Impact = Profit is a bad meme (and mechanism)

Retro Funding 🔴
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Recently ran into the Impact = Profit meme, and I have come to believe that it’s not a good mechanism for determining how much to fund a public good.

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Here’s a brief writeup of the problems I see with Impact = Profit, as well as a suggestion of a promising alternative: Impact = Funding

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If you’d like to join the discussion on twitter you can find it here:

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I think your suggested model keeps the profit motive unchanged.

While the Optimism mechanism is about incentivising impact, irrespective of whether it is profitable or ‘just’ a public good.

I prefer the original, Optimism position; where I believe they see the profit motive, alone, has skewed the creation and maintenance of public goods.

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I think the issue of profit happens because:

  • Lack of Basic Cost Knowledge: The challenge of profitability often arises from insufficient knowledge about fundamental and additional project costs.
  • Comparison with Peers: Validating costs through comparisons with local or regional equivalents is an effective method, particularly in countries with emerging economies or high inflation rates.

Economic Disparities

  • Wage Gaps: There are significant differences in minimum wages across countries, which can lead to discrepancies in cost estimates.
  • Misaligned Cost Placement: It is sometimes ironic to see costs that do not reflect the economic conditions of a country.

Cost Validation and Accountability

  • Expense Verification: Ensuring each cost is validated, such as through financial audits or the verification of expenses, is essential.
  • Transparency in Accounting: Accurate rendering or validation of accounts is critical for financial integrity.

Engagement and Governance

  • Lack of Skin in the Game: It is important that a portion of the profits is delegated back into the protocol to foster a deeper connection and commitment.
  • 0 or low participation in Governance: It is problematic when recipients of funds, such as RetroPGF winners, do not participate in governance, delegate tokens, or represent the community adequately.
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