Dialogue with Gitcoin Co-founder: Public goods are a worthy goal, but not all Web3 projects are suitable

TechFlow: Sunny

Gitcoin: Scott Moore

"Some things become harder to maintain and more susceptible to the 'tragedy of the commons' the more open and accessible they are."

-- Scott Moore

Public goods are an essential foundation for any society's prosperity. By maintaining the parks, roads, and transportation systems we rely on in our cities, we can create meaningful positive externalities. However, sustaining these public goods is not easy; it requires carefully designed economic mechanisms (such as taxes, subsidies, or regulations) to fund these goods and their ultimate impacts correctly or optimally.

The biggest challenge regarding these public goods is measuring the value they bring not just to a specific community but to society at large, and accordingly providing the necessary funding. For example, a local park not only provides a gathering place for people but also sparks creative and innovative ideas, as well as social harmony.

Unfortunately, in many markets, assessing the value of external effects is not always straightforward. As a result, many negative externalities from market failures lead to inefficient or unfair resource allocation and overall social unrest. For instance, if an oil spill damages their local waterfront, a community may suffer irreversible harm.

These same issues exist in the context of cyberspace. Gitcoin is one of the first organizations to consider these problems, where maintainers in the open-source software realm often find themselves overworked and underpaid due to similar market failures, while other organizations capture value by extracting their code for private benefit.

The Story Behind Gitcoin: The Funding Engine for Open Source Software

Scott Moore is not only a co-founder of Gitcoin but has also made creative contributions to new models for building and funding public goods in the digital age.

Before entering the world of digital public goods, Scott studied a unique combination of political science and mathematics and organized a series of related organizations in Toronto, Canada, focused on open financial markets and software tools.

Scott recalls, "Before I entered the cryptocurrency space, I was struggling to figure out what I wanted to do in this world." What initially attracted him was an Ethereum meetup in Toronto. "As I delved deeper into machine learning, I started using open-source software more and more, and I began to think: how do the people maintaining this software make a living? What would the world look like if everyone continued to develop tools so openly? When I attended some early meetups in 2015, I found many others asking the same questions, trying to find new social and economic models, and the impacts of those models far exceeded the questions themselves."

These diverse meetups covered many ideas that have now become a reality, including decentralized finance (DeFi) and non-fungible tokens (NFTs), but Scott was particularly interested in decentralized autonomous organizations (DAOs). Serendipitous encounters with like-minded friends like Ethan Wilding and Nick Dodson prompted him to dive deeper and start building in that space.

Scott states, "As someone who has spent a lot of time on the web and open-source software, I really care about maintaining the native communities of the internet. But platforms like GitHub don't actually engage with their users in that way; they just view that collaboration as a product. I believe DAOs are a way to better connect real people online through economic structures."

In 2016, Scott first attempted to realize this idea with a project that was completely different from existing platforms. He began building an exchange and system for creating DAOs, which he called the Venture Equity Exchange, and started reimagining what a new toolkit for online coordination might look like. However, after the 2016 "DAO Hack," he realized that any new economy would be easier to launch from platforms like GitHub that already had a record of contributions.

"That event changed my perspective -- you have to go to where things already exist and slowly, patiently build from there. I started to think it was better to build on existing foundations rather than starting from scratch or rushing," and this idea also contributed to the birth of Gitcoin.

Since then, Gitcoin has not only become the first organization to implement and popularize the quadratic funding mechanism invented by Vitalik Buterin, Zoe Hitzig, and Glen Weyl in 2018 (now used by various organizations from Fortune 500 companies to governments), but it has also emphasized the importance of a better framework for understanding and supporting digital public goods.

To date, Gitcoin has provided nearly $70 million in funding for various forms of open-source software and other forms of public goods, primarily by using quadratic funding to gauge community sentiment and allocate value based on their unique preferences.

Scott explains, "The core goal of Gitcoin is to prove that as long as we have the right tools and structures, we can coordinate value just as we coordinate information on the internet." "By establishing credible commitments online, we can not only make the economy more efficient but also better serve the public good, which we can all see in our local communities."

In addition to technology-driven projects, Gitcoin has also expanded into ecological sustainability and other major social issues. By addressing these different types of public goods problems, Gitcoin is realizing its long-term vision and hopes to encourage other organizations (including companies and governments) to join this movement.

Modern Solutions to Modern Public Goods Issues

You may have noticed that the term "public goods" has become popular in various web3 industry conferences, but it hasn't always been this way. A lot of effort and time has been spent convincing the community that this is not just altruistic charity but part of building a better socio-economic system. Such a socio-economic system is built on its own digital public goods, like Bitcoin and Ethereum.

Scott sees this as part of a broader historical movement aimed at making communities aware of their collective interests, which truly flourished in the early academic days of software. He says, "Starting in the 1970s and 80s, when open-source development really began to thrive, it became an important collective creative act. The trust and collaboration among developers to build public infrastructure is not a given; it is a conscious choice that many must make together and continuously."

Scott points out that this is similar to other public goods movements around the world. For example, like public transportation in Hong Kong, open-source software is an effort maintained by people that creates economic value for their communities. But Scott explains, "The more open and accessible something is, the harder it is to maintain, and the more susceptible it is to the 'tragedy of the commons.'" In contrast, local subway systems are somewhat easier to manage because they are confined to specific geographic areas and very particular use cases. Software, like the internet itself, is global infrastructure.

"Governments have found ways to fund public goods in the real world, but due to their global nature, digital public goods lack a single government or a group of citizens willing to take full responsibility for supporting them," Scott mentions. "We need organizations that serve the public to help these developers and leverage tools like Ethereum to achieve these common goals."

Gitcoin hopes to ultimately become one of those organizations and collaborate with other institutions globally to make this a reality.

The Current State of Web3 Public Goods

Bitcoin and Ethereum are not just digital currencies and smart contract platforms; they are themselves typical public goods in the Web3 ecosystem that can provide underlying support for other open-source software. These blockchain platforms have their own foundations to support their development. For example, Ethereum was initially driven by the Ethereum Foundation, but as the ecosystem matured, its governance gradually moved towards decentralization.

Scott points out, "These self-regulating networks demonstrate that it is possible to securely verify and maintain a global state of value that anyone can use in an internet-native way, supported by other local jurisdictions. For instance, miners in China often take responsibility for verifying and processing transactions on the Bitcoin network.

In networks like Bitcoin, the transaction fees paid by users help make the system economically sustainable, and the fees miners earn on Bitcoin incentivize them to further support the core development of the network.

In Ethereum, the potential infrastructure and application scope have greatly expanded. For example, decentralized exchanges like Uniswap often operate DAOs, where open-source communities can actively contribute. Since DAOs rely on Ethereum-based languages like Solidity and libraries like Web3.js and Ethers.js, they often support the developers of these tools through Gitcoin Grants.

However, even successful ecosystems like Ethereum face challenges in obtaining sustainable funding, requiring ongoing collective effort. To this end, there are often community meetings, decision-making processes involving various stakeholders, and public debates on platforms like X.

As more projects undergo tokenization (in some cases, DAO-ification), they redistribute the value of their tokens throughout the technology stack.

To further advance research on public goods governance, dedicated research organizations like MetaGov (of which Scott is an advisor) are exploring and incubating new frameworks and tools to provide more possibilities for managing on-chain public goods in the future.

Not All Web3 Projects Are Public Goods

As the influence of public goods in web3 continues to grow like a meme, a key question often arises: should all web3 projects be public goods?

To delve into this complex issue, we interviewed Scott and other industry leaders.

So, what is web3? In short, Scott believes it encompasses projects like Bitcoin and Ethereum that are developing new cryptographic tools that allow for globally verifiable computation and online coordination of value through shared ledgers (blockchains), secured by their own cryptocurrencies.

Scott points out that while not every project in this space needs to be a public good, the importance of creating "positive externalities" is undeniable.

He states, "My core belief is that everything works when we create a sustainable, shared ecosystem, which is crucial for real users online." He adds that this does not mean everything should be free, but it may require balancing different interests to support all stakeholders in the ecosystem. "We need to think about what can be monetized to support things that would otherwise be difficult or impossible to sustain. There must be real value flowing in the system."

The co-founder of SEDA believes that a purely public goods ecosystem may be more suitable for infrastructure. However, people like the founder of Zerion are concerned about the broader "public goodification" at the application layer. They argue that community governance models are not yet mature enough to successfully tokenize application layer projects, especially when they have not yet built widely adopted open-source tools or chains (L1 or L2).

Despite differing opinions, a common theme emerges: becoming a public good is not the ultimate goal, but it is still a worthy pursuit. Most importantly, projects need sustainability. Scott notes, "We often view public goods as an isolated term island, but sometimes a better approach is to consider Ostrom on the public -- the public needs to be managed and requires a sustainable economic resource."

To achieve this goal, thoughtful strategies and clear execution plans are needed to ensure maximum value creation for the broader society.

The Current State and Future of Gitcoin

Scott points out that scaling models like grants and venture capital in web3 can significantly improve the situation for grassroots participants and marginalized communities. However, to effectively address these inequalities, it is crucial to prioritize support for the areas that need it most. Determining the priorities of these areas is also one of Gitcoin's current agendas. Through quadratic funding, Gitcoin is also experimenting to validate the effectiveness of new models.

To ensure accurate utilization of community feedback, Gitcoin is also developing core tools like "Gitcoin Passport." By analyzing existing on-chain user data, Gitcoin Passport establishes a reputation system that more accurately identifies donors and generates priorities based on where institutional capital should flow.

In addition to quadratic funding, Gitcoin is collaborating with teams like Optimism for "retroactive funding." In this model, a project or activity only receives funding after it has started or completed for a period. This is primarily to compensate those who have already demonstrated their value or effectiveness but initially did not receive sufficient funding corresponding to the value they generated.

In the digital world, especially in the crypto space, trying different economic funding mechanisms is undoubtedly a bold and important endeavor. Perhaps it is the transparency and openness of blockchain that makes the implementation of quadratic funding mechanisms and subsidy processes through smart contracts more efficient. Perhaps this is the essence of the shared currency underlying these ecosystems.

Only time will tell how these ecosystems will evolve, but we are excited about the work Gitcoin is doing and hope to see the web3 ecosystem continue to "build for the public good."