Diversifying Funding for Ethereum-Related Public Goods: Are FRCs the Answer?

Transcript

[music] >> All right. Cool. It's such a privilege to be talking in this building. It's a beautiful example of art nouveau, so I'm very excited about it. Uh my name is Raul, and I work at the Ethereum Foundation funding coordination team. I'm also a member of the Department of Decentralization. So, I want to say thank you to Eth Prague uh for inviting us here to speak, and also congratulations to the volunteers as well. We always say that the DOD that volunteers are actually the backbone of community curated events like this.

Yeah. Okay. Let's see. No. No. I think it's okay. I think it's fine. Uh I'm here today to talk about what we work with at Funding Coordination, and particularly sustainability and public goods. Uh but first, a bit of what the Funding Coordination is before we start.

The Funding Coordination team all of the team is here today uh at Eth Prague. Uh we have two particular goals that we deal with. Uh the main one is making sure to increase the total net funding for public goods infrastructure on Ethereum. And the second one is to be able to reduce public goods projects dependency on the Ethereum Foundation as a primary funding source. As you can imagine, this is a single point of failure, so this is something we want to work with. My teammates are also going to be giving talks uh tomorrow, Martin, Debauch, and Sophia, and they're going to be explaining their scope of work and what they work on their programs. So, if you're interested, please make sure to

also catch them and you can discuss about this and hear their talk. But, let's jump into it. So, at the funding coordination team, we have identified a few problems uh that public infrastructure projects have. This is not uncommon. It's something that happens in the Ethereum ecosystem in general, but also in the broader open-source community. The first one is, of course, that funding in general for public goods projects is very ad hoc, very fragile, uh very political, and cyclical. This is really a problem for teams when they need to um plan the runway, plan the road map, and be able to actually develop and deliver products.

The second problem is that many public goods experts team are really good at what they do, but they lack the operational and strategic capacity in order to be able to plan long-term and remain future-proof. And the third one is quite a particular one and is the distorting effect that grants and grants progra- grants program generally have on the market, right? So, in general, what happens and what we see and we've seen in the last year is that teams stop being focusing on what technology and their project tries to solve, and they become they become focused on what satisfies a grant funding program eligibility

criteria. And this is quite problematic. And then, we have teams that develop projects that are used widely in the Ethereum community, but have very short capacity to think long-term and to think about the runway. So, our goal with Project Odin is to move these teams from an emergency support to a more proactive and sustainable pathway for the project and for the Ethereum ecosystem public goods landscape landscape in general, right? Project Odin tries to mirror a startup accelerator, but it's not quite that because we have a particular but very essential difference, which is we don't aim at venture scaling. We don't aim at

profit seeking as in general startup accelerators focus on. But we look at the frontier research idea, the mission that the team that we work with is focusing on and we set that as a priority. I'm going to talk a bit more about what frontier research contractors are and why they're so important to project Odin and to the program that we run. But it's very important to think about these projects and this accelerator, so to speak, as a program that focus on what sustainability means, right? And sustainability for us means quite simple the commitment of resources at a level that is sufficient enough to

remain viable effective as long as the project is needed. So this is quite quite important. So if we move to the vision, basically this is the question that our program is trying to solve or trying to answer. How can we translate research by these teams into deliverables that clients can actually pay for? And this is somehow a bit controversial in the open source community. There is a wild discussion if we should monetize code or we shouldn't monetize code. Obviously, Odin project has a very strong stand on it and we focus on the challenge of articulating north stars with the users' need. And this relates directly to the

idea of trying to minimize the distorting effect that grants have on the market. So, the vision is to actually transform the projects that work with us in what we call research frontier research contractors. This is a concept that we take from Renaissance Philanthropy organization, which is an organization that we partner with in order to run this program as well. And basically, a frontier research contractor is an organization that is hired to conduct very cutting-edge exploratory research, particularly research that is underfunded.

And this particular organizations transform their research into revenue streams, okay? So, they're highly aligned with their mission, and they transform this research into products that clients can use in order to keep funding the research frontier. So, basically, uh FRCs are sitting in between what a startup would be and what academic research organization would be. They have the ability to be flexible enough as a startup is in order to pivot when needed and in order to change directions when needed, but they define a research frontier, a North Star vision, so to say,

kind of like what an academic research organization would do. So, the idea is to deploy expertise to drive the creation of these FRCs within the Ethereum ecosystem. And this is what we're doing at Project Odin right now. Using revenue sharing agreements, as you can see, we focus mainly on monetizing the research through the deliverables, but at the same time combining combining this revenue sharing streams with R&D grants, government grants, and philanthropic grants as a complementary way to support the mission and the research frontier. And as I said before, these projects are highly driven by a North Star technical

vision that is definitely not revenue maximization. Now, let's talk about the eligibility criteria that we use at Project Odin. Right now, at Odin, we are in our pilot phase. We started this program only in December last year and we're working with four particular projects that are EF grantees, are active EF grantees. And for this pilot, our eligibility criteria is the following. The first one is related to system properties, right?

I'm sure you have all um read or heard about the vision that the Ethereum Foundation mandate stipulates for uh the foundation itself, but also for partners and projects that we work with. Projects that we work with at Odin need to embody the principles of neutrality, privacy, censorship resistance, public auditability, and also permissionless access properties, but they should not only embody this, but also materially help at promoting these values with the research and the technology that they develop.

We call them strategic projects not only because they are important for the ecosystem, but because the the pilot runs with participants that are part of the Ethereum layer, from the networking layer to the gateway layer, and this is why we say that Project Odin is not a product program per se. It's more an FRC program model that allows and helps these projects remodel their strategy following the FRC model. And these projects might be able or might need to develop products in the future to sustain and diversify funding, but it is not the main goal of the program per se.

These teams, as I said before, need to have an ambitious long-term orientation. And this ambitious long-term orientation is highly related to understanding that Ethereum can be a credibly neutral and permissionless computation infrastructure and a strong candidate for integration into the next generation of the internet protocols. This is quite important to highlight as well. When we talk or when we discuss about team profile, we're talking about, as I said before, these teams that have highly technical expertise or they manage the technical domain really well, but they have different gaps in business operations organizational

design strategy legal and most of all, Ethereum Foundation is our primary source of funding and funding fragility for them is structural. So, we choose these teams specifically in order to prove the hypothesis of the FRC model and to show how it works. And fifth and lastly is to have sustainability potential. This means there is a strong preference for monetizable paths, right? There is a strong preference for contractable work by these teams, and these monetizable paths need to be highly aligned with the research frontier.

So, Odin is not only the right program in this case for projects that are working in the Ethereum layer, but also for those that can define a north star much beyond the these implications as well, and that can think of Ethereum as part of the internet protocols. So, as I said before, to become a frontier research contractor, you need to define a frontier research, but you also need to be highly aligned with your user needs, and this is quite important. And the program focuses on specific problem statements for now, at least the pilot phase focuses on this specific problem statements, which is safety and reliability engineering, performance

infrastructure, uh public goods DevOps, uh privacy preserving systems, and so on. So, we ensure that there is a high alignment with the principle that EF is trying to champion right now. Now, let's talk a bit about our support cycle. When it comes to our support cycle, we have defined this pilot into a time lapse of 12 months or a year with a max timeline of 1 and 1/2 years. And we have defined three points when it comes to the cycle. The first point, of course, is discovery research and mapping. We get introduced to the project and the research goal that the team have. We help them define this

frontier domain domain that it that has to be generally underfunded and contractable. We ensure that this research can be translated into deliverables, and of course, there are some teams that have already done this work and are already exploring or consolidating revenue streams other than grants programs. And so, we help them already in this phase consolidate this particular revenue streams. When it comes to the second point, validation and planning, to me, this is the most fun one. I really enjoyed it a lot. And the validation and planning is quite interesting because this is the moment when we start thinking about how to architect the legal and the financial

container for these teams to be able to become frontier research contractors. So, we ask questions like do the bylaws of the organization behind the team permit earned revenue from contracts. Does the team have a runway to operate at negative margin? We also help them build three to five credibly assets. So, for example, publications, community releases, workshops that they can show off because reputation is highly related to the idea of a frontier research, as you might know in academic research organizations. And so, they need to work in parallel and to work in parallel this two routes of being a startup, having the legal framework, and the operational

framework, but at the same time being reputable enough to be able to contract their work. And most importantly here in this phase, we help them define their ICP or their ideal client profiles. This can be one or it can be many. They can be in different levels. With the participants that we're working right now, we have different definitions of ICPs going from the protocol layer, DeFi protocols, L2s, trade fire organizations, more traditional banking institutions. And so, this is quite interesting to see how the research methodologies and the research work of each of the teams align with their ICPs.

And the third one is execution and de-risking. Uh we help them build a talent core and then deliver the contracts. We help them consolidate this new funnel of revenue that they have, make sure that this is repetitive, that it can be repeated over time. And at the same time, we also document everything to make sure that at the end of the pilot, we can develop a handbook that will help us scale this particular project because as you may imagine, this project, at least in the pilot phase, is very hands-on with the team.

It's very intensive work with each of the teams and very ad hoc. So, we make sure to have something that will help us scale in the future as well. As I mentioned before, we're working on this three points and also in different workshops that we provide for the participants with Renaissance Philanthropy. Renaissance Philanthropy is an America an American infrastructure organization that has the goal to monetize ambitious research goals. So, to make sure that these research goals are translated into revenue streams for this particular um teams. We work with them and the participants this year in three specific workshops. They include

theory of impact, customer prospecting FRC style, and then tracking sales pipeline and crafting one-liners for potential leads. This is what we're working on with them. Now, I want to mention some of the participants that we're working with. As you might know, the Ethereum Foundation follows what we call the CROPS vision, which is censorship resistance, open source, privacy, and security. In the realm of censorship resistance, we're working uh starting to work right now with QuickGo, which is a quick library um developed on Go, particularly on mass and censorship resistant traffic development.

On the privacy realm, we're working closely with Phantom Zone. They work in fully homomorphic encryption and obfuscation, and they're developing two potential products to serve different ideal client profiles. And on the security realm, uh we're working with the Viper team, which is also an EF uh grantee, >> [snorts] >> and the Foundation for formal verification of software. And they have defined their frontier research as end-to-end formal verification for all software starting with smart contracts.

And uh they have already defined their ICPs and are already talking to potential leads in order to diversify their funding on their side. They're doing a great great work. So, I think that's it from my side. I still have a lot of time, but that's it from my side. If you have any questions or you want to find me and then talk a bit more about what FRCs are, please feel free to to catch me here at the venue. I'm here all weekend. And if not, you can also contact us at fundingcoordination@ethereum.org, and we're happy to answer all of your questions. Thank you.

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