Incentivizing Competition in Blockchain Foundations

There are many blockchain foundations with large financial holdings, in the range of hundreds of millions to billions of dollars. I wrote about some of them here,

Blockchain Foundations are relatively new entities, and they are still figuring out how to operate. A recent process they are going through is incentivizing third party developers to build new client implementations of their respective blockchains.

Ethereum has done this, with Vitalik sending 3,000 ETH (roughly $300,000) on what seems like a whim (although there were prior talks with the teams that they would build out Ethereum 2.0). These teams are now building Ethereum 2.0 in Typescript, Go, and Rust.

Polkadot is also incentivizing developers with grants, and they’ve awarded a grant to ChainSafe to build the Polkadot Runtime Environment in Go. They have awarded grants to other teams as well, that they have yet to announce.

Although handing out grants is much needed, and an admiral thing to do, it is by no means the most efficient and productive way to incentivize developers to build on your platform.

Building new client implementations is extremely important, and a lot of time and effort should be put into strategizing how to get this done effectively.

Public competitions

A much better strategy for getting third parties to build on your platform is incentivized public competitions. Competitions drive people to work harder, and do amazing things to meet deadlines and accomplish goals. Blockchain foundations could learn from such organizations as XPRIZE, which has launched many multi-million dollar competitions, with incredible goals such as suborbital spaceflight, and improving oil spill cleanup technology.

SpaceShipOne, the winner of the first XPRIZE, which put humans into suborbital space flight through private enterprise. [1]

XPRIZE has three primary goals to meet for handing out prizes [2]:

  • Attract investment from outside the sector that takes new approaches to difficult problems.
  • Create significant results that are real and meaningful. Competitions have measurable goals, and are created to promote adoption of the innovation.
  • Cross national and disciplinary boundaries to encourage teams around the world to invest the intellectual and financial capital required to solve difficult challenges.

Blockchain foundations don’t have to meet these three goals directly, they should create their own goals appropriate to blockchain tech.

There is a lot of untapped potential for blockchain foundations to incentivize building on their platforms, and the good foundations will figure out how to tap into this potential. But as of right now, it is funny to think how a space so obsessed with game theory and incentive design, are actually lacking this rigorous thinking in their foundations that control hundreds of millions of dollars.

An example of what it could look like

Putting a $2,000,000 and $1,000,000 1st and 2nd place prize for new client implementations could draw some amazing engineers to compete around the world. The winners could be determined by the usage of the client a year after launch date. So if Ethereum 2.0 in Rust is used by 60% of the nodes running the network, they would win the $2,000,000 prize.

Running blockchain foundations is going to be HARD

This is just a simple suggestion, much deeper thinking needs to go into setting up competitions to incentivize developers. But it is going to be hard, the incentive design has to be just right so that you attract good developers, and give them tasks that they can achieve in a reasonable amount of time.

Whoever works at these foundations is going to have their work cut out for them! It is hard to design a well thought out competition, and legally it is harder to pull off than just handing out grants. But it will be worth the effort.

We’ve already seen incentivized competition on a small scale

Cosmos has already done a small scale competition with The Game of Stakes, which was a great way to incentivize developers to help debug their software.

Such competitions can be applied to all aspects of open source development on blockchain platforms — wallet integrations, testnets, second layer protocols, etc.

Going forward

I would expect that we will see much more thought and consideration into designing public competitions as each blockchain matures, while competing with one another on a global scale to attract developers.


[1] Photo of Space Ship One

[2] XPRIZE Wikipedia