Loring Harkness - Funding Public Goods - Without Donations or Sacrifices

We have right now Loring Harkness with us uh head of commercial at Brainbot working on shutter network and paddle battle with a background in ethics law and financial inclusion in the Southeast Asia. His talk is funding public goods without donation or sacrifice. Let's give a warm applause to Lori. Thank you. That was a very serious introduction, but uh some things are too important to be taken seriously.

They told me that I needed to stand here in this little box or they would not be able to record this. But I'm breaking free. I'm going to No, I'm just kidding. Uh but first talk after lunch. Everyone get up.

Everyone stand up. Yes. Open your arms. Open your mouth. Open your eyes.

But most importantly, open your minds because we are going to talk about public goods. If you know anything about me, you'll know that I do not know how to use a clicker, but I I learned quickly. Uh if you know anything about me, you will know that I love to play games, particularly onchain games, and I love funding public goods. And it was my desire to get up here on stage today and to show you some of my favorite public goods funding mechanisms. But you know what?

I couldn't do it because I was on Twitter recently and there was so much drama. People were bitching and moaning about how there is no adequate funding for public goods. And actually, they weren't just bitching and moaning. They were raising some really awesome points. And so, I had like a deep conversation with myself thinking about what is the nature of public goods.

and I'm going to take you on a small 15minute rant today to talk about public goods. Let's get started with what the [ __ ] are public goods? Well, public goods you probably have heard are things which are non-rivalous and non-excludable. And the perfect example of public goods are lighouses. Everyone loves lighouses.

So picturesque, right? But they're a great example of public goods because when a ship is navigating in the ocean, uh it uh lighouses are non-rival. Uh one ship using the lighthouse does not diminish the value of another ship using the lighthouse. And it's non-excludable because no one can prevent uh any ship from using the lighthouse for navigation. And this may seem like a horrible example because lighouses are so antiquated.

Nobody uses lighouses for navigation anymore, but actually it's not so bad because even in crypto we have lighouses projects like DeFi scan which can help you navigate the rocky shores of DeFi, telling you how much D is in your FI and helping you keep your funds safe. the lighthouse for today's crypto. And some people confuse public goods with charity. But if you think about it, charity and public goods are nearly the exact opposite. Because with charity, you give something and you don't expect anything in return.

But with public goods, you have actually already received the good. And the question is, are you going to pay for it or not? Are you going to continue funding it so that you and others can benefit from it in the future? The next question is, well, why don't we fund public goods? And the traditional answer is the free rider problem.

Because no one can exclude us from using public goods. It means that we can't do things like uh create a payw wall or a subscription in order to use that public good. Maybe we can do things like advertising um on a public goods website. And Vitalik actually has a wonderful article about more evil ways and less evil ways of funding public goods. And it's definitely a spectrum.

But I do want to point out here that all of us live in a world where we are no longer expected to pay for anything anymore. The web 2 asymmetric datadriven business model is they give us things for free and we give them our data so that they can sell it for their benefit. So how can we expect people to pay voluntarily for public goods when the market does not even demand that we pay for private or club goods? So, how much money do we need to fully fund public goods on Ethereum? Well, recently, just like many of you, I have outsourced all of my critical thinking to ChatGpt.

And I asked ChatGpt this very question. Fortunately, I was using 03, so it's a very sophisticated model. High high degree of confidence in this answer. and chat GPT told me that we need $500 million every year in order to fully fund public goods on Ethereum. And this is things like clients and wallets and research and dashboards and rubrics.

All of the things which make Ethereum wonderful. And we're not talking $500 million Zimbabwe dollars. So how much of that $500 million do we currently fund and how much is the shortfall? What's the gap? And again I asked Chat GPT and Chat GPT I got ahead of myself.

uh chat GPT says that we currently fund around $150 million of public goods on Ethereum every year. And that's tremendous, but that means that we have a shortfall of $350 million every year. That's a lot of money. And so we need to think about how are we going to bridge the gap. But before we think about how we're going to fund public goods, we should think about what public goods we're actually going to fund.

And if you think of a public good as something which is uh non-rivalous and non-excludable, well there's lots of things which fall into that category. If I go into the plaza here in singing, technically that's a public good. It's non-rivalous and it's non-excludable. But should we fund that? Well, no.

So let's think about which public goods we should fund. Well, first of all, should we fund all public goods or merely the public goods which are currently underfunded? Should we fund things which are currently delivering value or should we fund things which are still in research mode and yet deliver value but have high potential for the future? Should we fund only the public goods which benefit us? Or should we fund public goods which benefit others?

Maybe blurring the lines between charity and public goods. And Vitalik wrote an interesting blog article recently about this and he actually proposed that we stop talking about public goods altogether and we talk about open source. And actually I disagree with him there. I think the most straightforward way to think about what we should fund is we should each fund our unfunded dependencies. And if all of us think about the tools and the research and the software uh that makes our world wonderful that makes Ethereum wonderful and we just fund the things which we depend on to do our work then what we're doing in reality is we're merely internalizing costs which are already um a part of our businesses and a part of our projects.

So, it's dependencies all the way down. So, how do we fund public goods? And traditionally, there's been three answers to this. The biggest, baddest, meanest answer of them all is taxes. No, no one claps for taxes.

And there's a couple of reasons. Number one, they feel coercive, right? And number two, we don't know where the money is going. We don't know whether it's going to fund things which benefit us or go to things quite frankly that we philosophically and morally object to. Uh the second one is donations.

Let's hear it for donations. Yeah. See, there's kind of a smattering of applause. And I think a lot of us have kind of a lovehate relationship with donations. Donations give us the opportunity to make the world a better place.

And that's a great thing, but all of us are used to getting this guilt trip over and over and over again. Television commercials. For just $1 a day, you can save the life of a child. And absolutely that child's life should be saved. However, having a guilt trip 247 is quite honestly tiresome.

And then the third one uh is like VC funding or token funding. And this is actually not that bad. There are some VCs which out of self-interest fund their own unfunded dependencies and that's a great thing but we do have to be wary because some VCs and some token holders are not actually in it for the public goods. They're in it for the profit and they may seek to capture a public goods project and turn it into um a windfall for themselves. So, is there a new way that we can fund public goods?

And the answer here is yes. It's yielded uh something which uh DeFi has unlocked. And these are two of my absolute favorite uh public goods funding mechanisms. And both of them essentially use the same mechanism. uh they have a big pool of money, they invest it, and then they take the yield and they distribute it to public goods based on a community vote.

For those of you who are not familiar, Glow Dollar is a USD stable coin, fully regulated in the United States. It's exactly like USDC. There's only one difference. The yield which they earn from US bills does not go into Coinbase's pockets. Instead, it goes to the Globe Foundation and the Glow Foundation distributes it to public goods.

Octant has I think it's a 100,000 ETH which they stake and they take the staking rewards and they run these wonderful epics where people can vote on how that ETH will be distributed to leading public goods projects. So again the key theme here is take a bunch of money invest it take the yield not the principle and distribute it to public goods. It's a sustainable public goods funding mechanism. But then maybe the question is, is there an old way to fund public goods? Sometimes we get obsessed with innovation and creating something new.

But sometimes it actually works rather well to take a look back in the past and see what has succeeded. Well, a fun trivia fact, the Great Wall of China was in part funded by lotteryies. And lotteryies still to this day fund parks and libraries and roads and schools and all sorts of wonderful real world public goods. And it's just one example of how games are this really nice kind of way of uh slaying moolok in order to uh generate public goods funding. For those of you who are not familiar, uh moolak is the god of coordination failure.

uh whenever people have a common goal but are unable to achieve it because they don't have the right coordination or the right incentives, the god Moolak is summoned. So, one of my favorite ways of slaying moolak is with games because everyone can participate in games out of self-interest and out of this kind of frothy mix of interactions. we can create uh funding for public goods. So just a few projects which take this approach. Lotto PGF is an onchain lottery with verifiable random lottery winners.

And when you buy a lottery ticket from Lotto PGF, part of the money goes to fund public goods and part of the money goes into the jackpot pool and the winner is selected at random to win the jackpot pool. So you can see the difference between that and charity. People are not uh buying a lotto ticket because they're getting guilt tripped into it. They're buying a lotto ticket because they actually want to win the lotto jackpot and they want to play a fun game. Very similar is Pool Together.

Pool Together has among other products a win ETH uh uh product. This is a no loss savings lottery where people put their money into a DeFi yield vault and then a winner is selected at random to win everyone's yield. But in this particular case, the jackplot is split partly between public goods funding and partly between the winner. So it's like pulled together, but it's a no loss lottery. Next, Paddle Battle, which is my own project, is an auction platform where anyone can auction off cool [ __ ] as long as they send the auction proceeds to public goods.

And we have auctioned off a one-on-one DeFi master class, a DAP node home device, tickets to ECC, and much, much more. And all of the auction proceeds go to public goods, but the people are bidding in the auctions not because they're giving something to charity, but because they actually want the auction prize. So why does the auction host put up the prize? Well, for them, it's good branding. It's a viral marketing campaign, and in some cases, they get a sales lead generation list.

And then the last one I'll mention today is the Ethereum time capsule in celebration of Ethereum's 10year anniversary. Um there is the Ethereum time capsule and anyone can create an entry basically documenting their hopes, dreams, projections, fears. All of these uh time capsule entries will be encrypted for one year and then decrypted all at the same time on Ethereum 11th anniversary. So go to ETH timecapsule.com and you'll notice that each time capsule entry costs 0.

001 ETH so about $3. So whenever you're creating a time capsule entry it's permissionless. Anyone can say anything they want and I fully welcome Solana Cardano Bros to come and bull about their alt L1s and in doing so they will be funding protocol guild and Ethereum's core developers. So these are all fun ways that we can fund public goods. So, as a final thought, I ask, how should we fund public goods?

In the most fun way possible. Let's play some games. Let's have some fun. And let's fund public goods. Thank you very much.

[Applause]