Retro Funding: on Memecoins and Onchain GM

[Jonas]

I’d like to open a discussion on the inclusion of memecoins and simple onchain applications, like ones that allow you to post “gm” onchain, in the Retro Funding Onchain Builder Program.

To recap: The Onchain Builders program rewards projects, that have deployed their own contracts on the Superchain, with monthly Retro Funding rewards based on measurable onchain impact like transactions, gas fee contributions, TVL and unique user interactions. Dive into the docs here.

The Dilemma

We’re observing a rise in projects like memecoins and onchain GM applications performing quite well by certain metrics, notably user adoption. You can find current RF Onchain Builder results here.
These projects are garnering significant engagement, but they also raise a critical question: should Retro Funding reward these types of projects, and if so, how generously?

Arguments Against Rewarding Them:

1. Perceived Lack of Long-Term Value: One might argue that these projects don’t contribute meaningful, long-term value to the ecosystem. They might be fun or trendy, but they don’t advance the ecosystem’s value and bring us closer to …
2. Limited Innovation: Compared to other applications that push boundaries, memecoins and simple apps are less innovative. We might risk incentivizing more of these low-effort projects if they receive significant rewards.
3. Airdrop Farming Concerns: There’s a concern that such projects are often used by users to farm airdrops, rather than contributing to genuine, sustainable growth.

Arguments in Favor:

1. Meeting User Demand: These projects clearly fulfill a demand. The high usage indicates that users find value in them, and ignoring this demand could mean missing out on what users actually want. A big factor here is the rise of “mini apps” which make fun, straightforward actions onchain more enticing to users.
2. User Base Growth: Memecoins and onchain GM apps might serve as entry points for new users, introducing them to the ecosystem. This can have long-term benefits as these users eventually explore more complex aspects of the blockchain.
3. Differentiation: Right now the market for onchain applications is fairly immature, with the dominant players like DEXs or lending markets, heavily benefiting from degen behavior that is not very different in motivation to memecoins. When the market matures, we should naturally see what we consider as “more valueble applications” winning out.

Request for Feedback

I’d love to hear the community’s thoughts on this. Should Retro Funding continue to reward these projects? If so, how do we balance rewarding user engagement with incentivizing long-term, innovative contributions?

[Gonna.eth]

This is my personal opinion and does not represent the Grants Council.

1. Misaligned Reward Proportionality

Retro Funding is supposed to reward impact, but there’s a clear difference between:

• Surface metrics: high tx counts from low-effort interactions
• Substantive contributions: long-term value creation

Tap to GM receiving 25k aprox OP/month, comparable to almost 6 months of GC Expert reviewer compensation. This undermines the legitimacy of governance labor. At that point, being GC Reviewer is effectively just the memecoin’s exit liquidity… unless GC sells first.

Worse, this trend could compromise gov security over time. If left unchecked, GM could climb into the top 40 delegates by year’s end not because of contribution, but because of token farming.

2. Yes, They’re Fun, But Not Valuable

Sure, memecoins and GM apps:

• Help onboard new users
• Signal user interest

But should they be top-tier Retro Funding recipients? Not unless they clearly drive deeper engagement: participation in governance, dev onboarding, DeFi usage, etc.

3. Incentive Distortion Is Real

Consistently rewarding memetics with 20k–30k OP/month invites a wave of copy-paste spam. Yes, onchain engagement matters, yes this could help the “cold start” of a chain but not if it becomes unsustainable.

I’m not saying memcoins should go to other ecosystem, I’m just saying Governance shouldn’t be incentivizing it. Maybe being a milenial is the new boomer.

I’m also wondering how this help the Collective Intent on Season 7. As a reminder:

The expected impact of RF Onchain Builders is: Drive cross chain asset transfers by growing the Superchain economy and growing the adoption of interop among onchain builders.

Tap to GM isnt even looking to be interoperable:

Ink address details for 0x9F500d075118272B3564ac6Ef2c70a9067Fd2d3F | Blockscout

0 tvl, 0 interoperability.

4. Bonus Information: Top Retro Recipients & Interoperability Mismatch

A quick glance at some of the largest recipients reveals another issue: Retro Funding rewards projects that don’t align with the Superchain’s interoperability goals something the Grants Council explicitly enforces.

• AAVE – 140k OP
  Not interoperable, and cannot be, since it lacks its own asset. GC denied a grant on this basis.
• Uniswap – 200k OP
  Deployed on Base, Lisk, and Bob—none are green in the Superchain registry. No interoperable return.
• Aerodrome (Base) – 200k OP
  Same issue as Uniswap. No commitment to Superchain standards.
• PancakeSwap (Base) – 116,272 OP
  Same.
• Moonwell (Base) – 115,196 OP
  Same.

To clarify is not the projects commitment, is the Chain where they are deployed the issue.

I’d love to see how much direct interoperable TVL this OP generated for the Collective. When I say direct is how these OP were used to incentivize or promote TVL growth.

For context: during Season 7, the Grants Council required all projects to either be interoperable or offer co-incentives when deploying to “orange” chains. Maybe RF should add these conditions.

[Michael]

I would love to focus rewards on more “useful” projects but how do we do that without some kind of arbitrary criteria?

I think some issues are that 1) rewards metrics benefit projects like this 2) the rewards being given out are more than the gas fees generated

Both of these things leads to weird dynamics that make projects like these earn much more than the gas fees they generate.

[Bunnic]

This is my personal opinion and does not represent the Grants Council nor the GovNerds.

I think @Gonna.eth said it better and more eloquently; my personal take is that the focus should be in “profit = impact”.

I don’t think memecoins and GM apps are inherently “bad intended” and that they can be valuable, but I also think that due their own nature, they could “gamify” metrics, which in turn, can make them appear as “more valuable” to the ecosystem than they really are (from a “numeric” point of view).

[MSilb7]

I work at OP Labs, but replying in a personal capacity, opinions are my own

In my opinion, these types of apps “tricked” the RF process in to thinking they had engagement due to misguided metric selections and limited choice in voting.

Metric Selections

Ideally, we start from some description of “What is success for the Superchain & the OP Collective?” and then select metrics from there. For some apps, this is directly “drive fees,” but others are more upstream (i.e. “provide liquidity that…”). No metric will ever be “good enough” and all have their flaws, but if we start from describing a thing that we think leads to long-term success, we can figure out what the best way is to represent that today.

This recent blog post started on similar ideas: Metrics To Be Optimistic About in 2025

On “active users,” I struggle to see the point. “People who use an app at least once” feels like a weak value prop. A potential better starting point could be “projects that are core to the experience of the most active onchain actors are critical to the Superchain’s success,” and that leads us to a different design than just “active users” (but still many challenges!).

Side note: I don’t believe it’s possible to generate a true “unique user” metric, no matter how strong your effort is. So any attempt is likely dead on arrival.

This idea isn’t specific to active users, you can make similar cases for TVL as well. “Any coins deposited in a smart contract” may be weaker than “liquidity that enabled high fee-generating activity.” Again, more work to do.

General goal: Start from a description of success, and work back to design targeted metrics & re-evalutate their relevance over time.

Voting Choices

Voters could only choose between 3 pre-defined algorithms. So, the there was no real option to express their preference (in my opinion).

“Active users” also had weighting in every algorithm. So if I thought that it was a bad metric, I had no way to express that, and I was stuck allocating Retro Funding to it (this may apply to other metrics as well).

General goal: Educate voters on metrics before voting, and give them choice. Assume any algorithm or metric will be flawed.

[fujiar]

Without a design that encourages conversion into deeper ecosystem engagement, the “GM ritual” risks stagnating as empty engagement. It hasn’t yet driven protocol or economic innovation either.

The use of automation scripts and referrals makes this platform highly susceptible to being exploited for farming and spam.

When looking at its longterm potential, there are both pros and cons:

• Pros: Demonstrates social adoption and helps onboard new users.
• Cons: Lightweight metrics (just “GM” transaction hits), with no contribution to DeFi, governance, or interoperability.

I believe it’s necessary to increase engagement with the OnChain GM team & project memecoin because I feel this model is not sustainable for future Retro Funding round especially since anyone can easily build apps like this.

For Improvements:

1. Strengthen Key Results or KPIs:

• Compare unique wallets vs automated transactions.
• track conversion into other smart contracts: staking, bridging, governance.

2. Modular ImpactBased Reward System:

• GM + deeper actions (e.g., DeFi usage, or voting at vote.optimism.io)

[ccerv1]

Hi everyone

Let me jump in with a few updates, clarifications and general thoughts.

First off, as a reminder, every month updates are made to the metrics and algorithms; all of this is public and you can view the changes in the Retro Funding repo.

I don’t think anyone is advocating the memecoin / gm projects should be excluded from Retro Funding, just that their rewards are too high relative to their perceived impact. Using the specific example of the OnChainGM app, their rewards declined by 40% despite a 45% increase in contract activity between April and May.

	May Rewards	April Rewards	May Txns	April Txns
OnChainGM	15K OP	25K OP	353K	243K

These changes are the effect of both changes to the algorithm and changes in the set of projects (+ the quality of those projects) in the mix.

Regarding “user” metrics specifically:

• Last month (May/M4), the weight of the “users” metric was reduced by 30% (from 0.25 to 0.175)
• In the preceding month (April/M3), the “users” metric was expanded to include World verified users – which are much more significant than Farcaster
• Active addresses has never had any weight at any point this season

Regarding @MSilb7 point:

Educate voters on metrics before voting, and give them choice. Assume any algorithm or metric will be flawed.

I agree in spirit, but don’t think it will ever be possible to get it right out of the box or to educate voters to pick the “best” option.

Moreover, I don’t think the season setup of citizens vote on an algorithm based on simulated results, then watch it evolve over 6 months with real results is the ideal mechanism. It should be more like here’s our best shot at an initial algorithm, now citizens react to real results and in doing so improve the algorithm.

Regarding @Gonna.eth point about rewards going to defi projects and the “interop mismatch”:

the Chain where they are deployed is the issue … none are green in the Superchain registry

The ability to offer chain-specific weights has been available since the start of the round, but was never acted upon. Now that chain operators have a path to clearer representation in the Citizens house, this feels like an issue that will come up (probably not until S8 though).

If there’s more feedback or actionable changes you’d like to see in the algos (or simulated), now’s the time to raise it!

[Jrocki]

We should just cap the amount of rewards these memecoins and onchain GM applications can get based on the net revenue (or just gas fees to use a metric we have available) they generate for the collective. At the end of the day all the below arguments against rewarding these projects become less of an issue if these projects are profitable for the collective in the here and now.

@Jonas

Arguments Against Rewarding Them:

1. Perceived Lack of Long-Term Value:
2. Limited Innovation:
3. Airdrop Farming Concerns:

[Marcus01]

Personally I’m not a big supporter of incentivizing memecoin or GM type Dapps, while it may bring in a lot of new users, it’s short term, Retro Funding incentives are based on the principle of ‘Impact=profit’
I think what really needs to be incentivized is long term participation in Optimism I think the real incentive is long term participation in and contribution to Optimism collectives, e.g. participation in governance, DeFi Dapps, building around the Op stack
Memecoin may bring in a lot of false prosperity, which can create some false judgments about impact