Introduction

In this and the following article, I'll introduce RetroPGF (Retroactive Public Goods Funding), a program that funds initiatives impacting Optimism. RetroPGF is a program that evaluates and provides funding to entities that have made an impact on Optimism.

The Optimistic Vision

Optimism, an Ethereum Layer 2 project, advocates The Optimistic Vision. This vision aims to dispel the myth that "public goods cannot be profitable," adhering to the axiom of "impact = profit." It declares the goal of constructing a new governance model for cyberspace.

So why can't public goods generate profit? The answer lies in their business models. For example, startups can acquire funding through equity and even exit the business later. Public goods projects, on the other hand, lack such mechanisms.

RetroPGF aims to fund these non-profitable public goods projects and ensure their sustainability. In this article, I will discuss the nature of public goods.

What Are Public Goods?

In economics, public goods refer to assets that are non-excludable and non-rivalrous. To put it simply, these are goods that:

• Anyone can use

• Usage by one person does not restrict another person from using them

Consider residential roads as an everyday example. Generally, anyone can walk or drive on these roads. However, if too many people use the road, it becomes congested, indicating some level of rivalry.

Gravity serves as an excellent example of a public good. Everyone living on or near Earth, including those on the ISS, is affected by gravity. You don't need anyone's permission to be influenced by gravity, and your usage doesn't limit another's—making it both non-excludable and non-rivalrous.

However, the public goods around us, despite being essential for our lives, typically require a system maintained by human effort. If you live within a bounded territory, you benefit from the public good of national defense, but those maintaining that defense require resources or compensation. In this way, the mechanism for supplying what is necessary to the entities that maintain public goods is taxation, and we are taxed to sustain these services.

Public Goods and Trustlessness

Permissionless blockchains can be considered to have the nature of public goods. In this section, we'll discuss blockchains like Bitcoin and Ethereum.

Setting up a node to participate in the blockchain doesn't require anyone's permission. Additionally, anyone can use the blockchain network by paying a usage fee. Scalability solutions are also gradually eliminating the issue of rivalry.

Despite these characteristics, it's interesting to note that many of us don't question the blockchain's functionality. Don't you find that curious? In other words, why does blockchain have the quality of being "trustless," where it operates without expecting a third party to take some action? Understanding this aspect of blockchain is a good opportunity to delve deeper, so let's take a little detour to explore it.

The key factor is that nodes verify the information they receive against the protocol. Similar to an airplane pilot following a checklist, nodes too have their checklists. Nodes must verify that other nodes are operating according to protocol. This embodies the spirit of 'Don't trust, verify.'

For instance, according to Mastering Bitcoin, the Bitcoin network performs up to 18 different checks when receiving a transaction from another node. Some of these are:

• The transaction’s syntax and data structure must be correct.

• Neither lists of inputs or outputs are empty.

• nLocktime is equal to INT_MAX, or nLocktime and nSequence values are satisfied according to MedianTimePast.

• For each input, if the referenced output exists in any other transaction in the pool, the transaction must be rejected.

• Reject if transaction fee would be too low (minRelayTxFee) to get into an empty block.

Through these checks, the Bitcoin network prevents being flooded with invalid transactions, ensuring the network's integrity. The reason the vast majority of nodes adhere to the protocol is due to cryptoeconomic incentives acting on the node participants. This is true not only for transactions but also for other types of data, and even for other blockchains.

Furthermore, because anyone can join the blockchain, several other rules have been introduced, such as consensus algorithms. In Bitcoin, Nakamoto consensus determines that the longest chain is the legitimate chain. The longest chain is considered legitimate because it is the one into which the most computational effort has been poured, according to Proof of Work (PoW). Contrary to popular belief, PoW is not a term that describes a consensus algorithm.

Thus, through various mechanisms and the introduction of consensus make it possible for the blockchain to have a trustless nature, despite being a public good.

Is Optimism a Public Good?

The chain known as Optimism has been renamed as OP Mainnet. This name change signifies that it is the first chain to conform to the vision of SuperChain that Optimism espouses. Let's delve into SuperChain in a blog post when we have another opportunity.

OP Mainnet is open for anyone to use, and anyone can set up a node. Speaking of the infrastructure, sequencers are not yet decentralized and are not available for just anyone to run. Therefore, until sequencers are decentralized, as outlined in About Optimism, all profits from the sequencers will be donated to public goods. In addition, the roadmap for Optimism includes sequencer decentralization.

Up to this point, we've been discussing whether OP Mainnet is a public good. Another important consideration is that there are many public goods projects in the ecosystem surrounding Optimism.

In a recent RetroPGF, projects were categorized into three categories: Infrastructure, Education, and Tooling & Utilities. While it's easy to understand why infrastructure supporting Ethereum and Optimism, as well as tools manifested in the form of dApps, are valued, some people might find it surprising that there's a category for education. Education is known as one of the most powerful means for promoting social inclusion and helps people access Optimism. This is something that propels the expansion of the Optimism ecosystem and should be appreciated.

In this way, when you include social factors like education, there are a considerable number of public goods projects supporting Optimism. Efforts to sustain these projects could be described as the aim of RetroPGF. Through this effort, Optimism aims to expand its own ecosystem.

In Conclusion

In the realm of blockchain, many projects are providing value as public goods but face challenges in sustainability. In domains where there are no mechanisms like taxation to collect funds, securing financing and maintaining these as public goods is a crucial issue.

In the next blog post, we will delve deeper into RetroPGF. Why is there a need to retroactively evaluate projects? Why bother with what seems to be the cumbersome process of human voting to evaluate projects? Upon closer inspection, there are many curious aspects to consider.

References

• The Optimistic Vision, https://www.optimism.io/vision .

• Retroactive Public Goods Funding, https://medium.com/ethereum-optimism/retroactive-public-goods-funding-33c9b7d00f0c .

• Hashizume, D. (2000). Concept on publicity. Japanese Sociological Review, 50(4), 451–463. doi: 10.4057/jsr.50.451（橋爪大三郎（2000）．「公共性とは何か」『社会学評論』50(4), 451–463）(In Japanese).

• Andreas M., Mastering Bitcoin, 2014, https://github.com/bitcoinbook/bitcoinbook/ .

• Abount Optimism, https://www.optimism.io/about .

• Announcing the Results of RetroPGF 2, https://optimism.mirror.xyz/Upn_LtV2-3SviXgX_PE_LyA7YI00jQyoM1yf55ltvvI .

• Marsela, Robo. "Social inclusion and inclusive education", Academicus International Scientific Journal. 10 ,181–191, (2014).

For official resources on Optimism, author attribution has been omitted.