As the third version of the renowned RetroPGF public goods funding program, RetroPGF Round 3 (R3 for short) announced its results not long ago. 501 builders, writers, creators, educators, and contributors from across the Optimism ecosystem (out of 643 candidates) received 30M OP as rewards for their contributions and impact within the Optimism ecosystem. The following insights are extracted based on an exploratory analysis of R3’s public data.
An Overview
The 643 candidates in R3 mark a whopping 230% plus increase over R2’s 195, whereas the number of badgeholders only increased from 70 to 146. There had been voices about how the voting process was ‘overwhelming’ during R2, how will R3 fare with such an asymmetrical increase?
Not bad, actually.
With the introduction of ‘list’, badgeholders can assemble their own candidate lists like they would their playlists, as long as there’s a reason. It can be ‘they’re all AA wallet projects’, ‘they create Spanish content’, or even ‘their logos are red’ (I made this up). This way, badgeholders can examine and reward multiple candidates in one go.
Like previous rounds, R3 took the median of all OP allocations for each funded project to calculate its weight in the total funding. All candidates must declare their contributions and impact within the given period as detailed and quantified as possible. All badgeholders were then given one month to review all candidates before casting their votes and allocating a certain number of OP to several candidates. Their goal is to evaluate a project’s impact and try to make up the difference between their actual profit and the profit they deserve.
Preliminary Analysis
There are 4 non-exclusive categories in R3: OP Stack (146 funded out of 165 candidates), Collective Governance (104/104), Developer Ecosystem (252/304), and End User Experience & Adoption (355/472).
A total of 531 candidates submitted their applications as ‘projects’, of which 429 received funding, funding rate (80.79%not to be confused with ‘funding rate’) is significantly higher that those ‘individuals’ (72/112 = 64.29%).
A visualized distribution of ballots and its correlation with OP received is shown below:
All candidates (however unlikely they may look) received at least 4 ballots.
Apart from several outliers, the scatter plot shows a somewhat consistent correlation between ballots and number of OP received, albeit not consistent enough to tell us that all ballots are created equal.
Because they’re not, even if we pick only the median ballots. The rule of thumb for R2 is that the number of OP received equals 1,000 to 2,000 times the number of ballots received. But there are still some exceptions that goes as high as over 7,000 OP per ballot received.
Of all categories, OP Stack, Developer Ecosystem, and End User Experience & Adoption all boast similar OP per ballot received, while Collective Governance candidates get significantly fewer OP, even though all candidates within this category received funding.
Did They All Say That?
The one word mentioned most frequently is — drum roll please — community (182 times). It should not come as a surprise since Optimism and RetroPGF pretty much get where they are now by the power of the amazing community.
The two words that come after ‘community’ are ‘build’ (176 times) and ‘ecosystem’ (175 times). People really have been BUILDING within this ECOSYSTEM.
Although there wasn’t a clear definition and even being abandoned by Messari, ‘Web3’ was still mentioned 114 times across all candidates.
‘Governance’ was only mentioned 63 times even though there were 104 candidates under ‘Collective Governance’ and they all received funding.
With Optimism’s partnership with Base, the word ‘Base’ was mentioned 65 times in all contribution statements.
The 25 most frequent words in all candidates’ impact statements are (again, removing words like ‘the’, ‘is’, and ignoring ‘Optimism’ and ‘OP’):
In stark contrast to their contribution statements, candidates really like mentioning ‘user’ (301 times) and ‘use’ (222 times), probably because new user adoption is one of the most obvious impact metrics and one that’s more likely to get funding than other metrics.
Say this 10 times fast: although candidates don’t mention ‘contribution’ in their contribution statements, they do like mention ‘impact’ (97 times) in their impact statements.
‘Base’ was mentioned 67 times, thanks to their partnership, again.
A total of 59 ‘first’s were created/mentioned in their impact statements.
Albeit lacking direct and inherent connections with public goods, ‘NFT’ was mentioned 93 times.
There were also 2 phrases most frequently mentioned in the impact statements: collective governance and client diversity.
Public Oddities
Not trying to throw shade on any project but there are several projects that felt out of place among all candidates. Some were not exactly ‘public goods’, others may not need OP funding that much. Quick recap, OP fundings are given as compensation for the difference between the profit they deserve and their actual profit.
Messari
Messari is one of my favorite research institutes and I’m one of their concerning free-tier subscribers. I read almost all their reports and learned so much from them. That said, it just feels odd that they would apply for funding in the public goods sector.
In case you don’t know, Messari runs a freemium business model whose premium tier starts at $900 a year and enterprise tier can only be more expensive. They stated only 1 impact metric — newsletter subscribers and offered only their quarterly report on Optimism as their contributions. Although they never disclosed their revenue or profit, it is at least safe to assume that they are financially healthy and possibly richer than most candidates.
Messari received 38 ballots and was rewarded almost 25,000 OP. It’s probably okay to reward a newsletter with 350k subscribers with 44,000 OP (plus 19,000 OP from R2) but there are certainly more candidates who are in direr need of these OP.
The Bankless Family
Not long after the Arbitrum funding controversy, Bankless made another surprising move in the Optimism ecosystem. A total of 12 candidates from the Bankless family applied for funding in R3. All of them passed the quorum and received a total of over 116k OP in funding.
It’s really difficult not to interpret this as milking, considering all Bankless DAO — the paterfamilias — offered as impact metrics were a bunch of X posts with fewer than 10k views, plus several Instagram posts with fewer than 10 likes and comments combined. Bankless Academy and Bankless Africa were both in Bankless DAO’s contribution statement, yet they both applied as standalone projects. Let’s just put everything aside, does it feel right to give around $50k (close to $75k now) to an influencer who hardly got any posts with more than 10 likes?
DeFi Summer?
DeFi is the future of finance. I am both an eager preacher and a humble farmer in DeFi and I will tell you DeFi will take its rightful place in the finance sector.
But in terms of R3, do these DeFi protocols really need funding? They boast millions of dollars in TVL and their daily revenue can get as high as hundreds of thousands of dollars. Is there a positive difference between their impact and their revenue?
Some protocols may claim they are attracting new users into the ecosystem by giving them OP tokens, like many Arbitrum protocols have been doing. But one has to ask: is bribing users really something you should (or even can) do as public goods?
This effect has already permeated through almost all sectors of our society. The big can only get bigger as long as they don’t do anything stupid while the others may have to fight tooth and nail just to stay the same.
It’s not that prominent in R3 but as we can see from above, there are still quite a few projects that may not need or even deserve this funding but still got some OP by their fame alone. If I (or you) applied for funding with several posts that few people liked or commented on, would they even consider us?
A little suggestion: in future RetroPGF rounds, maybe start a few bounties for background research to provide a more detailed background and context to all candidates’ contribution and impact statements. This way, a few candidates who deserve and need funding more than others may be justly rewarded and the entire ecosystem may just be a little bit better. There can even be more specialized awards for candidates within a particular sector or showed immense potential.
Summary
Optimism has been dedicated to public goods for quite some time now and like its optimistic sibling Arbitrum, Optimism has exerted immense influence with their native token OP by retrospectively funding public goods projects. Unlike the DeFi sector, where almost everything is quantifiable and where Arbitrum outshines most layer 2s, the public goods funding sector is still in its infancy. Immense research and practice are needed to develop a robust evaluation & funding mechanism. That said, Optimism has ventured further than most organizations in retrospective funding and with a few more rounds, the entire ecosystem will grow, thrive, and make the crypto world a better place.
