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# System prepended metadata

title: Continuous Dependency Funding

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# Continuous Dependency Funding

In the dynamic realm of blockchain and decentralized ecosystems, the Ethereum community has established a cultural norm of funding public goods. Platforms like Gitcoin and Optimism have been at the forefront, introducing groundbreaking funding models such as quadratic funding and retropgf, ushering in a new era of support for public goods.

Today, we are thrilled to introduce the first continuous mechanism for funding public goods: "Continuous Dependency Funding" (CDF). 

## Funding Public Goods with Continuous Allocations

Continuous Dependency Funding represents a different take on the problem, empowering Decentralized Autonomous Organizations (DAOs) to continuously allocate a percentage of their assets or income to their critical software dependencies.

Unlike existing funding models relying on periodic assessments or future projections, CDF operates in the present, allowing DAOs to dynamically adapt and respond to their evolving needs.

In this model, funders specify their critical FOSS dependencies. When these dependencies are onboarded to the system, they are also required to list their own dependencies, creating a network or graph of dependencies. Every time capital flows through this dependency graph, it effectively cascades where it matters the most, through a system of redistribution and splitting. 

Guided by the interconnectivity of projects and the individual assesment of project maintainers, funding organically flows to the most impactful projects in an ecosystem. Operating on a transparent and permanent ledger further enhances transparency and accountability, as projects engaging in selfish or manipulative behavior risk losing legitimacy and, consequently, their funding.

This approach on capital allocation is underpinned by our profound belief that **humans will naturally make the right choices when the environment empowers them to do so**.

## How It Works: Dynamic Allocation for Dynamic Ecosystems

**Collaborative Curation:** DAO members collaboratively curate a list (or many) of critical software dependencies that are impactful to their operations.

**Continuous Allocation:** They then decide on a percentage of their assets to be continuously allocated to this list.

**Adaptive Governance:** Decisions on modifying the list(s) or adjusting allocation percentages can be made dynamically based on changing priorities and needs.

## CDF in action

Continuous Dependency Funding draws inspiration from traditional finance's revenue-sharing models but introduces a novel twist by leveraging smart contracts, a continuous attribution model and a graph of interconnected projects and developers.

**Continuous Income Distribution:** Imagine a DAO programmatically sharing 1% of its income with its critical software dependencies. Example: Arbitrum

**Yield-based Funding:** DAOs generating yield through staking or lending dynamically allocate 1% of their yield to essential software dependencies. Example: Octant

**Continuous Native Token Distribution:** A DAO commits to distributing 1% of its native token over the next decade, ensuring a sustained and continuous commitment to critical software dependencies. Example: Radworks

## Why CDF?

With CDF, DAOs go beyond fostering innovation within their ecosystems; they also ensure the sustainability of the projects they depend on, creating a symbiotic relationship between funders and the FOSS projects that make their work possible. We think that this is a more holistic approach towards creating developer value in an ecosystem.

Furthermore, there are several compelling arguments in favor of CDF:

**Efficiency and Low Effort:** CDF represents a low-effort alternative to round-based funding approaches, as it delegates decision-making to individuals with the most context. This streamlines the allocation process, ensuring that funds are directed where they are needed most.

**Impactful Capital Allocation**: CDF excels in capital allocation efficiency due to the involvement of individuals with the most context, such as FOSS maintainers who assess the impact of projects. This results in more impactful and effective funding, as those closest to the projects understand their significance and requirements best.

**Sustainability:** CDF is a sustainable mechanism as organizations can seamlessly link their profits to their allocations. This is achieved through a continuous distribution of a percentage of income, eliminating the need for periodic allocation decisions and ensuring that the donated value dynamically adjusts based on the performance of the funding organization.

**Minimizing Popularity Games:** CDF also addresses the issues of popularity contests and continuous promotional efforts that often plague funding models. By prioritizing objective impact assessment and interdependency, CDF reduces the incentives for projects to engage in popularity games or relentless self-promotion, fostering a more balanced and merit-driven funding environment.

![image](https://hackmd.io/_uploads/HkQTKQ3KT.png)
