Podcast Summary
New frontier for making money: Public goods in layer 2 crypto: Public goods, like infrastructure and services that benefit a community, are becoming the new investment opportunity in the $1T layer 2 crypto space. Investors and builders can turn public goods creation into market opportunities using retroactive funding.
Public goods are the new frontier for making money in the world of layer 2 in the crypto space. Public goods, such as infrastructure and services that benefit a community as a whole, are becoming the new source of alpha or investment opportunity. Layer 2 projects, which build on top of existing blockchains to improve scalability and reduce transaction fees, are competing with each other based on their ability to fund and create public goods. This is a $1,000,000,000,000 opportunity, according to the speakers, as it combines the upside potential of a new startup with the benefits of public goods. Public goods investors and builders are the new alpha in the crypto world. The speakers, Ryan Sean Adams and David Hoffman, discuss how retroactive public goods funding can be used to turn the upside of building public goods into market opportunities and inject the power of the market with the opportunity of public goods. They encourage listeners to consider becoming public goods investors or builders in the layer 2 space as there are many opportunities in this new horizon. Sponsored tools for going bankless from MakerDAO were also mentioned.
Expanding Ethereum Layer 2 Ecosystem and Importance of Bridges like Across: Across bridge utilizes Ooma's oracle for secure transfers, join discord for co-founder opportunity. Optimize crypto taxes with Alto IRA, no fees. Crypto addressing public goods pricing, governments manage effectively for stronger economies.
The Ethereum layer 2 ecosystem is expanding rapidly, and fast and secure bridges like Across (CROS) are essential for seamless asset transfer between different networks. Across utilizes Ooma's optimistic oracle for secure token transfer back to Ethereum. Joining the Across discord can help you become a co-founder and participate in the fair launch of this bridge. Another key takeaway is the importance of optimizing taxes in growing and preserving crypto wealth. Alto IRA offers tax-advantaged crypto investment opportunities with no setup or account fees. Lastly, public goods, such as clean air and water, are essential for a high quality of life and are globally shared resources. Crypto is working on finding ways to price in the value of these public goods without relying on top-down government intervention, which is ultimately the purpose of taxes. Governments that effectively manage public goods contribute to stronger economies and more desirable places to live.
The Role of Public Goods in Economies and Blockchain: Effective investment in public goods, such as blockchain's block space and security, strengthens economies and improves quality of life.
Public goods, which are utilities that benefit everyone and are generally not privately funded, play a crucial role in making places desirable to live and compete in the global economy. Countries and regions that effectively invest in public goods become stronger economies, and people are willing to pay taxes for them because they see the value in their improved quality of life. Public goods include neighborhood infrastructure, city services, and national defense, among other things. In the context of blockchain technology, the original public good produced by a chain is block space and security. When users pay transaction fees, they are funding the defense and security of the chain, ensuring its fair and neutral distribution. As blockchain technology evolves, chains may start funding other things as well, making public goods an essential and valuable aspect of the blockchain ecosystem.
Maintaining integrity of underlying asset at layer 1: Layer 2 solutions fund public goods infrastructure, preserving neutrality and trustworthiness of underlying asset through innovation and competition.
While blockchains, as public ledgers, have the potential to be funded through various means including block rewards, it's crucial to maintain the integrity of the underlying asset at the layer 1 level. Tampering with money issuance and distribution for specific industries or purposes can lead to corruption and undermine the system's effectiveness as a public good. Instead, layer 2 solutions can compete to fund public goods infrastructure, generating revenue through various means and attracting more users based on the quality and efficiency of their offerings. This approach allows for innovation and competition while preserving the neutrality and trustworthiness of the underlying asset.
Ensuring Neutrality in Public Goods on Blockchains: Public goods are vital in blockchains, but neutrality and controlling MEV are crucial to prevent corruption and maintain fairness and efficiency. Retroactive public goods funding comes from layer 2s, with good MEV making markets efficient and protecting user positions, while bad MEV can lead to manipulation and chain instability.
Public goods are essential in social structures, including blockchains, with security being the original public good. However, introducing new public goods through governance can lead to corruption and a plutocratic system if neutrality is not ensured. Retroactive public goods funding comes from extractable value on layer 2s, with good MEV making markets efficient and protecting user positions, while bad MEV can lead to market manipulation and chain destabilization. The industry is working on controlling MEV to optimize for the good side, and layer 2s will compete on allowing or disallowing certain types of MEV. In summary, public goods are crucial, but ensuring neutrality and controlling MEV are essential to prevent corruption and maintain a fair and efficient blockchain system.
Layer twos in DeFi funded through unique form of tax called MEV: Layer twos in DeFi primarily funded through MEV, an optimization function allowing for value extraction while enabling and protecting users, with competition leading to better optimization and improved user experience
Layer twos in the DeFi ecosystem are primarily funded through a unique form of tax called MEV, or Miner Extractable Value. This is different from the traditional methods of taxation seen in nation states, such as block rewards (money printing) and excise taxes (consumption taxes). MEV is an optimization function for layer twos, allowing them to extract value while ensuring users feel enabled and protected. The competition among layer twos to provide the best environment for users will ultimately lead to better optimization of MEV, creating a fantastic environment for users. While block rewards and excise taxes are present in some form in layer twos, the focus is shifting towards MEV as a primary funding method.
Maximal Extractable Value as a Perpetual Heat Source for Layer 2 Blockchains: MEV is an invisible revenue source for blockchains, with good MEV providing perpetual funding for public goods on layer 2 networks. Aave, a DeFi project, utilizes MEV and community governance to build a bankless future across multiple layer 2 networks.
MEV (Maximal Extractable Value) is an invisible source of revenue for both layer 1 and layer 2 blockchains. While some of it can be bad and extractive, good MEV can be compared to geothermal energy, providing a perpetual heat source for funding public goods on the layer 2 networks. Optimistic Rollups, specifically, are pioneering this strategy, using MEV to fund public goods and create a desirable ecosystem. Layer 2s that don't follow this model risk becoming less attractive to users. Aave, as a leading decentralized liquidity protocol, is an example of a decentralized finance (DeFi) project that operates on multiple layer 2 networks and utilizes community governance to build a truly bankless future. With features like Isolation Mode, Efficiency Mode, and Portals, Aave v3 enables users to maximize their DeFi potential across various networks.
Crypto's Role in Funding Public Goods: Crypto's mechanism design aims to make building public goods as profitable as private projects, with examples like Aave, Arbitrum, and Brave Wallet leading the way.
The crypto world offers innovative solutions for traditional issues, such as funding public goods. Aave.com is a platform for obtaining crypto-collateralized loans, while the Brave Browser ensures privacy and security for crypto transactions with its built-in wallet. Arbitrum is a layer 2 scaling solution for Ethereum, enabling faster and cheaper DeFi and NFT experiences. Public goods, like cleaning the environment or building infrastructure, often lack a profitable business model, leading to underfunding. Crypto's mechanism design of retroactive public goods aims to fix this by making it as profitable to build public goods as it is to build private projects. This shift in energy and resources could lead to a better future with improved public goods. The Brave Wallet, Arbitrum, and Aave are examples of crypto projects addressing these issues in innovative ways.
Retroactive public goods funding through MEV in crypto economic networks: MEV in crypto economic networks enables retroactive funding for public goods, providing confidence for creators and improving society
The current capital market system does not allocate funds to long-term investments in public goods such as research, education, and general sciences due to the lack of short-term research and return on investment. However, the unique property of crypto economic networks, called MEV (Maximal Extractable Value), allows for retroactive public goods funding. This mechanism provides confidence for entrepreneurs and builders to create public goods, as the funding will be available in the future based on the utility and value they bring to the community. Retroactive public goods funding works through investors buying NFTs or tokens, which represent their investment in the project. Later, as the public good grows and provides value to the community, the investors can claim a portion of the funding allocated for public goods by the DAO (Decentralized Autonomous Organization). In this way, the power of MEV can be directed towards valuable public goods, improving society and creating a better future.
Rewarding early contributors to the Optimism ecosystem: The Optimism DAO's top-down governance system identifies and rewards early believers and contributors to the network based on the value they bring, shifting focus from traditional capital metrics to impact on the community.
The Optimism DAO utilizes a top-down governance system to allocate retroactive public goods funding to early investors and contributors who provide value to the Optimism layer 2 ecosystem. This system identifies early believers and rewards them based on the utility and value they bring to the network. The citizens house, composed of individual people, determines the budget and allocation of funds through a one-person, one-vote system. This approach allows startups and developers to focus on creating public utility applications and products, shifting the emphasis from traditional capital metrics to impact on the network and community. The value of foundational projects like Geth, which have received minimal funding, can be recognized and funded through the community's votes, creating a more sustainable ecosystem.
Revolutionizing Public Goods Funding in Crypto: Entrepreneurs can build public goods projects for community impact and financial returns, generating revenue through MEV fees and tapping into vast potential of layer 2.
The concept of public goods funding in the crypto world is revolutionizing the traditional investment model. Instead of focusing on private financial returns, entrepreneurs can now build products that maximize public financial return by creating positive impacts on their communities. This new approach not only leads to a positive feedback loop of more funding for public goods and better infrastructure, but also generates significant revenue through MEV fees. The potential for public goods in layer 2 is vast and largely untapped, and the market will likely see innovative ideas emerge as entrepreneurs explore this new opportunity. In essence, public goods are no longer just a feel-good concept, but a profitable one as well. This shift towards public financial returns creates a scalable and capitalist approach to funding public goods.
Retroactive public goods funding in crypto networks: The future of layer 2 blockchain networks lies in creating valuable projects first and funding public goods retroactively based on market demand, potentially leading to the creation of infinitely copyable and beneficial public goods for the crypto ecosystem and beyond.
The future of layer 2 blockchain networks lies in building valuable projects first and letting the market determine what public goods are worth funding. This approach, known as retroactive public goods funding, can lead to the creation of infinitely copyable and beneficial public goods for the entire crypto ecosystem. It's a potential game-changer, as it could also extend beyond crypto networks to fund public goods for the world at large. This could lead to crypto networks stepping in to fill gaps left by traditional institutions, such as funding educational programs or infrastructure projects. The potential for retroactive public goods funding to legitimize crypto networks and increase financial literacy in disadvantaged communities is also significant. Overall, this approach could lead to a more interconnected and innovative ecosystem that benefits everyone.
Market-driven funding for public goods in crypto: Retroactive public goods in crypto enable layer twos to provide essential services, creating new opportunities for sustainable business models and better social structures globally
The emergence of retroactive public goods in the crypto space allows for layer twos to step in and provide essential public services, filling gaps left by governments. This unique market-driven funding mechanism is creating a new path for building better social structures globally, with examples including education (bankless education), infrastructure (decentralized networks, wallets, bridges), and data provision (websites like Crypto Fees Info). These projects, such as Flashbots and Uniswap, benefit their respective networks and can now have sustainable business models. The invitation is for individuals and organizations to explore these opportunities and contribute to the development of future public goods in the crypto ecosystem.
An opportunity for builders and investors in public goods projects: Builders can create valuable public goods and be rewarded before market saturation, while investors can identify viable projects for early investment in the crypto space.
The crypto space is seeing a massive influx of funding for public goods projects, and this presents an opportunity for both builders and investors. For builders, there's a window of opportunity to get handsomely rewarded for creating valuable public goods before the market becomes saturated. For investors, there's a new skill to develop in identifying viable public goods projects ahead of the competition to secure early investment. Optimism is leading the way with retroactive public goods funding experiments, and this trend is expected to continue with other layer twos and alternative layer ones. However, it's important to remember that crypto and DeFi involve risks, and none of this should be taken as financial advice. But for those who are bullish on humanity and the potential of the crypto frontier, this is an exciting opportunity to be a part of. To get started, consider what public goods projects are viable now and what you can build in the future. Stay tuned for more information and resources in the show notes.
