Ratification of Profit Definition for Round 4

[spengrah]

@jackanorak

Builder grants are to get a thing built. Critical milestones are there to show that the thing has been built and that there have been attempts to make the thing useful. If the critical milestones aren’t met, no payment.

Benchmark milestones reflect actual impact, but you can whiff all the benchmarks and still get paid. Why? Because builder grants aren’t compensation for impact; they’re an ecosystem investment in the hope that stuff has an impact later on. For analogy: would a startup book investments as income?

The main difference between a builder grant and an investment is that the grant expects a non-financial return while an investment expects a financial return. We can see how this makes a practical difference by looking at a hypothetical comparison between a) a builder grant and b) an investment, both of the same amount X, given by the Token House to the same project that delivers impact of amount Y.

Let’s say that they delivered more impact than they received, ie Y > X.

In A, the project receives X as a grant and delivers Y impact.

• If retro funding discounted builder grants (for simplicity at 100%), the project would receive (Y - X) award from retro funding. In total, it would receive Y reward for Y impact, satisfying the criterion of Impact = Profit.
• If retro funding did not discount builder grants, the project would receive Y award from retro funding. In total, it would receive X + Y reward for Y impact. That’s too much! Because retro funding is not unlimited, some other project would necessarily go under-rewarded for its impact.

In B, the project receives X as an investment and delivers Y impact.

• If retro funding discounted investments (for simplicity at 100%), the project would receive (Y - X) award. That’s too little! The project team may well decide that building for the OP ecosystem is not worth the trouble, and pivot to something else in order to generate a return for its stakeholders’ investment.
• If retro funding did not discount investments, the project would receive Y award. In total, its reward for delivering Y impact is also Y, satisfying the criterion of Impact = Profit. Note that Z goes back to the Token House.

@jackanorak

Growth grants don’t even go to the teams, a distinction that people need to fully internalize. I hope the implications of this fact are a little more obvious to the reader.

Its true that the growth grants don’t go directly to the teams, but they are effectively subsidizing their marketing budgets. Certainly paying your users OP to execute transactions against your contract will result in greater sequencer revenue generated by your contract!