform the broader landscape of public goods financing.

Today, most grantmaking and sponsorship models used to fund open source mirror the requirements of traditional public goods and non-profit funding models. They have been designed to support registered organizations engaging in high upfront cost projects, often carried out by in-person teams. However, this mold doesn't fit the creators of digital public goods, who are usually decentralized, distributed, and face relatively low upfront costs. Here, retrospective funding on crypto rails appears to be an ideal solution.

Furthermore, open source is a motley crew of projects and people. There's no single path from crowdfunding to corporate sponsorship, nor a universal metric for impact. Retrospective funding on crypto rails offers the flexibility to adapt to the distinct needs of various project types.

To fund digital public goods more effectively, we need to speedrun the lessons learned over the last half century of grantmaking and develop powerful digitally-native mechanisms for raising, distributing, and measuring the impact of funds.

Fund digital public goods. Not prospectively. Mostly on crypto rails.