Are Competitions Better?

Last season as a community we had a realization that the grants we’ve been distributing from the community governance fund have had somewhat disappointing results in terms of user stickiness and TVL.

The goal of this thread is to examine why this is and how we can improve on this for next season. Specifically, thinking about competitions as a better use of grant funds.


Starting from first principles, why are we even spending this $OP on grants on the first place? The whole point of anything we do at this stage in Optimism’s growth is to push us closer to the Optimistic Vision and it’s flywheel.

Just as a reminder, the optimism flywheel looks something like this:

  1. Make the Optimism network a valuable place for users to transact
  2. Create sequencer revenue from those transactions
  3. Apply this sequencer revenue back towards [a] in the form of RPGF


It’s important to know that the value generated in [b] is directly tied to the value that users are getting from their transactions which inherently comes from the value Optimism itself provides. In math form that looks like this:

Sequencer Revenue = Value of Transactions to Users = f(value of optimism network)


Luckily we have a tool to accelerate this flywheel in the form of the grants fund. In an ideal world the makes our flywheel look like this:


But so far, the majority of grants have gone towards liquidity incentives on DeFi protocols.

How do these juicy yields affect the flywheel?

The good:

  • Brand new users may come for the yield but stay because of the ecosystem
  • Fledgling protocols can get their first initial bumps of users and liquidity to become viable on their own

The bad:

  • As we saw in the analytics, the majority of these grants are really just transfer payments from the OP Foundation to users

While there’s nothing wrong with free money, these kind of incentives are not actually accomplishing our goal of getting the flywheel going. In fact, liquidity incentives are creating a short-circuit in the flywheel by directly giving value to users [b] without boosting the value of Optimism itself [a].


And our equation for B becomes:

Sequencer Revenue = Value of Transactions to User = f(value of optimism network, value of liquidity incentives to users)

Yes, the value of transactions to users does go up in the short term but this value isn’t coming from the ecosystem itself and will dry up as soon as the incentives do. This appears to be exactly how the results are playing out in the data.

So what can we do?

I believe that part of course correcting is to shift grant focus to make SURE that we are target [a], the value of the optimism network, directly with grant funds.

One effective way that I believe we can do that is competitions.

Competitions have long been used as a way to leverage dollars to encourage innovation in a space. They are especially useful when the answer to the problem is not known.

Can you predict what the most popular app on Optimism will be 3 years from now? We might have some ideas, but as of now we really don’t know what the killer app of the future will be.

Well-crafted competitions allow us to move closer to the killer apps of the future as well as increase the utility and usage of the apps we currently have on Optimism.

Examples of competitions to draw from:


Just to add in a little bit of perspective as far as bang-for-the-buck goes, OP Season 2 was capped off with a $4million OP grant to Velodrome for liquidity incentives (not mad about this, Velodrome and their team is great).

EthGlobal had a recent hackathon in Bogota with a total prize pool of ~$500k USD which included all prizes contributed by technology sponsors. That hackathon brought together 900 hackers and 212 project submissions.

With the funds from that one liquidity incentive grant, we could have funded 10 massive hackathons.

By scaling back the prize pool to $100k, we could have used those funds to run 50 individual hackathons. That’s one hackathon with a juicy $100K prize pool for every single weekend of an entire year.

Extrapolating numbers, that could have brought 9,000 developers and 2,000+ new projects to Optimism.

Other Competitions

Competitions don’t have to be just hackathons either. Here are some ideas for the many types of competitions that Optimism could run in order to make the ecosystem more valuable:
  • Hackathons

    • Public goods
    • ZK-dapps
    • Bedrock Hacks
    • DeFi
    • Tooling
    • NFT
  • Social/awareness

    • Most viral optimism-themed TikTok
    • Meme competitions
    • Best Optimism Rap competition
  • Business Dev

    • Business plan competition
    • “Build a business” competition
      • Cross between hackathon & incubator
    • Interactive NFT competition
  • Education/onboarding

    • Best educational “what is optimism” video
    • Best Optimism coding tutorial
    • Best “getting started with optimism” tutorial

All of these competitions can be directly tailored to directly increase the value of the optimism ecosystem for the long term, accelerating our flywheel and moving us closer to the optimistic vision.


While the OP Foundation might host their own competitions, I think the option should be open for community members or community governance to run it’s own. The design space is really large for these, and funding multiple attempts might be a good idea until we find what is most effective.

If you made it this far, thank you for taking the time to read. I’ll leave you with a few open questions that might be useful topics of discussion:

  • How would a community-run competition work?
  • Could anyone apply to create and host a competition?
  • Would these organizers be compensated for their work?
  • How do we prevent the gaming of the system (i.e. hosting a sham competition and pocketing the prizes)?
  • What kinds of competitions would you most like to see?

Stay Optimistic,
-Michael :heart: :sparkles:


[quote=“Michael, post:1, topic:4318”]

  • Hackathons

  • Social/awareness

  • Business Dev

  • Education/onboarding

I think this is a really great idea! Competitions especially within the educational category would increase the quantity and more importantly the quality of the Optimism related content out there. Which I believe fills quite a large gap. The network is growing so fast with so many new products being developed, the educational content to go along with those products tends to lag.

My suggestion would be to start small and iterate. Maybe start with a trusted sub-set of OP community members to run these competitions. I think a great place to start would be with Optimism Ambassadors maybe? They are out there and plugged in so know what competitions may be of the most value and can really get the word out.


I think the Optimism Foundation knows this is the next step, which is why part of the future council has 3 members dedicated to approving developer events like hackathons.

Quote from:

  • Builders Sub-Committee:
    • Goal: maximize the number of developers building on Optimism
    • Non-goal: retroactive funding
    • Possible RPFs: prospective builder grants for new projects, hackathons, technical content
    • Format: proposers receive grants, suggested to be <50k OP, which are locked for a period of 1-year. If access to upfront capital is a blocker for applicants, Optimism may put them in touch with alternative resources to support teams in this position.
    • Budget: 850k OP / Season
    • Reviewers: 3 (see below)
    • Consensus: 2/3 vote required to fund a grant

There are already plenty of DAOs and developer organizations we should reach out to. For example, Secureum makes a developer race every month:

This is already happening we just have to incentivize moving it to Optimism.

Yes but I think either the competition should be ready so we can verify how it works, or the hosts already have some background in doing this kind of thing.

This one it’s tricky because they are promoting their own brand with OP prices so this is mostly a win-win situation without payment. If they charge for any other service then $OP prices are good marketing for their brand and they attract more clients. If the host it’s a nonprofit living on donations then this is the same case, OP used as prices will create marketing enough to bring in more donations. I think this will have to be examined on each proposal.

Clear rules from the beginning
Well-known organizations with hackathon history can have bigger prices but they should apply full transparency
New hosts can have an OP request limit for their first event and earn trust step by step
All hosts would post a thread for accountability like grants approved from season 2

good times are ahead!


Not a bad idea! Theoretically trusted community members would be more likely to have a grant request approved so maybe this is baked into the system a little bit already.

The other thing we could do is set things up to be milestone-based. We can only distribute the $OP needed to run the competition and let the grants council distribute the prizes.

I think one step would be to encourage anyone that want’s to put on a competition to do it once we have an idea of what that looks like. The OP Ambassadors might be a great place to start for this.

I also totally agree, the new apps/protocols are growing much faster than the educational content!


It’s interesting, in my mind when I was making this post I was picture community members that wanted to randomly organize a competition (for example some community member decides to set up the rules, infrastructure, and marketing for a “best OP memes” competition) rather than companies/protocols that wanted to do a competition directly with their tech. I actually think both are interesting but you’re right, it does come down to evaluating case-by-case.

I love seeing these ideas because they are some things that I never would have even thought of in the first place. The IAmTheOptimizer one seems really cool.

I think one goal for next season would be to try and get a lot of these going but with smaller budgets of OP. It would let us experiment with what works and then the following season we could repeat the successful ones but at a bigger scale.