(Looking For Feedback) Proactive Fundraising for Retrofunded Projects

[zherring]

Looking for feedback on some of the avenues we’ve explored after about 6 weeks of research and ideation.

• Questions for the reader to keep in mind:
  What resonates? What doesn’t? Would this be helpful in the OP ecosystem?
  What are some ways we could make this even more aligned or crucial for the OP builder ecosystem?

TLDR: Donate OP to teams in between RetroPGF rounds, receive a %% of their RetroPGF in the future.

The Design Space

Over the past 6 weeks we’ve been exploring RetroPGF from the the lens of capital allocation and project sustainability. The primary design question: Can we design a system that accomplishes the following:

1. Provide greater income flexibility to projects who rely on RPGF
2. Give upside to early supporters
3. Create clear, obvious market signal for allocators (see spreadsheet near bottom)

What we’ve heard

We’ve run a survey (shared on Twitter & Farcaster) with non-representative sample size and done 5 user interviews around the importance of Retrofunding and existing pain-points.

Key findings + opportunities

• RetroPGF is the lifeblood of these teams but also difficult to plan around.
• “it’s very sporadic, I can’t plan around it, just have to scramble when it’s announced.”
• Waiting to redeem can be painful…but so can streaming w/ OP market fluctuations
  • Has already lost 25% of value since time of grant ($4 at announcement, $3 upon receipt, $3.85 at time of writing)
• “Sign us up, we would love to launch with this.”- Med-sized recipient
• “Honestly, we’re interested in just a boring bank loan…like debt financing, just make it as simple as possible. It’s a lot of work, convincing the bank of our income etc. but I want something very simple.”
  • Note: Larger projects have more options, a medium-term goal would be building deep enough liquidity to compete with 20-25% APR associated with business loans

Additional User Interviews

• Grant program admin at different protocol foundation, head of startup incubator
  • TLDR: historic data is huge, sorting signal from noise is very time consuming (2-3 mo for cohorts of 1200+), currently word-of-mouth dominates so wisdom of a crowd of allocators could be very compelling. Additionally, allowing custom weighting would help prevent gaming the system.
  • A lot of interest we retro-fitted this to use historic info from GitCoin and onchain data as well.

The solution we’re exploring

1. Teams applying to RetroPGF4 deploy a contract
2. Supporters send OP to this split contract.
   2.1 The OP is forwarded on to the team’s wallet.
   2.2 An NFT “ticket” is sent to the sender representing the amount they sent, and the proportional claim to future distributions.
3. When RetroPGF4 is received, a predetermined percentage is sent to the contract, with ticket holders able to claim a refund proportional to the amount they sent

–
V0.12 Figma Prototype
Mostly a wireframe w/ some ideas around display and user flow. Very early.

–
Repayment Spreadsheet

Proactive RetroRPG Spreadsheet

Note: Because awards are percentage-based, funders are incentivized to find and fund projects with room to grow into impact funding. Potentially strong market signal for allocators.

What’s Next

• Incorporate feedback from the OP community

  • Questions for the reader:
    What resonates? What doesn’t? Would this be helpful in the OP ecosystem?
    Ideas to make this more aligned or crucial for the OP builder ecosystem?

• Additional user interviews for feedback with the intention of finding 5-10 launch projects

• Identify sources of funding for a v1 (to be spent on a light SC audit & 1.5 FS eng resources)

About Us

NiftyApes in partnership with Kevin Owocki at Gitcoin has spearheaded this initiative ( big “thank you” to them for the assist so far!).

NiftyApes is the co-founders Kevin Seagraves (Gitcoin, Boston Consulting Group, @captnseagraves) and Zach Herring (BasePaint, ConsenSys, @zherring). Between us we have research, design, GTM strategy, solidity, and front-end eng chops.

[ccerv1]

There are a lot of nuances to consider here, but big picture I think this kind of experimentation is super exciting!

What resonates: Blurring the lines between risk capital and grant capital. RetroPGF can serve as an “advance market commitment” for impactful work. Prospective funding can help early stage / resource constrained teams fill that demand.

What I worry about: The RetroPGF demand signal is weak / hard to predict right now. If people are donating then this is one thing, but if they view it as an investment then it’s very hard to establish comps.

FWIW, this is a design space that hypercerts has explored as well: What Are Hypercerts? | Hypercerts

[latruite.eth]

It’s genuinely thrilling! It’s sparked so many questions in my mind, and I’m excited to see where this leads.
This tool could significantly help ‘bridge the funding gap’ for projects. It also essentially creates a predictive market on who might receive an RPGF allocation.
I think the Foundation is also working hard on that topic. I recall Mark Tyneway discussing ‘Project tokens’ in a podcast last year, see my notes : ). It might be something to consider in light of this new development.

I noticed the focus is on projects that have already received RPGF allocations, rather than new ideas or projects in their infancy. Why is that? Newer projects, especially those in development, often need upfront capital. Offering them a platform to pitch to investors interested in public goods and the ecosystem is an incredible opportunity. It complements grants and even mirrors the now-abandoned Co-Granting experiment (Introducing Optimism Co-Granting).

However, I’m struggling to see the concrete value proposition for well-established projects. With more regular RPGF rounds, these projects might not often need to urgently raise funds between rounds (but I could be wrong).

Also, the collateral implications could be huge and emerging:

• Integrating my proportional claim NFT into DeFi →
• If VCs start using this tool to inject significant amounts, it’s great for public goods and the ecosystem, but what about measures for anticapture?
• This might raise some legal questions for projects too (expected return on investment - security ?).

These are just initial reactions;looking forward to the developpements and to see how the community responds to this

[bitbeckers]

From my converstaions with people and project in the hypercerts/PGF space this is a pattern that keeps emerging, so exciting to see it here as well.

It looks like you’re looking to do greenfield development, but I would argue the components are already available.

“deploy a contract” → fundraising and management:
Yeeter is a kickstarter like product that onboards funders into a MolochDAO. This entails anti-capture of funds because funders can ragequit when they don’t agree with the direction the project is taking. As additional funding would end up in the same Safe, RPGF funds are implicitly assigned to the funders.

“receive a NFT ticket” → redeeming prospected funding for retroPGF:
The project applying for funding could create a hypercert with their application/intent/roadmap for x-period of time in the future. Funders who yeet into the pool receive a fraction of that hypercert back for their funding.

Composing these products would safe on the dev effort and need for audits. You’d probably want a clean solution to ragequiting with hypercerts fractions, which is something worth exploring.

I’d argue for a Moloch V3 situation because of governance and anti-capture mechanics. I’d argue for hypercert because it would not lock a team into this single product. They tap into the evaluation and funding market we’re building with hypercerts.

[jackanorak]

I love the idea. I think @lavande has been talking about something like this for some time

[dennison]

This is a super exciting idea!

I’d be concerned that maybe it kind of “financializes” the RetroPGF system, but one of my big complains about RetroPGF is that public sentiment seems to expect it to be a kind of funding (rather than a reward) and as such people build RetroPGF into their expectations, which means it starts to be needed by teams to cover operating costs. This bridge funding is a great idea.

I’d also be a bit concerned though about it devolving into a kind of “payday loans” type system, but I’m sure we could get around that.

Awesome idea! What would it take to actually start building it? Some sort of integration with the RetroPGF system where the payouts go to smart contract wallets that enforce a split?

[zherring]

Incredible feedback so far. I’m going to bucket the feedback across three themes that I see, hope that’s ok with folks. Anything I fail to address, lmk and I can hit it again.

@ccerv1 @dennison

What I worry about: The RetroPGF demand signal is weak / hard to predict right now. If people are donating then this is one thing, but if they view it as an investment then it’s very hard to establish comps.

I’d be concerned that maybe it kind of “financializes” the RetroPGF system

Strong agree here, and an additional complication - is this a security? We’re chatting w/ legal w/r/t to ways to de-risk a pilot which might ameliorate the over-financialization risk, but it’s not going to solve it.

It’s another reason why my preference would be to keep this a closed pilot (~5 projects at different points in their maturity to gauge where it’s useful vs where it isn’t).

@latruite.eth

I noticed the focus is on projects that have already received RPGF allocations, rather than new ideas or projects in their infancy. Why is that? Newer projects, especially those in development, often need upfront capital.

Great call out — early projects either pre-RPGF or early in their RPGF journey would benefit the most and I think are the niche to start with. It was easiest to detail how returning projects could raise (10% of prev grant w/ a 10% + APR of next grant to keep things extremely simple), but I think expanding it to projects who haven’t received RPGF is necessary and also where funders would have the highest incentive to fund (because it’s also where the highest risk is!).

We’re open to suggestions on how much unknown projects should target to raise (some percentage of the median of RPGF3? Or set a small amount so the risk funders take has a good payoff).

Also, is there any good place to read a post-mortem about Co-grants? Or someone who’d know why the project didn’t work out/was abandoned. Seems like lots to learn from prev attempts here.

Feedback we’ve received that I agree with: keep the pilot small so that you aren’t spreading funding across too many projects, and optimize for signal (what we want to know: can projects who need it get proactive funding? And is proactive funding a good way to predict who gets RPGF?).

@bitbeckers

Totally agreed that a lot of the parts already exist. I wrote this for a general pop audience, so avoided the use of hypercerts but it’s absolutely been on our radar as a standard to incorporate. Molochv3 less so, just bc my experience w/ v1 and v2 were so heavy for the UX I was imagining, but 0xSplits was on my radar for that (and apparently Superfluid supports splits already? So we might already have this model covered end-to-end with solutions OP already uses).

Something I’m cognizant of: we’ve had projects say “if it’s 1 button click to set this up, I’d be >50% likely to use it. If it’s a lot of work for an unknown payoff? I’m much less likely” so whatever technology we select would need to align with the desired UX for builders and funders.

Additionally, we need to be cognizant of the UX that occurs outside of the software: we’re essentially creating a new work stream for projects to promote and campaign for outside of the normal RPGF campaign.

50% of subjects surveyed said they spent 0 hours campaigning, and only ~18% of respondents spent over 4 hours … the frictionlessness of RPGF is a huge feature that IMO should be adopted as a design principal for this pilot.

We’ve heard from very established teams that this not an interesting project because it gives them more work, “shilling to degens,” so it’s something I’m pretty sensitive to.

@dennison

I’d also be a bit concerned though about it devolving into a kind of “payday loans” type system, but I’m sure we could get around that.

Strong agree re concerns about payday loans. The time between the application process of RPGF4 and when the funds are distributed make this less useful if you only open it up to teams once they’ve applied.

Conversely, fundraising for teams before they’ve even applied seems problematic too. Open to suggestions on ways to solve it. An “easy” fix for an open model could be something as simple as: projects who have received RPGF in the past can have a rolling fundraiser, pre-awarded projects must wait until they’ve applied to RPGF4 to verify that they have a valid project that they’ve applied with.

[kutubu]

Interesting idea, I love the fact that it will provide financial flexibility for projects to thrive. However, I will be glad to ascertain the matrix used to access a project’s legibility apart from retropgf, and also what about if a project cannot retrieve the retropgf funds due to certain reasons and there is an outstanding refund?

[astro]

I must commend you on the innovative approach and thorough research that went into your exploration. Your initiative to provide a structured mechanism for supporting OP ecosystem projects between RetroPGF rounds, along with the concept of offering future RetroPGF percentages to early supporters, is indeed a compelling one.

I’m reaching out to share insights from Blocktrend, a Taiwanese Web3 subscription media, which has been conducting a somewhat similar experiment since 2022. Our model diverges in that we offer a 100% return of the OP to our supporters, as opposed to a percentage. Moreover, we identify our supporters through backend subscription data instead of NFTs. Blocktrend has a significant base of hundreds of paid subscribers, and the funds from these subscriptions support the production of our tri-weekly Chinese content, which is also translated into English.

From the onset of our involvement in RetroPGF2, we pledged to return 100% of the OP received to our paying subscribers as a reward for their early-stage influence investment. Fortunately, Blocktrend secured OP in both RPGF2 and RPGF3 rounds and has faithfully redistributed it to our paid members. Our goal is to make subscribing to Blocktrend more beneficial than remaining a free reader, as only paid members are eligible for OP rewards, despite free readers having access to all articles.

You might wonder how we sustain our operations if we’re redistributing all OP rewards to our members. Our primary revenue stream is the subscription fees, with the RPGF-derived OP acting as an added incentive for subscribers. This creates a win-win-win scenario: subscribers financially support Blocktrend’s operations, Blocktrend produces valuable content for the Optimism Collective, and the Optimism Collective rewards Blocktrend’s supporters with RPGF.

Although our approach doesn’t utilize NFTs and involves a 100% reward redistribution, it has indeed attracted a segment of readers interested in participating in this public good experiment. Our ultimate aim is for the RPGF-derived OP to exceed the initial subscription fee paid by our members, achieving what we term “paying is more beneficial than free.”

This model not only helps maintain our independence but also pioneers a new form of public goods experiment. I am very open to exchanging experiences and insights if there’s interest. Perhaps our experiment has gone unnoticed in the mainstream community because it has been conducted primarily in the Chinese-speaking domain. Hence, I felt compelled to share our feedback and experiences here.

Looking forward to potentially collaborating or exchanging ideas that can benefit both our initiatives and the broader OP ecosystem.

Related link:

• Blocktrend receives OP airdrop: rewarding members for early investment with RetroPGF
• RetroPGF 3: A Lavish 1.6 Billion Social Experiment
• RetroPGF: Earn back subscription fee by social impact bonds
• Optimism Funds Public Goods: Subscribe to Blocktrend for OP Airdrop Chance
• RetroPGF Simulated Voting: 13 Selected Impactful Projects Eligible for 10M OP

[0xR]

Hi @zherring !

0xR (Ruben),a web3 governance & UI/UX research and designer

This initiative is very exciting I also have a similar idea but I love how the incentive for funders is the OP retro rewards. Curious to learn more about UX research and am open to getting more involved!

Bless 0xR

[kutubu]

I must say this is interesting, but how do you directly connect active members to incentive.

[astro]

Thank you At Blocktrend, we connect with our subscriber using their subscription data (email) to collect the cryptocurrency wallet addresses where they wish to receive the retrospective rewards. Each year, we update these wallet addresses to ensure subscriber have the freedom to choose their preferred wallet for the rewards. This practice also prevents us from accidentally sending OP to obsolete or no longer used addresses, ensuring that our incentives directly reach the active supporters who contribute to Blocktrend’s content production.

[zherring]

Sharing some updates for folks + some open questions we’re asking ourselves.

TLDR: Things seem promising, there’s a couple of forks in the road w/r/t practical implementation, SuperFluid might accomplish most of what we’re proposing out of the box, and we’d like to meet with LPs to gauge interest and understand what projects we should be focusing our recruiting efforts for the Pilot Program.

Open to feedback, would love introductions to either Projects for the Pilot or LPs who would want to back these teams.

---

1. We have hard commits from 2 teams, but have paused our recruitment efforts because we’re asking ourselves “how big should the pilot be?” More on that on point 4

2. Met with a couple of folks who are lawyers but not our lawyers (one of our startup’s advisor w/ deep US+crypto expertise. He introduced us to someone we could work with with tremendous bonafides).

• TLDR: based on initial readout, they think this could be defensible as just providing software as-is, so restricting US users/projects may not be an issue.
• It would be a modest project, around $10k for quick research, opinion, and rough T&Cs to CYA, which seemed reasonable to us based on prev legal work we’ve done.
• We could also just geo-fence the US starting out - cheaper in the short run, but would also nix the two teams we’ve recruited.

3. To that end, Kevin Seagraves has started scoping out a technical implementation. We’d like to use as much of Superfluid’s existing smart contracts to reduce build time, security risk, and UX friction. Initial looks have been positive, will share a full write-up when that’s ready.

4. The biggest question we have now is LPs - who’s going to put money into this? I think if we did a build-it-and-they-will-come approach, we could realistically get $10-25k worth of OP, which keeps our pilots pretty small and restricted to just higher risk projects. We’re reaching out to other potential LPs to gauge interest.

• We’ve also considered raising a matching fund starting with NA’s treasury (maybe distributed quadratically) to gin up interest, but that’s a lot of risk of us to shoulder (build cost/risk, legal risk, and LP risk) so we’re looking for resources in the space we can leverage across the three.

Open to feedback from folks in terms of next steps we’re missing or resources we could leverage as we gauge risk and rewards.

[SuperchainEco]

Gm @zherring - we’re stoked about this pilot and have been walking around with a comperable idea for some time!

We would love to be part of a potential pilot, seeking ~3k OP tokens to distribute in our Superchain Season distributed research and content program. We can probably source most of those commitments ourselves, but are eager to be a design partner and tester of your solution.

Feel free to shoot us a DM or mail to op@superchain.eco

[zherring]

Working on the UX! Would love feedback, or if you’re a project that would be excited to be included in the pilot, please reply here or DM me (@SuperchainEco DM’d!)

gofundOP

[raho]

In my opinion a creative solution like this is long overdue, and I’m extremely excited to see somebody taking on this initiative!

[jaack]

I really love this idea, and it would definitely work for some kind of projects that would have a much higher incentive in building on the Superchain without knowing if they’re going to get Retro Funding. This is like distributing business risk like VCs do, but with a more practical return on investment, even though it may have a lower interest.

[Sator]

Always welcome new experiments in the space. For the following point:

The biggest question we have now is LPs - who’s going to put money into this? I think if we did a build-it-and-they-will-come approach, we could realistically get $10-25k worth of OP, which keeps our pilots pretty small and restricted to just higher risk projects. We’re reaching out to other potential LPs to gauge interest.

I might be wrong but VCs rarely fund public goods because their business model might not be that attractive. Maybe narrowing down the scope of projects that you are looking to fund would help attracting LPs; ideally, these projects should be “for-profit” and startup like.