Funding Core Protocol Stewardship

Transcript

hello everyone thank you so much for being here today uh thank you for the to the organizers for having me I am cheeky Gilla and I'm here to talk to you about protocol Guild a collective funding mechanism for ethereum's L1 R&D maintainers but before we talk about protocol Guild let's talk about ethereum specifically what even is ethereum now I'm pretty sure that if I were to ask 10 of you what eum is I will get at least five different responses some of you might describe it as an infinite Garden or ultrasound money or maybe a settlement layer God forbid one of you might even describe it

as Bitcoin plus smart contracts but you know what you would all be right there are so many ways to describe ethereum because there are so many ways to use it and to that extent we can kind of think of ethereum as a Commons like forests or Fisheries what are commons they are an area or shared resource that is accessible to and used by the public but unfortunately like all Commons this resource can be abused and I'm of course talking about the tragedy of the commons which is when individuals act in their own self-interest depleting shared resources to the detriment of everyone

else and so that's why I have an image of mik there who you may know we like to use to represent coordination failures in ethereum and mik he is uh holding up a tweet by Amin solomani where Amin is calling out the lack of adequate funding for ethereum's core protocol work and this is actually a really big issue existing funding for ethereum's core protocol work only provides a fraction of the financial incentives that are otherwise available in the ecosystem and so it essentially means we have this situation where we have a small number of relatively underpaid core protocol contributors who are responsible for

infrastructure securing billions in value and that's a really bad place to be in basically it is not economically rational to work on ethereum's core protocol itself and so to visualize this issue we've created this chart here where you can see that ethereum's L1 R&D is both low risk and low reward but crucially it also shows us how by just taking on a little bit more risk for example by going to work for a large crypto project like an exchange or Layer Two ethereum's core protocol contributors could earn significantly higher rewards and you're probably not surprised to hear this because there is

obviously a lot of money in the crypto space but not a lot of money in ethereum's core protocol development and given the unbelievably specialized knowledge that ethereum's core protocol contributors have they can really easily command low seven figure salaries almost anywhere in the ecosystem and of course they're earning nowhere near that amount working on the core protocol itself so we really can't be surprised when these core devs take up these job offers why does this matter well because ethereum is still very far from being done if you are at all familiar with ethereum's core protocol development road map you know that there are a bunch

of really really exciting upgrades that are planned for the future and I'm pretty sure everyone wants those upgrades sooner rather than later but to be able to execute that road map it is imperative that ethereum can actually on board and retain its talented core protocol contributors so this brings us to an existential question for ethereum how do we rebalance Financial incentives to make ethereum's core protocol work economically rational on a risk adjusted basis so let's brainstorm how about altruism can we rely on kind individuals to fund this work out of the goodness of their hearts

well this is ethereum so we do have some examples of that and so here's a Preston an ethereum core Dev tweeting in 2018 to bemoan the lack of funding for the prism client team now luckily for Preston some guy responded YOLO and sent a th000 eth which was worth approximately $100,000 at the time but is this something we can actually rely on no it is not sustainable it also has a risk of capture because of course we don't actually know if these kind individuals actually have ulterior motives and of course it's also very narrowly targeted not all of ethereum's cevs have the reach of Preston and not all cevs

are on Twitter asking for money so what else how about making ethereum's holders pay and this is an idea that has been floating around for a while um here's a proposal from 2020 which basically proposed carving out a portion of ethereum's issuance to pay for ethereum's core protocol development and look blockchains like polka dot do this so why can't ethereum because it's simply not credibly neutral ethereum is about giving power back to the people and that does not include forcing a paycheck for cevs into every single block also given ethereum's governance process it would be really hard to undo

this kind of change if we ultimately decided that it wasn't a good idea protocol upgrades or protocol changes cannot be made willy-nilly in ethereum and that is absolutely a feature and not a bug and lastly if we were to establish this precedent that we are happy to dilute ethereum holders to pay for this kind of stuff then who's to say that other groups of individuals wouldn't pop up and also demand to be paid in this way in the future so there's got to be a better option what about social norms so here we have a tweet from Danny Ryan back in 2020 where he said make it a social Norm for projects building on ethereum to allocate

1.5% of their tokens to the individuals who are building and designing the L1 infrastructure they rely on now this is a very interesting idea because it targets individuals not teams so you know that the funding is going to the actual people who are doing the work that you want to support it also gives those individuals exposure to the upside being created in the ecosystem via the tokens and if the social Norm is actually uh spread out across the ecosystem it would have a low risk of capture if everyone's doing it similarly that could make it sustainable and it would be a cost borne by the projects themselves not their users or not

ethereum's holders but we're missing a piece of the puzzle if you had this how would you go about Distributing that funding so let's take a step back what we want to do is build build social norms around projects building on ethereum to help support ethereum's core protocol development by donating tokens to rebalance Financial incentives for this work what we're missing is a mechanism to distribute those ecosystem tokens to ethereum's core protocol contributors in a way that is sufficiently fair remains accurate over time and perhaps most importantly maintains ethereum's credible neutrality now you might be able to

guess what I'm going to say next because I just described protocol Guild and to really understand protocol Guild you just need to understand its two core components which is a membership registry and a funding mechanism so let's talk about that first one first and foremost protocol Guild is a membership registry of ethereum's active core protocol contributors how are we defining core protocol contributors well we'll get into that a little bit later for now this list has 177 individuals and these are individuals from all over the world all of whom are working on ethereum score protocol and the way that it works is broadly speaking your work has to be

open source and involve building or maintaining ethereum score protocol itself and there are three categories of work that could make you eligible for protocol Guild membership that could be client development research and implementation experiments and and then work that supports those first two which include spec workor testing security infra and coordination here are some examples of teams that are eligible for protocol Guild membership you may have heard of client teenss like gu or prism you may have heard of research groups like The robust incentive group and you may have heard of coordination teams like ethereum cat herders but I should clarify protocol guilds membership is centered around individuals not teams

which means that if you are hired by one of the these teams to work on the core protocol but you quit but you keep on doing the work you would retain your protocol Guild membership now I did also say that it is a membership registry of active core protocol contributors so let's quantify what I mean by active for starters to be eligible for protocol Guild membership you have to have contributed to ethereum's core protocol development continuously for at least six months but on average protocol Guild members have contributed 3.2 years of their lives to ethereum's core protocol development and the longest member well they've basically been there from the start 10 years as a collective protocol Guild

members have contributed 565 years to ethereum's core protocol development which is why we can confidently say that protocol guilds membership registry represents the individuals who are stewarding ethereum's core protocol lastly you might be wondering well how is this membership registry updated who curates it and in this case protocol Guild's membership registry is actually self-curated which means that it is the exist existing members who coordinate to add and remove members and if you think about it this makes the most sense because for protocol Guild to have any legitimacy this list needs to be accurate and the reality is most

individuals don't have the necessary context or expertise to both identify who these contributors are and also track their contributions over time on the other hand protocol Guild members due to the very nature of their day-to-day work as cord devs they have all the necessary context and all the necessary domain expertise to be able to curate this list in such a way that we have the highest assurances that it will remain accurate both now and in the future so what is the net result of all this well we've made the entire set of ethereum's core protocol contributors directly legible on chain but how does that help rebalance incentives well you see we've built a

funding mechanism around this membership registry so let's talk a little bit more about how this funding mechanism works for starters we've created a single ethereum address that anyone can use to send tokens directly to everyone in this list so think about how much complexity we've removed associated with having to tr try to figure figure out who to donate to if you want to support this work also because this is onchain it is completely transparent anyone can see who has donated anyone can verify that donations are actually going to ethereum's core protocol contributors what happens when donations are made well our donation address is actually a 4-year immutable vesting

contract which trustly vests funds directly to these contributors why four-year vesting well because this is pretty much the ecosystem standard for employee stock options and of course four-year vesting creates strong long-term incentives for these contributors to stick around lastly how do we distribute that funding ask any project that's has a grant program or otherwise distributes funding it's hard to do so in a neutral way and protocol Guild sidesteps this complexity by using the most neutral impact measurement that we know which is time and so the way it works is the longer you've been contributing to ethereum's core protocol developments the higher your share of donated funds

but we do also use a square root function to compress that variance to give new members a chance to catch up their weight faster than existing members what is the net result of all this well we've created us a funding mechanism that we believe is simple and transparent which creates strong incentives to on board and retain ethereum's core protocol contributors over the long term thus enabling ethereum's ecosystem to fund its dependencies and that last part is really important because it brings us back to these social norms which brings us to the protocol Guild pledge and this is the third component of the protocol Guild and you can probably guess the protocol Guild pledge is a commitment by projects building on ethereum to donate 1% of

their token Supply towards ethereum's core protocol development via the protocol Guild so this is a big ask so let's unpack this a little bit why are we asking for native tokens why not eth or Stables well by donating native tokens you are giving ethereum's core protocol contributors access to a diversified basket of funds representing the value being created in the ecosystem and crucially you're giving them access to the financial upside of those tokens while staying focused on their core protocol work why are we asking for 1% why not a dollar amount well by denominating The Pledge as a percentage we help to normalize contributions because of

course not all projects can make a $10 million donation but all projects no matter how large or how small can make a 1% donation it's also very easy to pledge you can take the protocol Guild pledge before you even have a token it also helps abstract volatility a $10 million donation is going to be worth a lot less in a bare Market but 1% will always be worth 1% and lastly why 1% why not 1.5% as Danny Ryan suggested well because we did the math and we think that 1% will be more or less sufficient to rebalance Financial incentives assuming we can implement this social Norm that projects

building on ethereum take the pledge all right now you are a project building on ethereum why should you take the pledge well you're here so I hope this is self-evident but of course it's to fund your dependency if you are building on ethereum in any way you have a def dependency on this core protocol development by taking the pledge you are helping to rebalance Financial incentives to make those core protocol contributors stick around to continue maintaining and upgrading the protocol that you depend on it also contributes to a more resilient ethereum by providing another Diversified funding stream for this work and it helps scale ethereum's values ethereum's core protocol development is a foundational public good so by taking the pledge you are helping to support

that so I can see you're all very excited about the protocol Guild pledge now and you're wondering well how do I take the pledge it's very simple tweet about it make a forecaster post about it here are the first three projects that took the protocol Guild pledge shout out to ethery Tao and poundal and of course we're also tracking pledge takers in our Dune dashboard so check that out we do also hope to release a to an nft not a token an nft for projects that have taken the pledge so at this point you know about the protocol Guild you know about the protocol Guild pledge and so you might be wondering all right all right well is ethereum's core protocol development economically rational yet did protocol Guild actually do something and the answer is we're getting there so since

being started two and a half years ago protocol Guild has received almost 8,000 donations totaling almost $100 million in value and I should clarify the vast majority of that funding actually just came in the last month from two projects that took the pledge again shout out to Ether f Tao but as you can see in our donor leaderboard we've received substantial donations from many different projects in the ecosystem but I know what you're thinking $100 million protocol Guild doesn't need any more money it's good but that's not the case because remember we need to quantify how that funding is being distributed protocol Guild today has 177 members and of course we are onboarding

new members every single quarter and also remember that the funding is being Ed over 4 years and so what that means is that the median protocol guild member is expected to receive approximately $90,000 from protocol Guild over the next 12 months now $90,000 is a great amount of money but it is not enough to replace a full-time salary for these individuals and so if we want the financial incentives associated with protocol Guild membership to be enough to on board and retain ethereum's core protocol contributors so that in the worst case it can be a funer of Last Resort we will need to increase our funding by orders of

magnitude so to answer the question no unfortunately ethereum's core protocol development is still not economically rational here's a tweet from a highly respected cev who left ethereum's core protocol development to work on a layer two at the start of the year and in their farewell tweet uh they did give a shout out to protocol Guild and they said said protocol Guild almost managed to persuade me to stay an L1 Dev so clearly we still have work to do but the initial results over the last two and a half years are very very promising we've seen buyin from the ecosystem we've seen buyin from the community that they do want to standardize this social Norm that

projects building on ethereum donate 1% of their token Supply to help make ethereum's core protocol development economically rational on risk adjusted basis and thus slay mik in the process so my final call out to all of you here today if you know a project that is planning a token launch please let them know that you would like them to take the protocol Guild pledge that way we can all help secure the future of ethereum's core protocol development together thank you very much