Degens for the Public Good

Transcript

public goods funding and we're going to get into what that is soon and the third thing is challenges you know you gotta you gotta do some some full exploration of the space so first you know this is I'm I work at optimism PBC I'm Carl PBC stands for public benefit corporation that means that we have a charter to enshrine Fair access to public goods and open source software that means that is our mission that is something that we value and that's why this talk is kind of what it is but first before I get into the details you know just got a shout out uniswap launch thank you to all the people thank you to synthetics for you know being there forever and thanks to you know it's been amazing all the people have used it I feel very very appreciative

and so you know this is just the beginning it's fast and cheap and it's and it's uh just the beginning pretty awesome and you should try it but not at this talk because I'd be rude but next we got community rollout right we're going to be onboarding more and more projects against synthetics and you know chain link for the synthetics exchange very exciting Dogecoin confirmed not really but the technical roadmap let's talk a little bit about that because right was the scalability talk well the grow map in an image is this right what we're trying to do is we're trying to reduce our footprint we're trying to upgrade the systems to Layer Two in fact we have a metric we want to reduce our lines of code change in get to less than a

thousand lines right if we can build a system that can tightly integrate like that that would be an objective now why would we want to do that well performance and stability death has been in production for a long time additionally it makes implementations of the protocol the optimistic ethereum protocol this is a layer two protocol that scales ethereum if you're you know that's some context important context but it also allows us to stay close to the ethereum roadmap it allows us to adopt the various changes that ethereum is going to make you know eip1559 and you know account abstraction all of these things right and ideally we can get to a point where ethereum nodes can support layer 1 Layer Two various contexts you know even multiple types of Layer Two

but and that also means that the optimistic ethereum roadmap is very much the ethereum road map like it's it's all about alignment it's all about building on and contributing to but now this kind of begs a simple question and kind of very important question that has troubled me for a very long time and that is why has the ethereum roadmap taken so long to implement why are we still suffering from scalability challenges what is happening because all the time we talk about the implementation details the research questions and we're like oh okay you know this is how you solve this problem that's how you solve this problem but it doesn't get solved like we don't see these systems in production what is like there's a disconnect and

it's very frustrating it's like shouting into an abyss you know and what are you going to do well it turns out that I think that the problem is a little bit deeper than that it is an incentive problem it is the metagame around scaling ethereum that needs to change more than the specific implementation details of a single project so scaling ethereum is an incentive problem and that is we are you know crypto economics people we are ethereum people that's that's the lens you know you got to look at the game why are people doing what they're doing and so you know insufficient funds right like this is there's not enough incentive to build on ethereum so what are the root causes there are two root causes that I you know I will

make the claim the first one is quote not enough funding right not enough funding and we'll talk about both of these second one is poor Market incentives for supporting the scalability research and implementation importantly into Plantation so let's dive into the not enough funding um so this is a classic image from vitalik's blog and it's it shows that we're spending so much more on mining and securing the system than we are in research and development and ethereum is in like an early stage system it's an early stage startup like what what who would spend all your money before you finish the protocol on not iterating on your protocol but actually just you know securing what is not even production like you know production for the globe

ready so this is clearly an issue but thankfully you know there's hope and Layer Two is part of that hope right we can rewire incentives to support public goods funding and support this research and support the development of of ethereum and you know I I this I feel pretty confident about right there is definitely a lot of Hope here and we can get that bar to look a lot you know a lot bigger and there are other talks that we talk and we've talked about that but that's not the new kind of new thoughts right this is that's only half the story the other half of the story is the poor Market incentives for actually scaling the system so let's look at those poor Market incentives there are three major poor Market incentives so the current funder of much of the

ecosystem is the ethereum foundation let's face it but more and more Dows are kind of getting involved but still all of these these suffer from similar issues but I'll use the ethereum foundation as a case study because we've had the most history so first it's a single organization it is a centralized organization it does not have the ability to predict what exactly is best for the ecosystem right that's why markets are beautiful you you find a problem and you solve it so that's you know this is this this kind of like is a little bit they don't have you know it's hard to isolate the exact problems for an ecosystem like that additionally there's another layer to the scalability problem if we want to invest in scalability infrastructure projects Etc that are

trying to scale ethereum there's also a legitimacy risk for the ethereum foundation so a lot of the ethereum foundation's role is and by the way the ethereum foundation is incredible and that's why you know used to work and I just you know it's everything but they're doing two important roles they're funding the ecosystem but they're also coordinating the ecosystem around Solutions around you know values Etc and so that is a legitimacy game and so if you if the ethereum foundation funds a project that means that they become much more legitimate within the community's eyes and if the project does something bad that actually hurts the legitimacy of the grants program and so now you have this like it's a little bit of a bizarre incentive right it's not clear like you know some like profit

incentive which is a lot simpler to reason about and then the final thing is that there's no stake in the upside for these open source projects and for these Grant funders right this is you know clearly when and you are creating a startup when you're creating a venture having skin in the game is extremely important and that goes for both the project Creator and the project funder like the grants program right this is a motivating incentive it's just not sufficient to be like oh yeah altruism is going to solve it like the whole point is we're moving away from altruism and like defining markets which actually are altruistic markets so these are poor Market incentives real real problems and these are the things

that limit the scalability of ethereum because we don't invest in what will actually work it's like pushing this you know this rock up up a hill you know I don't know what that thing is no I'm just kidding and just you wait forever and ever and you're like what is happening like we literally have solutions for all of these problems for the most part like they need a lot more work they're just like sketches raw designs like that kind of stuff but you just thinking it's like you have one team working on it it just doesn't it just doesn't add up this is like what an ecosystem that we have here and you know it's question you just uh can't wrap my head around it and so people are building on the protocol but don't fear don't fear we've got Solutions because

that was just the problem statement we got we got two more sections you know we're doing pretty good so don't worry we got it retroactive public goods funding so a few months ago the vitalik out of nowhere was really just like after quarantine was like hey there's this crazy idea called retroactive public goods funding and it works in this way and it just could not get out of my head like I it was like it's been a I don't know people have been annoyed because I just can't stop talking about this thing and it is very simple and that is the sign of an ex expertly crafted design and this this the steps are through there are three simple steps the first one is you gather funding

second one you establish a mission you know maybe you establish a mission before you gather funding but establish a mission and then you retroactively reward projects and people who contribute to that mission those simple steps so Gathering funding right you need funding to be credibly sustainable this is not it's not enough to say oh yeah I have this like you know I promise I promise that I'll reward you if you contribute to the Cause right like oh yeah no it's like I know that I will get a reward if I contribute Additionally you need to establish a mission because you need a kind of north star that everyone is aiming towards you know that if you really push this project forward that you will actually

be rewarded so those missions can be scale ethereum quite quite obviously can be a billion users it can be whatever it can be support you know reduce inequality whatever you really want right then retroactively reward and this is probably the most like unintuitive part you have to give people money without expecting them to do work for you right you you're constantly you know oh I'll pay this person to do that thing no they have earned the reward they deserve the money they should be paid for it this is you know they can go to an island if they want and how do you actually determine what you reward and who you reward well you create something

like a results Oracle and in fact there's you can you should and can have many results oracles it's I just gonna call it one but this is like one of those systems you you just copy and paste so big question though right okay so yeah I I just did some of this great thing and now I got this reward but like how did I get the money to do the great thing that's like that's the obvious obvious like next step right where do you actually go to bootstrap your venture well thankfully retroactive funding giving people money for fulfilling a mission actually bootstraps is part of a larger market or larger multi-sided marketplace where a results Oracle with a results Oracle developers that

are building towards the mission and investors that can invest in those developers to achieve that goal and that objective and so what you can see is you can say okay the developers they get an idea and you'll you'll kind of notice that this is very similar to systems that we literally work in today it's just a little just a little flip and maybe maybe a little bit more explicit they pitch some investors then the investors if they're convinced invest in the project and then the project implements the idea and then they are rewarded for their successful work if they are successful of course not everyone is rewarded and this is part of the point right you need a Market Force to actually evaluate who is a good predictor of what is going to

be a successful project and who is a you know actual person who has contributed to that mission and so you know some sad gerbils but they'll get rewarded in some other way I promise um and then this this cycle can repeat and you know you kind of weed out and you get better and better at achieving your mission whatever the results Oracle says and in fact you know there should probably be a multiplicity of these results oracles you know you can get funding from one to many you know all of that um okay I mean yeah sure I'll do it ah yes of course so a results Oracle is what judges the results of these projects that whether or not they succeeded whether or not they failed so

they are the thing it's like the Judgment it's like the you know it's almost like the dopamine system for a decentralized network it's it's what is Judge what is what is rewarded it's the thing that judges the rewards so straw man implementation here pick an open source project something that you want to do this is from the developer's perspective I'm a developer picking an open source project I create a project token you know for instance that's a way that I can represent my my own my ownership in this this idea then I'll sell the token to people who believe in me and believe that this project is going to achieve those good results and be rewarded for them I'm going to build my awesomeness of course of course and then the results Oracle or many results oracles deem it awesome

and then they buy those tokens they establish a price floor for these tokens now this is a kind of representation of what that token price might look like right you start out you know maybe people people don't believe yet right they don't believe in the beginning but then it becomes clear that some good stuff is going on and maybe that price goes up and then boom the floor kicks in the blue line where the results Oracle is actually buying a non-trivial sum of these tokens and so this allows you to get both funding right through people who are you know investors and also rewards these investors can look and and they can determine what the actual outcome is going to be before it happens and so

this is establishing a business model for something that previously didn't really have a business model and therefore has been neglected by our community and so it gives it you know you can go from idea that is going to further that mission all the way to exit where you can actually be rewarded for your for your contributions so this is a market for producing the public goods that we all need to scale ethereum and it doesn't have the limiting factor of legitimacy these investors their only reward is through doing good investing and developers can find problems that they think are the most valuable or that they are uniquely capable of solving and

invest in themselves it's pretty cool so now you know we're trying to solve scalability now you know we got we can actually fund it and incentivize it like a true crypto system you know to the Moon all that kind of stuff you know yeah I had to I had to throw in at least one thing for the you know the djen word and the name it would otherwise it'd just be a complete sham anyway um challenges of course there are many challenges you're probably like wow there's so many challenges well I'll tell you at least three of those challenges we can categorize them first one is the Judgment problem second one bootstrapping problem and the third free rider problem so first the Judgment problem immediately you're like okay the results Oracle that sounds like a really hard problem

absolutely it is a really hard problem there is one one little bit of Hope right we we do have governance systems or systems Dows that are trying to you know invest in projects and strictly investing in what has happened and judging what has happened is strictly easier than investing in what will happen that's a good thing but there's obviously a lot of cases of bad judgment you don't want centralization you don't want you know Rand oh random results Oracle that that would not make sense so maybe some quadratic funding future key non-token governance I mean they're going to be a lot of these systems because this is a system for incentivizing people this is not like you know there's no real judgment here and one of the challenges that I'll highlight is like

specialization right we don't want to only reward people who like are flashy and you know are in the top no you want to reward all the people the cryptographers you know create elliptic curves PCP theorem all these things the next thing is a bootstrapping problem this is the most obvious one it's this is a multi-sided Marketplace you need to bootstrap it you know it's a bit of a chicken in the egg problem but I think that's that's one of those things that we have a little bit more you know we're accustomed to then finally the free rider problem so I've been talking about these public goods public goods public goods and I and I believe that those are this is this is the use case this is like the real strong use case but I will say that we have to acknowledge the you know elephant in the room where you know

if a doubt were to be private and were to attempt to free ride off of other public goods funding you know people people who are contributing to the the commons then someone's just extracting the contributions and then building their own ecosystem for their own profit that is you know a classic thing that we will have to deal with and we will have to just acknowledge so there is a tragedy of the commons when funding public goods in all contexts but this tragedy of the commons I hope can be mitigated by one hour just will because we want it to be a better future for everyone but I think there's even rational reasons for this and you know here I'm going to get a little game theory but just got to throw it in sprinkle it in it's a crypto talk you

know game theory is is the is the jam basically if both if both Dows are funding public goods then great we're in this great equilibrium right but if one if both of them are funding private Goods then tragedy of the commons were not information sharing we're not lifting each other up and we get into this problem but now of course if one's public and one's private we're now in the classic you know you're cooperating and the other is defecting and The Defector gets a bigger payout and so this is like one of those not not fun things and unfortunately you know it is the rational choice for the private it is the rational choice and the prisoner's dilemma to defect but is it rational in all cases well of

course if this is an iterative game then you know that if you defect every time then you will get a lower payout so in fact the rational choice in a iterated game is to cooperate so hopefully when you're thinking oh do I want to make my closed Source software or my public good choose the public good not just for for me and for the community but also for ethos Phoenix this is you know the idealized public goods Savior and it's kind of the reverse of ruko's Basilisk rooko's basilisk is this evil AI that's going to kill you if you don't help it bring to life but you know what we're we're not into killing people in ethereum that's that's one of our tenants actually

um and the instead we're into rewarding people give all the people the tokens and so what this says is either's Phoenix if you help bring it to existence it will reward you in the future for your early contributions to the public good and so it's better to be here in the you know in the iterated game starting to cooperate early than it is to be back here you know cooperating in the end and so here's a nice little way for you to say oh yeah I'm making a long-term investment when I invest in these public goods I'm not just being a fool falling for the tragedy of the comments but it's not investment advice of course and so pray to the the ethers Phoenix did I say ethics Paradox because I said it

multiple times when I was doing this slide apologies it is a phoenix not a paradox um anyway chefing up some good Indian food um you know gotta Gotta Throw a little a little something in anyway let's scale ethereum right let's fix the incentives to scale ethereum cooperatively together again you know it's optimism PBC public benefit Corporation let's enshrine pair access to open public goods it's it's important and of course okay I gotta I gotta chill gotta shill you know we we need more people to join the cause you can join the cause by being on the interwebs but you can also join the cause more directly so I just gotta show that um you know if you want to like reinvent capitalism and create a market which uh

serves as a moral compass for the super intelligent AI then that would be that would be late because that's what we're doing right here you know we're creating a kind of operating system for Humanity so anyway love knows no borders we're working on this open source let's fix it and most of all stay optimistic thanks y'all thank you [Applause] so the I think the counter-intuitive aspect to this is that the thing that you're funding doesn't necessarily produce cash flow right so can you just speak to like why that's okay okay so we

have clearly seen that you know platforms and extractive projects produce cash flow produce Revenue and we've also seen that there's a bunch of memes that that can can you know go to the Moon and what this is this is a part of the market that is giving value to the thing ethereum that is producing a bunch of cash flow it's creating tons of value but currently it does not have a business model and so it is in ethereum's interest it is in every cash flow generating Project's interest to fund to create a market to like form this market around

things that produce more cash flow for that cash flow generating system so it's not quite a meme it can be a meme and it definitely should be partially a meme but it's also value generating and so it's kind of decoupling the value extraction from the value generation in a way that enables developers like me to build towards value generation yes I guess there's a mic somewhere yeah I have a bit of a philosophical question I just want to ask a question about PPC so what is optimism PBC like um I think historically they were like

like Silicon Valley all over like startups people try to do a startup they make lots of money or fail the capitalists right they're also altruists like little storivals don't want any money so do you guys want to make money or your like altruist what is PPC I love this question because it's all about breaking this idea that contributing to public goods and cooperating is not profitable and in fact you can generate enormous amounts of value and be rewarded for that value and the way we can do that most effectively is we

happen to have the rails which allow us to program money and program incentives to Purdue systems that obviously everyone wants like who wants to work at a company that's oppressing people that's like so bad but who also wants to work at a company that's not giving you any money that's also terrible so why don't we have both of these things where you can work at a company that's bringing people up and you're rewarded for it like it's it just needs to it needs to be infrastructure and this is not just for our community this is like a larger thing and this is why I'm so excited about it and this is why I've been excited about ethereum and to think that literally just giving money back to people who have done great work to think

that that is like a a solution in some ways to the tragedy of the commons was mind-blowing it's not like oh yeah E equals MC squared these are the 15 algorithms that you have to use it's like no bro just give give money to people who are who deserve it laughs and scale ethereum any more questions yes how do you imagine a funding will come from for paying for the results that is a great question so I think it's going to realistically come from many

sources they're going to be many results oracles pushing for many different Visions for the future I think that it will come from our parts of the stack from our the core protocol because the core protocol these blockchains are going to be competing for your liquidity and your interest and your time and so if you choose a blockchain that's just extracting all your value and not giving it back that's a pretty that's a pretty lame deal so I think there's a market pressure even there then their Market pressure is all over the stack you know whether you're extracting it at a at a front end level where you're whether you're extracting it at you know a smart contract level various things many ways to slice the pie it's going to be a market and it's hard to express

complexity in words because there are only so many um so it's more than what I just said that's the best cop out right there it's like yeah it's just the words I know the answers but I just can't express them all right I guess uh that's it let's go uh fund and build public goods y'all [Applause] and scale ethereum scale ethereum very important