Resilient Funding for Ethereum's Core Protocol | Peter Vecchiarelli - Protocol Guild

[Music] how's it going everyone welcome to my presentation thank you for being here today um before I get started I am actually pinch hitting for my colleague cheeky gorilla that's not his actual name he's just a privacy officient AO so if you guys could do me a huge favor and say uh get well soon cheeky because he he injured himself just a week before for Denver uh 1 2 3 get well soon cheky please get well soon all right cool that was close um sweet well thank you for being here uh my name is Peter beerelli I'm here to talk to you about protocol Guild uh protocol Guild is an onchain funding Institution for ethereum core protocol contributors uh before I talk about protocol Guild though let's talk about ethereum and specifically what is ethereum even I bet that if I were to ask 10 of you if there are 10 of you out there I'd probably get at least five different respons responses um some of you might describe it as an infinite Garden or ultrasound money others might describe it as a settlement layer or maybe even Bitcoin plus smart contracts um all of those are right to some extent um there's so many ways to describe ethereum precisely because there are so many ways to do to use it and to that extent we can kind of think of ethereum as a Commons like forests or fisheries and Commons referred to share resources shared resources or areas that are accessible to and used by the public but unfortunately like all Commons these resources can be abused and what I'm talking about of course is the tragedy of the commons which is when individuals act in their self-interest to pleading shared resources to the detriment of everyone else so that's why we have an image of mik here who is a symbol of coordination failure for ethereum he's holding up a tweet from one of protocol Guild's uh our favorite critics Amin uh and a mean in this tweet is bemoaning kind of the lack of adequate funding for ethereum core protocol development and the problem that he's highlighting is that existing funding for ethereum core protocol work only provides a fraction of the financial incentive compared to similar work in the ecosystem and so we have this weird situation where we have a small subset of of core contributors that have this specialized domain knowledge um but are simultaneously both underpaid and securing hundreds of billions of dollars in value and that's not great right because that means ultimately it's not economically rational to do core protocol work in the moment and you can see this visually represented in the chart uh which shows that ethereum's core protocol work while relatively low risk you know ethereum is Lindy it's it's big it's going to be here for a while there it's still relatively low reward as well um it also show shows how these core developers by taking on just a little bit more career risk um can actually earn significantly more um and this is not to say that that these individuals are you know solely or even primarily motivated by Financial rewards um you know that they are motivated by working on hard problems and working with individuals that they respect um but often times these uh these properties are available in other opportunities in the space as well and you're probably not surprised to hear it there's a lot of money in the ethereum ecosystem but these Developers are able to routinely get high six low seven figure um compensation offers elsewhere in the ecosystem due to that specialized knowledge and of course they're not earning anywhere near that working on the protocol right now um and so why does any of this matter well ethereum is very far from being done um most of you are probably familiar with the road map but of course beyond the present road map there's a future road map and um essentially this is kind of an unsolved question question which is how do we fund core protocol development into the future um to be able to execute on that road map it's imperative that we continue to onboard and retain talented core protocol contributors so that raises an existential question for ethereum how do we rebalance these Financial incentives to make ethereum core protocol work economically rational on a risk adjusted basis there's a couple options so what about altruism right can we rely on individuals to fund this out of the goodness of their heart s um you know this is ethereum so there are some examples of that back in 2018 one of the core developers Preston vanloon who works on prism kind of bemon the lack of funding publicly um some random guy on Twitter came by and gave him a thousand eth um which is $100,000 US dollars at the time um and that's really cool but is this scalable sustainable can we rely on this into the future we think not um what about making eth holders pay uh there's been of this before proposals around this before um this is something that blockchains like polka dot do um so why not well we believe it's not incredibly neutral um ethereum is about giving power back to the people and that should not include forcing a paycheck for developers into every single block um and given ethereum's governance process it would take a while to undo this kind of change if we ultimately decided it wasn't a good idea protocol changes can't just be made willy-nilly and that is absolutely a feature and not a bug um and there's got to be a better way to do this um so we think what about building and constructing social norms uh the band myth Legend Danny Ryan back in 2021 tweeted calling for projects on ethereum to allocate a portion of their tokens to the individuals working on ethereum's core protocol and this is very preent um a lot of the things he said in this 2021 tweet make a lot of sense uh he's talking about targeting individuals and not teams meaning the funding goes directly to support the people doing the work uh it gives those individuals exposure to the value being created in the ecosystem via tokens and it would be it would it's a cost that's borne by the projects themselves uh who have a dependency on ethereum and not by eth users or uh users of ethereum or eth holders um and finally if projects were to do this um if all projects or a critical mass of projects do this then there's a low risk of cap and undo influence and this could be a sustainable um Paradigm over time but we're missing a puzzle piece you know we want to establish this social norm and at the end we profit and profit in this sense means that we rebalance incentives for core protocol work so the the open question is how do we design a mechanism which distributes tokens to protocol contributors in a way that's sufficiently fair accurate and maintains credible neutrality you probably understand what I'm going to say say or you probably could guess what I'm going to talk about protocol Guild that is that is the solution and for those that are unfamiliar with protocol Guild um we are trying to make ethereum core protocol work economically rational on a risk adjusted basis and to understand protocol Guild you need to understand its two components uh the first is a membership registry and the second a funding mechanism the registry is essentially a list of ethereum's active core protocol contributors represented on chain um today there are around 100 88 individuals in the membership registry representing represented from all across the world and you can see their names in the background here um and you might be wondering how does one become eligible for protocol Guild membership uh what does it mean to be an active core protocol contributor um well essentially that means you're doing one of a few things uh working on Research uh doing client development or doing something that supports one of those two things like spec work or testing uh devops and coordination work um and here's some of the examp ex of the team that protocol Guild members are the teams that protocol Guild members are a part of you probably heard of some of them G W nethermind uh cat H herters um but I should clarify that protocol Guild membership is centered around individuals and not teams um so if you've been hired by one of those teams and you continue to work on ethereum's core protocol um after you've quit but you continue doing the work and the membership wants to maintain you on the list you can still be eligible for protocol Guild membership which we think is a really cool feature um when I say active uh let's quantify what active means in this sense to be eligible for protocol Guild membership you must have contributed continuously for at least 6 months prior to being eligible um the average member on protocol guilds registry has 3.3 years of contribution to ethereum and the oldest member has been here from the start uh with over 10 years um as a collective protocol Guild members have contributed over 600 years to ethereum core protocol development uh that's why we can confidently say that protocol Guild is a membership registry of the individuals who are stewarding ethereum core protocol development so you might be wondering how is this list actually updated well the protocol Guild membership registry is self-curated um and that makes sense because protocol Guild members have the highest context um if if this list is to have legitimacy it needs to be accurate um ultimately external entities don't have the context to to track the contributions over time um on the other hand protocol Guild members due to the very nature of their work are very um they have the necessary context and they have the necessary domain expertise to uh give the strong assurances that this list will be accurate over time so what's the net result of this um I at this point we've made the direct uh the entire set of ethereum's core protocol contributors directly legible on chain and so where do rebalancing incentive comes in well that's the funding mechanism so we built a funding mechanism around this membership registry that has three components um the first is a single donation address so to abstract away the complexity of donating to many individuals all you have to do is send funds to one address um and it's all happening on chain it's totally transparent meaning anyone can see who donated you can track the funds to verify they're actually going to ethereum core protocol contributors and when the tokens are donated um they actually vest over four years they go to an immutable vesting contract which uh vests linearly over four years um and this is because that is kind of the common uh stock option compensation package that's been popularized in Silicon Valley and we also think that that provides a strong incentive for members to stick around in the long term so once the tokens are vested uh they are distributed to membership um we use a neutral uh waiting formula which is uh time waiting um so the longer you've been contributing to core protocol work the higher your weight in the membership uh and there is a square root function to kind of compress uh the the deviation between the the newest and the oldest members um and we we uh you know we understand this is not perfect right you know we're looking at potential ways to assess impact and things like that but um ultimately this mechanism is super neutral um and so for all those reasons we think it's sufficient to say that we built a funding mechanism that is simple and transparent which creates strong incentives to onboard and retain contributors over the long term and enables e the ethereum ecosystem to fund its dependencies and that last point is really important because it brings us back to this concept of social norms and the norm that we are really trying to construct right now is this concept called the protocol Guild pledge uh how many of you are familiar with the protocol Guild pledge cool any projects that have taken it in the in attendance or planning on taking it if not if you if you'd like to speak with me afterwards I would love to speak speak with you about it uh I expect to see more hands next year uh the protocol Guild pledge is essentially a commitment of 1% of a Project's token Supply to protocol Guild um so let's unpack that why are we asking for Native tokens um we think by donating native tokens you're giving ethereum's core protocol contributors access to a diversified basket of funds that represents the value being created in the ecosystem and thus you give them access to the upside of of that activity and those tokens and they can participate in that upside while they stay focused on core protocol work so why are we asking for 1% um ultimately because it normalizes the contributions uh not every project is able to give a $100 million but every project is able to give 1% if they have a token um it's also easy to pledge all you have to do is tweet it out um and yeah we did some math and we think that if enough projects give 1% that we can provide sufficient funding to these uh contributors into the future this is of course assuming that more projects release tokens valuable tokens on ethereum into the future so why take the pledge um I hope it's self-evident by now but if you're building on ethereum in any way you have a dependency on ethereum's core protocol development um and so by taking the pledge you're helping to rebalance these incentives make a more resilient ethereum and scale ethereum's values um you've heard probably heard the expression public goods are good ethereum core protocol development is a foundational public good um so you're helping to support that um and how do you pledge it's super easy you just tweet it out um so you can see the some of the projects that have that have taken the pledge huge shout out to like either fi Tao p a number of others uh one caveat if you do tweet out that you're going to take the pledge please do follow through um so uh yeah are we economically rational yet have we actually rebalanced those incentives well we're getting there um we've been around for just over 3 years uh in that time we've received over 8,000 total individual donations totaling over 100 80 million at the time of donation um the vast majority of that is coming from around three projects Igan ether F and Tao all of whom took the pledge um as you can see in our donor leader board we have a number of of um donations across the ecosystem um and I know your thing it's like do we need any more funding we have 180 million unfortunately we still have a lot of work to do and let me quantify that for you real quick um so like I said we have over 180 core protocol contributors the funds vest over four years um and while $79,000 which is our um median the ve what we'll vest to the median member over the next 12 years is a lot of money we still have a long way to go to really rebalance those incentives and close that Gap that I mentioned earlier um so yeah uh I'm coming up on time here so I'm going to I'm going to quickly cycle through these last slides um but yeah we again we're trying to make ethereum core protocol development economically rational we're trying to create stability in the core protocol contributor set and and uh stability of of a funding Institution for those individuals into the future thank you