Programs like Quadratic funding of public goods attempt to distribute funds for Public good projects according to people’s estimates of how valuable the project will be. But people are often much more sure in hindsight how valuable a project was. So Optimism (an Ethereum-centric company) and Vitalik Buterin propose that retroactive public goods funding, in which a “Results Oracle” commits to rewarding projects recognized to have delivered value.
Exactly how it disburses funding is left unspecified. One simple approach would be to allow experts to choose the most important projects, then to implement the results oracle as a fixed allocation table.
But a more interesting approach would have the oracle issue rewards by creating a “project token” which could be initially distributed to awardees, and then setting up a smart contract which would purchase those tokens at some price floor. But because that price floor might vary over time—e.g. if the project turns out to be recognized as more valuable—the token would create a prediction market. If you anticipate that the price floor will go up soon, you might be willing to buy one of the project tokens for a higher value than its owner can get from the oracle.
There is some prior art: Lewis Carroll Invented Retroactive Public Goods Funding In 1894
Q. What’s the name of the model that Ethereum Optimism and Vitalik Buterin proposed for creating an “exit” for public goods projects?
A. Retroactive public goods funding via a well-resourced oracle.
Q. What’s the key high-level advantage of retroactive public goods funding over, say, quadratic funding a la Gitcoin?
A. It’s easier to agree on what was useful than on what will be useful.
Q. Retroactive public goods funding is analogous to what existing for-profit funding model?
A. A startup being rewarded with an exit.
Q. In retroactive public goods funding, what do we call the entity which actually funds the projects?
A. A “results oracle.”
Q. How does a “project token” acquire value in retroactive public goods?
A. The “results oracle” offers to buy it at some rate.
Q. How are the “project tokens” initially disbursed in retroactive public goods projects?
A. To people who initially contributed to creating the public good.
Q. How do retroactive public good “project tokens” create a surprising secondary market?
A. They make a prediction market: if you think the results oracle’s price floor might go up, you’ll be willing to pay more to buy a token.