‍Katherine

Hello everyone and welcome to episode eight of Cross-Chain Examination. I'm your host, Katherine Wu.

Each week on Cross-Chain Examination, we have on the smartest and most interesting people working full time in the crypto industry to tell us what is top of mind for them. This week we will be examining the intersection of crypto and public goods. But before we dive into that discussion, I wanted to give a quick overview of public goods in the traditional sense. So in economic theory, a public good in contrast to a private good, is one that is non excludable. So that means no one can be excluded from the goods consumption and is non rivalrous. So the good’s consumption does not reduce its availability to others. So some examples of a public good in our traditional world or in our current world is expecting the rule of law or even more basic goods, such as access to clean air and drinking water.

Today, blockchain based networks are increasingly involved in a conversation surrounding the development of public goods. And many in the crypto space are thinking hard about this topic. So with us today to discuss all things public goods and Gitcoin is Annika Lewis, who leads grants programs at Gitcoin. Welcome to the show.

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Annika

Thanks for having me. I'm excited to be here.

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Katherine

I'm really excited to talk about this because I feel like it's been so front and center. And so I wanted to kick off the show by just diving into public goods. And what I mean about that is I feel like the funding public goods narrative has been on so many people's radar, especially right now in the crypto industry. Can you help us explain or understand why crypto is such a compelling fit for public goods? And can you also give some examples of what public goods mean in the crypto context?

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Annika

Yeah, definitely. I think that's a really good framing. As I think about public goods and crypto contracts, kind of from a macro level, a lot of why I'm excited about web3 and why so many of us are excited about web3 is the ability to kind of rethink and rebuild structures in society, in companies, and in money just from first principles. Because we've got all these new technologies and networks that can enable that. And I think public goods are kind of one such domain that a lot of people are starting to think through in a web3 context about how might we fund public goods differently than how we do in web2.

I think the initial sort of compelling event for thinking about public goods and web3 has been sort of the open source movement and obviously open source has been around web2 for a long time. But kind of the core thesis on which Gitcoin was founded, which obviously is an organization which I'm with that’s very focused on public goods funding, was around digital public goods. And the fact that even in the web2 world, open source software generates billions of dollars in economic value every year, and yet there aren't really intuitive funding mechanisms that exist for it. If you think about traditional public goods, like public parks or health care in many countries and all of what governments tend to fund through taxation, there isn't an analogous sort of funding mechanism for digital public goods. And so that's kind of the thesis on which Gitcoin was built - to think about open source software as a public good that should get funding in ways that perhaps are different from your traditional capital allocation mechanisms.

I personally saw this problem firsthand. I used to be a VC investor focused on projects in analytics and data infrastructure, and I would always see these amazing open source founders trying to shoehorn their open source projects into these business models that made sense to VCs. And so that's why I was so excited about Gitcoin and web3 in the context of public goods and open source and kind of figuring out new ways to fund these projects that weren't necessarily in line with the existing structures.

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Katherine

It's actually an interesting paradox, which is that in crypto I think so many protocols, and the assumption of these protocols is that it's open source and anyone can contribute. But the problem is that doesn't always necessarily mean you can get compensated for your labor and time. And so I know there's a lot of core developers who've worked on crypto in the early days who just never really got paid for their work. And so I've been seeing the discussion of retroactive funding happening on my timeline, which is interesting and actually makes a lot of sense in my mind. So speaking of Gitcoin, where you currently lead grants for, can you just give us a high level TLDR of what Gitcoin is and especially with the Grants program, how does it work?

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Annika

Yeah. So Gitcoin is an organization focused on funding public goods and we have various mechanisms through which we do that. The primary mechanism and kind of our main product is our grants program, which you just mentioned. I like to describe Gitcoin grants as a three sided marketplace. So there's basically three constituents that are involved in the Gitcoin grants program. There are the matching funders which are effectively like B2B kind of blue chip companies or DAOs within the Ethereum ecosystem very often who are having a desire to give back to the community and fund public goods. And they will often donate large sums of money to be distributed across these grantees. So matching funders are the first side. Then you have community donors like you and I who see value in funding these types of projects, whether it's maybe an open source protocol that we're building on top of. It's another project we're passionate about for some reason. And so we decide to donate a dollar and $5, $10 through effectively crowd funding towards these projects. And then finally you have the grantees. And so these are folks who are either open source developers or building another public good of some sort. They post their project to the Gitcoin platform in hopes of receiving funding for that project.

And so these three sides of the marketplace come together every three months when we run this quarterly grants program, which is a two week period in which all of those matching funds are distributed to the grantees on the platform. So it's effectively a combination of crowdfunding as well as large donors. And it's all driven by the community and a mechanism that is called quadratic funding that basically distributes those funds in a much more democratic way than a top down grants program would. So the idea is to find early stage projects that are public goods, that may not have other sources of funding and hopefully help get them off the ground on their feet.

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Katherine

So let's say for cross examination, I work on educational content for folks who want to come to the space and maybe for next season, maybe I don't want my sponsors or whatever, even though I love them. What would be the process be like to write a proposal to somebody, approve them? How do I actually go about getting funded?

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Annika

Yeah, great question. So the process is much less arduous than a typical grant application. You just go to gitcoin.co/grants and then you'll see a button to create a grant. You'll fill out a form that takes no more than 15 minutes and asks you a bunch of information about your project, what you're working on, some verification stuff like your Twitter and your GitHub handle, and then it goes in for review. And the only review of activity that happens at the beginning is our fraud team is doing a bunch of checks to make sure that it's not a fake project or having kind of malicious intent or content and that it meets the definition of a public good, and then it's posted to the platform and then anyone can see your grant, can contribute to it, and you can benefit from the funding pools that are provided by those matching funders.

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Katherine

And explain to me what quadratic funding actually is.

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Annika

So quadratic funding by way of background is a mechanism that was developed by Vitalik Buterin, of course, the founder of Ethereum, Glen Weyl and Zoe Hitzig. And you can read, they've got a long paper on it. You can read the whole 30 page paper and learn about it or you can go to wtfisqf.com to see a calculator to learn about it in real time and play with it. And I think that's kind of the easiest way to concretely grasp it.

But in short, quadratic funding is a funding mechanism that is designed to favor the preferences of the poor and the many over the preferences of the rich and the few. And so what that means is that in the community donating on the platform, if you had, let's say, $100 donated, if you had 100 people donating $1, that is much more heavily weighted in the mechanism than one person donating $100. So it's really trying to allocate funding to the projects that the community at large wants to see built. And so that's kind of the intent behind it. So in opposition to a direct grants program where you would have very much a small group of decision makers, a small committee that's trying to pick a handful of grants to fund, this is really a bottoms up community based trying to get the projects funded that the most people want to see funded.

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Katherine

Yeah, no, that makes perfect sense to me. One of the really common criticisms in crypto broadly, when it comes to governance or any kind of holding a voting mechanism, is whoever has the most amount of tokens, which often translates to financial interests, are super overrepresented or have the most amount of power. And so quadratic funding as a way - it's not the biggest check that holds the most power or has the loudest voice, I think is a really good way to kind of democratize the grants process. I think it can go beyond just financial contributions. I'm hoping to see more of that in governance and just the way people actually make decisions.

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Annika

Yeah, and it's not to say that there isn’t value in direct grants programs or centralized decision making to some extent. But I think we've seen a lot of our funding partners who perhaps have a direct grants program already using quadratic funding as kind of an add on to be able to make sure they're also capturing the community sentiment and not missing anything that the community sees as really valuable to fund. So I think there's power in both. And I just think historically, most of our mechanisms in society have just been centralized because it's easier. You mentioned governance, right? Historically, companies are governed by a small board of directors and there hasn't really been much in the way of bottoms-up governance. So I think this is one of many efforts in the crypto space to move us in that direction.

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Katherine

So this is maybe more of a moral question, but how do you actually determine what counts as a public good in the crypto context?

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Annika

That's a great question and one that is a continuous journey for us at Gitcoin. As you mentioned at the top of the show, sort of the economics definition of a public good is something that is non-excludable and non-rivalrous. But the question then becomes, how do you implement that type of decisioning at scale? It's really hard to go into a specific project and perform that analysis of truly, does it meet both of those criteria? We at Gitcoin for the past several rounds have used the criteria as a proxy that is, the project should not have raised VC funding or should not have a token. But I think we're realizing in a bunch of the appeals that have come up lately that there are a lot of projects that launch tokens for a variety of reasons these days that are not just kind of ICO-esque, “I need to fund my project in a really big way.” And so there are some token based projects that have been on Gitcoin grants. And I think this brings up the conversation of the need to define public good in a little bit more of a sustainable fashion, especially as we scale. We now have thousands of grantees on the platform and we're only getting bigger every round. And so finding a way to scale the public goods eligibility without a ton of human centralized fraud intervention on our end is top of mind. I think ultimately we will move to a more community led definition so that rather than Gitcoin deciding top down, what the criteria are, letting the community kind of vote on what is considered a public good to them.

And this is kind of a classic sort of definitional challenge in public goods and kind of from the economic sense from way back when there's even what is a public, right? There's a public that is the Ethereum community, but that's not the public to everyone. There are publics that are nation state sort of government driven, and if you have a certain passport, you're part of that public. But again, that is exclusive to others. So there's a really big question here to figure out. But I think to me, ultimately, kind of like a bottoms-up definition is probably where we’ll end up lending.

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Katherine

And I mean, also, given the early days, I imagine the people who end up going to Gitcoin to get funded are a little bit self-selecting. So I'm sure as we scale and as the industry matures, we all collectively figure out a better way to define all of these terms that we're using today. So I know that the last Gitcoin grant round just closed. And I think I saw an email that said it was like hundreds of projects and like 44,000 contributors.

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Annika

Yeah, that's right.

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Katherine

That's pretty wild. And so contributors in the sense that everyone that's donated something. Is that what it means?

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Annika

Yeah, that's right. So 44,000 unique wallet addresses in this past grants round contributed to a grant on Gitcoin, which was incredible growth to see over the previous round of definitely more new folks getting engaged with the ecosystem. And we distributed about $5 million in that round to about 1200 grantees this time. So yeah, definitely reaching a level of scale that hopefully will be more and more impactful over time. And just excited to see the web3 community rally around these quarterly rounds and get involved in supporting projects.

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Katherine

Also as a plug, it's really interesting for me to go on every time, there's a new round just to see what people are working on. I think if you really want to see who's at the forefront thinking about working on new interesting projects and things that don't necessarily have to be like a VC funded project. It's a really good resource for that. So just a plug to check out the next round. So looking into your background, you used to work in VC, I think you were in banking and you tweet a lot about the woes of working in a DAO. So I think culture shock from anyone coming from web2 to web3 but in particular from web2 to web3 in a DAO. So I wanted to ask about some of your big culture shocks or things that you were really surprised that were either good or bad?

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Annika

Totally, yeah. I think for anyone moving from 1 to 2 web3, there's certainly a culture shock just in terms of how things operate. And I think for me, probably even less so relative to the average person because I was working in venture and at the forefront rather than in a more established job. But I think the DAO structure in particular is probably where I personally have felt most of the culture shock. It's a brand new way of working and operating and organizing and trying to rally teams and people in service of a broader objective. In a DAO, you get all sorts of contributors that are very high contact and have been around for a long time and are full time. But you also get people coming in from the internet every day who have no context and are wanting to start contributing. And trying to find ways to include them and engage them meaningfully without causing a burden on the organization’s productivity is definitely something that's top of mind.

I think working in a DAO, it's high highs and low lows. Like there's days where it's like, wow, we are working on the biggest problems at the forefront and nobody's ever done this before. And this is just incredible. And that's how I feel most days. But there's also times where it's like, wow, this at the same time that lack of structure can cause a lot of coordination challenges, just like lack of clear defined accountability and all of that. And so there's definitely a lot of a lot of struggles to work through as well. But for me, I wouldn't have it any other way. I love having to navigate that new territory. And yeah, I'm just super excited by what I see both in the Gitcoin DAO and in the DAO space overall. I think when we look at in ten or 20 years, what work looks like and kind of like thinking about the future of work, I think a lot of it is going to be reflective of what you see in DAOs today.

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Katherine

I was getting drinks literally just yesterday with someone I went to high school with. And she's not in crypto at all, but she's very interested. And we came to the topic of DAOs and she was basically just like what are DAOs? You know, in my mind, she said, DAOs are just like what people do when they want PR, when they want to do marketing. And so I was trying to explain to her that concept of if you're a user, you get tokens, you can have a say in the product roadmap. And then she was like, Oh, that's really cool, but isn't that just really, really messy? And I was like, Yes, 100%. It's super chaotic at all times.

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Annika

Yeah, it definitely is chaotic. But the glimmers you see of exactly as you say contributors having a say in those types of decisions that would typically be made at a board level or at an executive level. And now a lot of that being more democratized across all contributors. Yeah. Just so much more happening in public that would typically happen behind closed doors. So, yeah, the chaos is real. But I think the innovation is also very real.

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Katherine For sure. I fully agree. And I think it's messy today, but everything at the start is messy. And sure, even with voting on proposals, you're like, I feel like we're still getting to where do you go and vote for things? I feel like we're getting there. What are you really excited about in crypto right now?

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Annika

Oh, man, so many things. Yeah. As I said at the top of the show, I'm really excited about crypto, generally speaking from the context of rethinking from first principles how we operate like society, companies, and money. I initially came at crypto from a very sort of macroeconomic investor lens, being worried about the future of the U.S. dollar and thinking about the thesis of Bitcoin being digital gold and whether or not I agreed with that. And as I ended up going deeper and deeper down the rabbit hole, I realized there's so much more than just the money angle and understanding Ethereum as sort of a virtual computer on which all of these applications and even economies in and of themselves are being built today. I'm so excited by the potential to redefine how we do society in the information age from the ground up. So that's kind of my very, very general long term game and excitement when it comes to crypto.

In the near term, there's a lot of things I'm excited about. I think a lot of the work happening on the data side and just data infrastructure and enabling applications to be built in a much more powerful, user friendly and kind of privacy preserving way is really exciting to me. A lot around kind of curation and being able to share things in a lot more kind of an intentional way. And that happening in web3 is very exciting. There's so many things I could keep going down the list, but I think, yeah, top line. Just being able to redefine structures around how we govern is what's really exciting to me.

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Katherine

I think about this actually a lot. So I think once you get crypto-pilled, you really never come back from it. We're hoping to build an industry in which everyone else can get onboarded easier. And so as I start to talk about the concept of DAOs and tokens in the hands of the users - this is more like a yes or no question and we can have a fun thought experiment - do you think it makes sense for eventually every company to become a DAO?

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Annika

No, not necessarily. I've said this before, I'm very much not a DAO maxi. I think DAOs are providing, as I said earlier, insight into a lot of where the future of work is likely to go and how we coordinate as humans. One example very tactically being like, try before you buy as an employee and as an employer. I think just how we've done hiring in web2 is kind of crazy and even a lot of the experimentation and seeing there and DAOs, I don't see a world where companies don't take on kind of, more of this experimentation and being a little bit more fluid in terms of employment. But no, I don't think every company needs to or should necessarily be a DAO whatsoever. And I don't know. Yeah, I do have questions about the DAOs in the next ten years and how big of a thing will they be versus traditional companies. And I think the typical company ends up kind of in between a traditional company and a DAO today. I think there's really good things from both worlds. But no, I'm definitely not like DAOs will rule the world total DAO maxi by any means.

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Katherine

Yeah. I mean, honestly, at the end of the day, like DAOs and the way they're structured and how they reward users, a lot of that I think also has to do with where value has accrued in web2 companies. And I think the big criticism of web2 is, you build all this value off the backs of your users, especially as the platforms are owned or controlled by five people and the people who make up your community and let you profit or whatever, you're selling their data. And so it's a lot of extracting again and again from these people that really prop you up. And so sometimes when I think about where DAOs make sense or why people are so into it, once you get it, it's really where the value is and also where the control is.

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Annika

Yeah, totally. 100% agree with that. And yeah, I think also for what it's worth, with kind of the DAO company thing, I don't think of it as binary necessarily. I think there is very much a spectrum of – there are some DAOs that are much more centralized. There are some companies that are much more kind of decentralized and flat structures. And so there's a lot of fluidity there. But yeah, 100% agree on the almost business model side of platform versus protocol and where value accrues to. And there's probably some way you can layer that onto the company matrix.

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Katherine

Just talking about public goods as it applies to crypto, I think actually takes on a whole new meaning as well. I think a public good, when I think about it in the traditional sense, is not profitable. I guess that's not the right way to think about it. And I don't know that necessarily has to be true actually. Yeah, true for crypto because public and crypto is like, maybe protocols, but I feel like basically everything in crypto is open source, so technically you can define it as everything is public. I don't know. Is that too messy?

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Annika

No, I don't think so. And yeah, I think that's a really interesting question around can a public good be profitable or not? And I think the answer to me is yes. Right? The definition of excludable and honorable or does not take into account sort of the creator of that and what their economic incentive is. It's more so kind of what they're providing and kind of what that means for the end user. And so, no, I don't think that's necessarily a constraint by any means. But as I try and think through strong examples of public goods that are deeply profitable, I struggle. I'm sure they're out there, but there's nothing immediately that comes to mind.

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Katherine

Are there any really interesting projects or grants in the latest Gitcoin round that I don't know that you think about or what you look to and you're like, Oh wow, this is really cool and interesting.

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Annika

Oh, so many. I mean, yeah. Again, as I said, there were like 1200 in the latest round. So there's a ton to go through. But I think for me, what's been really exciting about this past round and even the one or two rounds before is we as Gitcoin have expanded pretty intentionally beyond just kind of open source and into public goods more broadly. As I mentioned we were initially very focused on digital public goods and funding of open source because we saw a clear gap there. But in the last couple rounds, we've actually been expanding into kind of like off chain public goods. So we've run some rounds around areas like climate diversity, equity and inclusion, even blockchain advocacy and raising funds for those types of things, which brings in really interesting different grantees, many of whom like, this is their first time in crypto. They're setting up a MetaMask wallet for the first time so they can receive funds for Gitcoin and they've never engaged before. So I think that's really interesting on many levels. We actually had one grantee in the last couple rounds who is planting fruit trees in rural Uganda. So really not open source, really not crypto, but has received a ton of support from the community because that's something that in the context of the climate, the community has seen is really valuable. So that's where I get really excited and of course I'm eternally excited about this open source problem statement and the work we're doing there. And that's super, super important. But also rethinking traditional philanthropy and taxation mechanisms and how governments have funded public goods. And thinking about how we might do that in a more bottoms up manner is something we're experimenting with and playing with. And that started in the last couple of rounds that that really gets me going.

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Katherine

I love those examples so much. I'm sure you get this a lot. But I feel people often ask me, who are sketchy of crypto, what are the use cases? And crypto doesn't have anything to do with the real world and how real people live and work. And I think having examples like that is so powerful and it makes a lot of sense. If someone wants to plant trees, they should do that and they should be able to buy whatever they need to grow trees?

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Annika

Yeah, totally. No. What we're doing is coming in many shapes and sizes and yeah, I'm excited about expanding beyond just digital.

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Katherine

Last question, where can people go to learn more about Gitcoin and get involved in the next grants process either to help out, submit a grant or be a contributor?

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Annika

So a few good places. Gitcoin.co/grants. As I mentioned, if you want to browse through grants, get familiar with what they are and how they work, or even submit an application for a grant yourself. Our Twitter just at Gitcoin is a great place to start as well, and that has the link to our Discord, which is where you should jump in if you want to join the conversation and start contributing in the DAO. So yeah, that's where I would start for anyone interested in getting involved.

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Katherine

Gitcoin also has a really awesome Learn tab and a lot of learning resources that I recommend to a lot of my newbie friends. Yeah. Okay. Well, cool. Thank you so much for coming on to talk about all things public goods and Gitcoin.

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Annika

Awesome. Thanks for having me.

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Katherine

Thanks everyone for tuning in to another episode of Cross-Chain examination. I hope you enjoyed the discussion on public goods. Please make sure to subscribe, rate, comment and let me know what you thought of the episode. We are on Twitter @crosschainpod or you can follow me at @Katherineykwu. Looking forward to hearing your feedback. And as always, we'll see you next week.