Interpretation of PGN Layer 2 Application Chain: Based on OP Stack, open a new paradigm of public goods donation?

Written by: LeftOfCenter, BlockBeats

On July 7th, Gitcoin and several organizations launched a two-layer application chain called PGN (Public Goods Network, public goods network), which is developed based on OP Stack, and its goal is to explore a new funding mechanism for Ethereum Public goods (Public goods) beyond and provide a sustainable source of funding.

As the OP Stack family has added a new army, its sequencer revenue will also be used for the first time in the public goods funding mechanism.

PGN can be said to be an upgraded version of Gitcoin Grants quadratic fundraising.

Different from pure donations that rely on users' pockets, all sources of funds in the PGN network are generated by users' actual interactions. Once the EIP-6969 proposal is successfully incorporated into the Cancun upgrade, it will be possible for Ethereum application developers to directly obtain sequencer fees based on CSR As a source of income, it is possible to reward developers who truly create value for active users on the chain, and Ethereum may also usher in the era of "developer economy".

It can be said that if the previous donations are stagnant water, then the self-sufficient revenue model brought by PGN is a living stream, and the source of this stream is the orderer fee. Zakk.eth, the head of the Gitcoin developer ecosystem, told BlockBeats that the team uses the RaaS service Conduit for hosting, and most of the obtained sorters will be allocated to public goods developers.

So, what does PGN mean to ordinary users and developers? What impact might it have on the fee structure of the Ethereum ecosystem? How does it relate to Gitcoin Grants and the quadratic fundraising model? And what does the upcoming October Cancun upgrade mean for PGN?

What are PGNs?

PGN is the abbreviation of Public Goods Network, which was initiated by Gitcoin, and it is an experimental plan for public goods funding, and has received support from Protocol Guild, Public Nouns, Clr.fund, Giveth, Hypercerts, Protocol Labs, Octant, Eco, Hedgey and other groups . As an upgraded version of the secondary financing of Gitcoin Grants, PGN aims to provide a sustainable source of funding for public goods by piloting a funding mechanism.

This two-layer application chain based on OP Stack not only inherits the performance advantages endowed by OP Stack (including easy-to-use one-click deployment application chain, EVM-compatible rollup and high composability), but also inherits the OP Stack The fee structure of the super chain obtains fee income through self-deployed sorters in the network, and PGN promises to distribute most of the income to public goods developers in Ethereum and other fields, providing them with an organic and sustainable source of income, while Not distributed to the development team or token holders.

For ordinary users, interacting with decentralized applications based on the PGN network can not only enjoy extremely low transaction fee costs and high security guarantees, but also part of the gas fee generated by each interaction will be imported into the sequencer, It is used to fund public goods, which can be called "donate as you use" to some extent.

Gitcoin Grants and Quadratic Fundraising

If you have an understanding of public goods and secondary financing, you probably don’t know Gitcoin Grants.

The Gitcoin Grants program is an initiative run by Gitcoin DAO in the cryptocurrency field to fund public goods. It adopts the "Quadratic Funding" model. An early attempt to improve crowdfunding, which encourages participation by the largest number of people, benefiting everyone's favorite projects. For example, a project that receives 500 donations ($1 each) will receive more matching donations than a single $500 donation.

The Gitcoin Grants experiment can be said to be quite successful. So far, it has funded many high-quality encryption projects through 16 rounds of donations. While helping the project grow, it also brings retroactive rewards to donors. Many users also use Gitcoin to enter the Web3 world.

However, all of this is nothing more than an experiment, at least in the mind of Ethereum founder Vitalik Buterin, quadratic fundraising is just testing the waters, and its long-term goal is to "make transactions from L2/applications (such as rollup MEV auctions) Fees flow directly into the matching donation pool.”

According to a previous tweet by Vitalik Buterin, those who say "whale funding is a terrible mechanism, we need [something better X]" are missing the point. Gitcoin Grants is a "test run" of quadratic fundraising with the long-term goal of getting transaction fees from L2/apps (like rollup MEV auctions) to flow directly into matching donation pools.

Vitalik believes that from a system level point of view, a well-designed economic model should be "taxing scarce resources to subsidize public goods." and listed a series of scarce resources, including packaged transactions, MEV, and shorter domain names , attention, status symbols, etc., while public goods are items that do not immediately earn income but are meaningful to the overall well-being of mankind, including network security, development, research, education, etc.

PGN is an upgraded version of quadratic fundraising

If the secondary fundraising of Gitcoin Grants is just a test of the water, then the launch of PGN marks a new journey for Gitcoin.

PGN will bring a self-sufficient model to the Ethereum ecosystem. From then on, public goods that lack funds will become a source of water. This source is the orderer fee from PGN.

The PGN created based on the OP Stack naturally inherits the fee structure of the OP Stack, that is, every transaction generated in the network will generate a sorter fee, and the PGN intends to use these fees to fund the Ethereum ecosystem and beyond. Development of public goods.

Public goods in the Ethereum ecosystem, of course, refer to open source software and applications.

As one of the most common digital public goods, open source software and applications create enormous value for society. Basic Internet protocols such as TCP/IP, HTTP, FTP, and SMTP were developed and maintained to bring free, non-exclusive, and non-competitive access to information to the global community. Still, core maintainers of these open source software are underpaid.

For developers, deploying applications on the PGN network can not only inherit the advantages of "high security, stability and scalability" brought by the OP Stack modular framework, but more importantly, deploy decentralized App developers also have the opportunity to receive donations from the network without any financial commitments.

Different from Gitcoin Grants matching donation mechanism, all sources of funds in the PGN network are generated by user interaction, which is generated by the actual interaction between users and Dapp, and the sequencer fee generated by each interaction will be fed back by a certain mechanism For the builders in the ecology.

It can be said that if the matching donation mechanism of Gitcoin Grants was still "dead water", then, starting from PGN, the Ethereum ecology has become a "living stream", and its source is the developers in the network. The Dapp that encrypted users are willing to interact with generates income, which is then fed back to the contributors of the entire ecology, forming an organic cycle. It can be said that Ethereum has realized the real externality.

Ethereum enters the era of developer economy

It can be seen that whether it is the EIP-6969 proposal that will be incorporated into the Ethereum Cancun upgrade in October this year, or the launch of the PGN this time, the revenue system of Ethereum has begun to deliberately tilt towards the developer community.

EIP-6969 is an Ethereum proposal that aims to enable contract creators to obtain part of the Gas consumed by their own contracts by introducing the concept of contract guaranteed income CSR. This economic mechanism can also be applied to L1.

In other words, starting from EIP-6969, the Ethereum revenue system began to consider the interests of developers.

Prior to this, the Ethereum miners group was the main group of Gas fee income. After all, in the early development stage, miners are the core group to maintain the safe operation of the network and the foundation of the entire network. Therefore, it is necessary to give enough rewards to the miners in order to maximize Maximize the security of the network.

If the most important thing in the early stage of Ethereum is network security, then, as the ecosystem of Ethereum matures and improves, the application and ecological construction in the network become increasingly important. As the most important ecological contributors, developers are not as important. It goes without saying.

Therefore, incorporating the developer's income incentive mechanism into the protocol layer is crucial to ecological development. The greatest value of EIP-6969 lies in the more reasonable distribution of Ethereum revenue to contributors, who are not only validators (or miners), but also developers and builders.

Since the generation of the gas fee is provided by the contract creators, who developed the Dapp to attract users to consume and trade, and then generate the gas fee, it is of course natural to get a slice of the gas fee. By introducing the contract creator revenue mechanism EIP-6969, Ethereum further aligns the incentive mechanism of contract creators and the network, and promotes the participation and rewards of contract creators.

Once the Cancun upgrade is successfully incorporated into the EIP-6969 proposal in October this year, then, PGN will enable Ethereum developers to directly obtain a part of the sorter fee based on CSR as their source of income, rewarding those contracts that really create value for active users on the chain Developers, Ethereum may usher in a self-sufficient "developer economy" era.

Conclusion

PGN is off to a good start, with deposit/withdrawal transactions exceeding 100,000 in less than a week since the testnet was launched. However, it is only the beginning.

For ordinary users, there is very little that can be done at present. Users can only perform test currency bridge transfers between the Ethereum Sepolia network and PGN through the test network.

In the future, the sorter fee will be allocated by a certain mechanism, but what this mechanism is has not yet been implemented. It is important to provide developers with a stable source of income. However, how to allocate these funds reasonably and whether the allocation standards are reasonable are more important issues to be resolved. According to the plan of the PGN team, 6 months after the launch of the mainnet, fees will be assessed and distributed based on cumulative impact data.

In the long run, PGN is still a long-term experimental project with a long way to go. According to the official announcement, such an experiment will have to last for at least two years.

And experiments mean constant trial and error, uncertainty, and even a future with a high probability of failure, but at the same time, experimentation also means vitality, a possibility of exploration, and from the visible human historical experience, we will find that experiments Sex is also the place where groundbreaking things are born with the greatest probability.

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