Budget Board Advisory Proposal for Retro Funding for Seasons 8 and 9

Elected Representatives 💼
1

TL;DR

As part of the citizens house missions budget, the Budget Board is providing a current draft proposal for community review. We aim to have this finalized 7/9.

We recommend a budget of 87M OP (~ 19,893 ETH) for Retro Funding over the next year (Seasons 8/9). This represents a +10% increase in ETH terms versus last year’s spend and a 99% increase in OP terms. Our recommendation is driven by the fact that the program is on a positive trajectory but the OP price has weakened relative to ETH over the second half of the past year.

Strategic Rationale

Retro Funding is a core component of the Optimistic vision. It aims to retroactively reward the builders who have created the greatest impact on the Superchain.

As the Budget Board, our mandate is to set a Retro Funding budget that (1) effectively rewards existing builders, (2) sends a clear signal about high-impact contributions to up-and-coming builders, and (3) keeps the Collective on a financially sustainable trajectory. We do not get into the details of setting budgets by season or category of Retro Funding.

Methodology

We have created an initial methodology for sizing the Retro Funding budget. The methodology consists of two steps:

  • First, we assess the quality of the trajectory that Retro Funding is on. We use a five-point scoring rubric to determine an uplift / discount factor - a percentage by which we believe the budget should be increased / decreased. A factor of -10 would yield a 100% reduction in budget (ie, zeroing) while a factor of +10 would yield a 100% increase in budget (ie, doubling).

  • Then, we make adjustments to the budget based on the OP-ETH ratio. We use OP-ETH because the Collective’s revenue is in ETH and Retro Funding is in OP. Currently, this is unbounded, and based on a 6-month lookback period.

The methodology is designed to encourage expansion of Retro Funding following periods of strong performance and a contraction during periods of weaker performance.

Analysis

Our net score for the past year is +1. This factor translates to a recommended increase of +10% in ETH terms.

You will see our analysis and scoring for each factor below. In general, we have been conservative and assigned an initial score of 0 wherever results are ambiguous or flat.

Factor Score (-2 to +2) Explanation
Fund availability +2 859M OP (20% of genesis supply) reserved; ~76M OP (9%) committed to date; 91% of initial allocation remains. The Board felt that the program still has a strong runway. Source: [PUBLIC] OP Token Unlock (Estimated)
Program effectiveness 0 Season 7 added data-driven impact metrics and monthly rewards; ROI visibility is rising, but causality remains hard to prove. The Board felt that it was too early to measure the effectiveness of Season 7 given the current round is still underway. Source: S8 Retro Funding Missions
Governance risk -1 Citizens’ House expansion (~150 to >1,000) is the first major change in three years and therefore comes with potential risks. The Board took a conservative view in the short term although in the long term this change is intended to reduce platform risk. Source: Governance in Season 8: The Next Phase — The Optimism Collective
Collective revenue 0 Sequencer fees up 5% YoY (6,955 ETH vs 6,653 ETH), effectively flat after inflation. The Board saw this as a neutral signal. Superchain Health Dashboard
Macro context 0 Superchain share of crypto TVL grew from 3% (Jul 2024) to 4.5 % (Jun 2025). The Board felt a market share of at least 5% would be necessary to warrant a +1. Superchain Strategic Focus Dashboard

Budget Calculation

We now apply this uplift factor (+10%) to arrive at a budget proposal for the next year:

  • Sum last year’s spend: 43,853,186 OP
  • Convert to ETH at 6-month TWAP: 18,085 ETH (43,853,186 OP x 0.0004124 ETH/OP)
  • Apply a 10% uplift factor: 19,893 ETH (18,085 ETH x 1.10)
  • Convert back to OP (spot): 87,411,829 OP (19,893 ETH / 0.0002276 ETH/OP)
  • Round to 87 million OP

Detailed exchange-rate worksheets are available here. The dates used for the 6-month TWAP calculation are January 1 to June 30, 2025.

This amount represents 10.1% of the total tokens reserved for Retro Funding, and would bring the Collective’s cumulative spend on Retro Funding to ~20% by July 2026. We believe this is sustainable given that the Collective is entering Year 4 and is able to support another ~8 years of Retro Funding at these levels.

Next Steps

  • 9 Jul 2025: Final draft posted
  • 22 Jul 2025: Onchain vote opens
  • 1 Aug 2025: Season 8 Retro Funding opens; first set of rewards released in early September
2 Likes
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GFX typically tries not to insert itself into Citizens House affairs, given our prominence within Token House and a desire to respect the separation of powers.

But it seems like the discussion should directionally be around how much to reduce retro funding. This is not a program that has, to our mind, consistently demonstrated good value. 87m OP is approximately a 5% inflation over the current circulating supply of OP according to Coingecko. It is also a staggering $47m in USD terms.

To put that in perspective, this amount of funding could:

  • purchase an entire bank in the US which could be used to provide banking and ramping services to the Superchain
  • create a governance-owned stablecoin in US or other currencies
  • build or grant to user-facing apps that onboard new users directly
  • just be burned, reducing emissions overhang

The burden of showing that retro funding is superior to simply burning the OP in a cost-benefit analysis should be included in this proposal, particularly with years of playing whack-a-mole with projects that exploit retro funding without even a solid narrative of how they contributed to Optimism’s sequencer revenue, user retention, or TVL secured.

8 Likes
3

Two updates here:

  1. For S8, the role of the Budget Board is to propose budgets for missions already scoped by the Foundation. But fully agree with your assertion @GFXlabs that future versions should have some concept of a BATNA / alternative use of funds.

  2. Immediately after posting we were advised that we should limit the proposal to just S8 and include detail on the split among the three proposed categories of Retro Funding, ie, Onchain Builders, Dev Tooling, and OP Stack Dependencies. We will preserve the original post but offer an updated version shortly.

3 Likes
4

We resonate with the logic and share the perspective that increasing Retro rewards without a clear upside for the Optimism Collective is likely to be net-negative for the long-term health of the Superchain ecosystem.

Our team is actively exploring potential Ecosystem Fund structures with multiple DAOs we collaborate with, aiming to enable convertible grants and investments that provide direct ownership and upside to onchain treasuries.

It could be highly impactful for the development of the collective to work toward a proposal to create a Superchain Ecosystem Fund running in parallel with the Retro Funding programs.

Early research has shown that we can leverage builder data points—such as OSO and Karma GAP progress—to gain valuable insights into project and builder traction, which can help the Superchain Ecosystem Fund make better and more aligned allocations.

We are happy to craft the thesis for an Ecosystem Fund to be evaluate in addition to Retro Fund, burning tokens and other potential paths.

2 Likes
5

Just buying risk-free Treasury bills and notes with this tranche of retro would nearly fund governance expenses at currently proposed levels in perpetuity.

The appropriate time to discuss whether retro funding should even continue or be repurposed for something else is now, while funding is coming up for renewal.

3 Likes
6

Informative and amazing.

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I agree with @GFXlabs on a majority of there points, especially with some builders exploiting the retro funds and not really bringing any value to the superchain ecosystem. However , some aspects that @ccerv1 brings up, ie the increase from 150 op to over 1000 op might warrant some consideration since there has been no increase in over 3 years for citizen house expansion to occur. @GFXlabs also brings up low risk treasures as a viable option to fund optimisms collective by the yields gained from the treasuries. That idea would be very similar to what tether does backing there coin with the treasuries and there yields. Just my small two cents