Since the Optimism Collective launched sixteen months ago, Bankless Publishing has been covering that ecosystem, from tokenization and technology to the Law of Chains and the Optimistic Vision. As part of our work, we’re pleased to curate eight of those articles as part of what we’re calling The hOPe Series. These article are available as free, open edition digital collectibles, helping you to curate writings on one of the most impactful ecosystems in web3.
Shortly before Optimism burst into much of crypto consciousness last year with its first OP token airdrop and the establishment of the Optimism Collective as a playground for digital governance experiments, it published what I called a “short but powerful blog post — Ether’s Phoenix — about building infrastructure to support public goods funding,” positing that public-goods-focused building is “a mindset: that optimism prevails, that better systems are possible, and that humankind will be rewarded for its cooperative revolution”.
The difference here is that unlike so many other profound visions for an optimistic future, Optimism also provides a way to fund the creation of this better world.
Ether’s Phoenix is a mashup of ancient wisdom, blockchain technology, and the idea that we should monetarily reward people who have made a positive impact, summed up by the Optimism Collective's succinct guiding axiom: Impact=Profit. At a high level, it means that Optimism has built a recursive, retroactive public goods funding model which uses profits from its blockchain sequencer to reward individuals for past work they’ve done that benefits Optimism, the Collective, and Ethereum. In a practical sense, it distributes OP tokens to those individuals who are building tools that don’t themselves generate revenue but are immensely profitable as a public resource.
In the grandest sense, Ether’s Phoenix is a test of the thesis that regenerative cryptoeconomics isn’t just a funding mechanism for web3 public goods; it’s a vehicle to solve the world’s greatest challenges and an attempt to rectify millennia of coordination failures. Ether’s Phoenix rises from the ashes of Moloch.
Made famous through Greek mythology, the phoenix has long symbolized rebirth, the cyclical nature of a self-renewing world. In many ways, the phoenix is the perfect metaphor for what the Optimism Collective is trying to accomplish — as Ether’s Phoenix makes clear, the Optimism Collective has no less than a long-term goal to provide infrastructure aimed at addressing humanity’s long-standing failure to meaningfully manage large-scale coordination challenges, which range from nuclear weapons and clean air to digital rights and open-source software. But first we have to start small.
In web3, we are acting as a laboratory to solve the world’s coordination problems, to — in the words of many crypto natives — slay Moloch, the modern god of coordination failure and ancient god of child sacrifice. The Optimism Collective believes the best way to slay Moloch, to overcome humanity’s history of coordination failures, is to center itself around Impact=Profit as practiced through retroactive public goods funding.
Optimism ran its first retroactive public goods funding round in 2021, when it donated $1 million to about two dozen projects. By its second round earlier this year, it was donating nearly $25 million in equivalent OP tokens to 195 participants. For its third round slated later this year, the Optimism Collective is going to distribute 30 million OP tokens, with a current market value of around $50 million.
One of the main hurdles to solving issues that require large-scale human coordination is the free rider problem. Simply put, because of the nature of collective goods, there is no incentive for parties who benefit from collective action to contribute towards the costs of that action … i.e. since it’s being done anyway, why pay for it? Optimism’s solution is to tell free riders to take a hike by incentivizing builders to solve collective problems through the promise of proportional rewards.
The dream is to build an incentive structure so rewarding that free riding is against the party’s own self interest. Start to imagine trillion-dollar matching pools and worldwide quadratic voting rounds and you can see that this model may be the missing piece that resolves an inherent dichotomy of capitalism: how to focus collective effort towards a beneficial purpose while also making money. That’s what Impact=Profit is all about: the idea that both can be achieved by an action, that both are equally important goals.
The vision is that this type of retroactive funding will enable better collaboration and incentivize collective action. In many ways, optimism, both the concept and the capital-O scaling solution, is Ether’s Phoenix; it’s what helps to give rise to new forms of coordination. Enabled by Ethereum and scaled by the Optimism Collective, it’s also a call for us to summon our own phoenix, to participate in the process of building the future we want to see. For Optimism, that starts with using sequencer profits (and 20% of the initial token allocation) to retroactively fund public goods. For members of the Collective, it may mean supporting these efforts through use of Optimism or by building tools and resources to help the Collective flourish.
As this incentive engine continues to burn hotter with the fuel provided by the growth of the Collective, ether will become the creative phoenix on which our collective dreams rise, stretching the wings of optimism as we ride a perpetual updraft, soaring over the remains of Moloch, whose dying ember slowly fades far below.
Hiro Kennelly is a writer and shipper at Bankless Publishing, building at BanklessDAO, an Associate at Bankless Consulting, and is now and forever a DAOpunk.
Trewkat is a writer, editor, and designer at BanklessDAO. She’s interested in learning about crypto and NFTs, with a particular focus on how best to communicate this knowledge to others.
Tonytad is a graphic designer who has worked locally and internationally with organisations and firms on over 200 projects, which includes branding, logos, flyers, cards, and covers.
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