Source: TechFlow ShenChao

Some things are more difficult to maintain and are more susceptible to the 'tragedy of the commons' when they are open and easily accessible.

-- Scott Moore

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

The biggest challenge with these public goods is measuring their value not only for a particular community, but also for the broader society and providing corresponding 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, evaluating the value of externalities is not always easy. As a result, many negative externalities from market failures lead to inefficient or unfair allocation of resources and overall social unrest. For example, if an oil spill damages their local waterfront area, a community may suffer irreversible damage.

These same issues also exist in the context of cyberspace. Gitcoin is one of the first organizations to consider these issues. In the open source software field, maintainers often find themselves overworked and underpaid due to similar market failures, while other organizations capture value by extracting their code and using it for private gain.

Gitcoin's Story: The Funding Engine for Open Source Software

Scott Moore is not only the co-founder of Gitcoin, but also has made creative thinking and contributions in the new model of building and fundraising for public products 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 dedicated to open financial markets and software tools in Toronto, Canada.

Scott recalled, "Before I entered the cryptocurrency field, 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 more and more open-source software. I began to wonder: how do the people who maintain this software make a living? What would happen if everyone continued to develop tools openly like this? When I attended some early meetups in 2015, I found that many others were asking the same questions and trying to find new social and economic models. The impact of these models went far beyond the questions themselves."

These diverse gatherings cover many ideas that have now become reality, including decentralized finance (DeFi) and non-fungible tokens (NFTs), but Scott is particularly interested in decentralized autonomous organizations (DAOs). An accidental encounter with like-minded friends such as Ethan Wilding and Nick Dodson prompted him to delve deeper into research and begin building in this field.

Scott said: "As someone who has spent a lot of time on the internet and open source software, I really care about maintaining the native community of the internet. However, platforms like GitHub don't actually interact with their users in this way, they just see their collaboration as a product. I believe DAO is a better way to economically connect real people online."

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

"That incident changed my perspective - you must go to existing places and gradually, patiently develop. I began to believe that it is better to build on existing foundations rather than starting from scratch or rushing to succeed," this idea also led 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 also emphasized the importance of better frameworks for understanding and supporting digital public goods.

So far, Gitcoin has provided nearly $70 million in funding for various forms of open source software and other forms of public goods, mainly by measuring community sentiment through quadratic funding and allocating value based on their unique preferences.

Scott explained: "Gitcoin's core goal is to prove that with the right tools and structure, we can coordinate value just like we coordinate information on the internet. By establishing trustworthy commitments online, we can not only make the economy more efficient, but also better serve social welfare, which we can see in our local communities."

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

Modern Solutions to Public Goods Problems

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. It took a lot of effort and time to convince the community that this is not just a selfless act of charity, but rather a part of building a better socio-economic system. Such a socio-economic system is built on its own digital public goods, such as Bitcoin and Ethereum.

Scott believes that this is part of a broader historical movement aimed at making communities aware of their collective interests, which flourished in the early academic days of software. He said, "Since the 1970s and 1980s, when open source development really began to flourish, it has become an important collective creative activity. Trust and cooperation among developers to build public infrastructure is not a given, but a conscious choice that many people must make together and continue to make."

Scott pointed 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 maintained by people's efforts and creates economic value for its community. But Scott explained that "the more open and accessible something is, the more difficult it is to maintain and the more susceptible it is to the 'tragedy of the commons'." In comparison, local subway systems are somewhat easier to manage because they are limited to specific geographic areas and very specific use cases. However, software, like the internet itself, is a global infrastructure.

The government has found a way to fund public goods in the real world, but due to their global nature, digital public goods lack a single government or group willing to take full responsibility to support them for their citizens," Scott mentioned. "We need organizations that serve the public to help these developers and use tools like Ethereum to achieve these common goals.

Gitcoin hopes to eventually become one of these organizations and work with other institutions around the world to make it a reality.

Web3 Public Goods Status

Bitcoin and Ethereum are not just digital currencies and smart contract platforms; they are also typical public goods in the Web3 ecosystem, providing 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 pointed out: "These self-regulating networks demonstrate the possibility of securely verifying and maintaining a global value state that anyone can use in a native internet way and receive support from other jurisdictions. For example, Chinese miners are often responsible for verifying and processing transactions on the Bitcoin network."

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

In Ethereum, the possible infrastructure and application scope is greatly expanded. For example, decentralized exchanges such as Uniswap often operate DAOs, and open-source communities can actively contribute to them. As DAOs rely on Ethereum-based languages such as Solidity and libraries such as 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 efforts. To this end, there are often community meetings and decision-making processes involving various stakeholders, as well as public debates on platforms like X.

With more and more projects being tokenized (in some cases, DAO-ized), they are redistributing the value of their tokens throughout the entire tech stack.

In order to further advance the research on public goods governance, specialized research organizations such as MetaGov (with Scott as its 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 products

As the influence of public products in web3 continues to grow like memes, a key question is often raised: should all web3 projects be public products?

In order to gain a deeper understanding of 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, allowing for globally verifiable computation and online coordination of value through a shared ledger (blockchain) secured by its own cryptocurrency.

Scott pointed out that although each project in this industry does not need to become a public product, the importance of creating "positive externalities" is self-evident.

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

SEDA's co-founder believes that a pure public product ecosystem may be more suitable for infrastructure. However, people like Zerion's founder are concerned about the wider "public productization" of the application layer. They believe that the community governance model is not mature enough to successfully tokenize application layer projects, especially when they have not yet built their own 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 worthwhile pursuit. However, the most important aspect is sustainability. Scott points out, "We often view public goods as a separate island of terminology, but sometimes it is better to consider Ostrom's research on the public - it needs to be managed and requires a sustainable economic resource."

In order to achieve this goal, a well-thought-out strategy and a clear execution plan are needed to ensure the creation of maximum value for a wider society.

Gitcoin's current situation and future

Scott pointed out that expanding models such as grants and venture capital in web3 can significantly improve the situation for grassroots participants and marginalized communities. However, in order to effectively address these inequalities, it is crucial to prioritize support for the areas that need assistance the most. Determining the priority of these areas is also one of Gitcoin's current agendas. Through quadratic funding, Gitcoin is also experimenting with verifying the effectiveness of new models.

In order to ensure accurate utilization of community feedback, Gitcoin is also developing core tools such as "Gitcoin Passport". By analyzing existing on-chain user data, Gitcoin Passport establishes a reputation system to more accurately identify donors and determine their priority generated under the guidance of institutional capital flow.

In addition to quadratic funding, Gitcoin also collaborates with teams such as Optimism to provide "retroactive funding". In this mode, a project or activity will only receive funding support after a certain period of time has passed since its start or completion. This is mainly to compensate for projects that have already proven their value or effectiveness but did not initially receive sufficient funding corresponding to their value.

In the digital world, especially in the encryption industry, trying different economic support mechanisms is undoubtedly a bold and important thing. 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 us how these ecosystems will develop, but we are excited about what Gitcoin is doing and hope to see the web3 ecosystem continue to "build for the public good".

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