How Web3 Funds Open Source
Discussion
Crypto Altruism:
"The rise of Web3 has brought with it innovative funding opportunities for open-source projects, significantly altering the landscape of development funding. Traditionally, open-source projects relied on donations, sponsorships, or sporadic funding which often resulted in financial instability. With the emergence of Web3, many innovative funding mechanisms have arisen, including community-driven grants programs, retroactive funding models, and protocols that reward open-source developers for their contributions.
When it comes to grants, most blockchain protocols have their own grant programs and bug bounties for developers who want to contribute to the ecosystem. Some of the prominent chain-specific grant programs include the Ethereum Foundation’s Ecosystem Support Program, the Arbitrum Foundation Grant Program, Solana Foundation Grants, and Cardano Foundation’s Project Catalyst, to name a few.
Beyond chain-specific grant programs, there are many grant programs that extend to open-source projects across Web3, including Gitcoin’s grant program, which to date has contributed over $60M USD to public goods projects, including many open-source software projects. Gitcoin makes use of an innovative community-driven funding mechanism called quadratic funding, which places a greater value on the total number of unique individuals supporting a project, rather than the total funding the project receives. In a QF round, individuals "vote" for their favorite projects by making donations to them, often micro donations of a couple dollars, signaling to the QF algorithm which projects they feel should receive the most matching funds. In essence, more community support means more matching funds.
For Gitcoin’s 20th round, GG20, which launches on April 23rd, $1 Million in matching funds is available for Open-Source Software projects through one of four rounds: Web3 Infrastructure, Developer Tooling, dApps & Apps, and Hackathon Alumni. To meet program eligibility, projects must be fully open-source and champion the development of open-source software in the wider Web3 ecosystem.
Another funding program that has gained incredible momentum in recent years is Optimism’s RetroPGF program. The program, which retroactively rewards individuals and projects for their contribution to the Optimism ecosystem, is funded through profits generated by OP Mainnet transactions, and to date has distributed tens of millions of dollars in funding. RetroPGF serves as Optimism’s mechanism to “support the creation of a truly free, open, and decentralized internet that returns value to the people who create and maintain it.” While projects don’t necessarily need to be open-source software to participate, many open-source projects have received substantial funding through RetroPGF, including IPFS, DappNode, Protocol Guild, and many more.
In addition to granting programs, innovative Web3 incentivization mechanisms have also emerged, including Tea Protocol, a decentralized protocol that enables open-source software developers to be rewarded for the value they create in the software supply chain. This is made possible by their “Proof of Contribution” consensus mechanisms which aims to quantify the impact of all projects across all open-source systems. It does this by assigning a score, also known as a “teaRank” to open-source projects based on their impact and utilization within the open-source software ecosystem. Rewards are then allocated to projects based on their teaRank, ensuring they are fairly rewarded for their contributions. We recently had the pleasure of interviewing Max Howell, Founder of Tea Protocol and OG open-source software builder on the Crypto Altruism podcast."