Crypto Public Goods Funding in Action

A public good refers to a service or commodity that is made available to everyone in society. Public goods are said to be non-rivalrous because they do not dwindle in supply and non-excludable because they are open to all.

The most commonly understood form of public goods are those administered by the government and paid for by the people through taxation – law enforcement, national defense, public safety, and environmental protection. The types of public goods that a person may access depends on their location. For example, in many places in the world healthcare is a public good, but in the US it is not.

Public goods are not exclusive to governments. They can also be handled by charities or private/public partnerships such as in the provision of toll roads.

Public goods funding in crypto

Interest in the previously dry topic of public goods has grown in recent years, mostly due to the introduction of cryptocurrency and crypto thought leaders such as Ethereum founder Vitalik Buterin.

Buterin himself explained the theory last year: “A public good is something that benefits a large and unselective group of people. So it’s a thing or a project or something that someone can do or create that has a benefit, where that benefit gets spread out across a very wide group of people. Where there is no way to decide who’s part of that group.”

There are three main forms of public goods funding:

Retroactive funding: a mechanism in which the public good is paid for after the fact.
Proactive funding: a mechanism in which the public good is paid for upfront.
Continuous funding: a mechanism in which the public good is paid for by continual donations or on a subscription model.

Each model has its merits with no one-size-fits-all solution being applied. Perhaps the most interesting model as it pertains to cryptocurrency is the retroactive model. Last May, Buterin worked in cooperation with layer-2 blockchain Optimism to implement a retroactive funding model. The result was one of the most hotly-anticipated airdrops of 2022 as Optimism retroactively funded Ethereum holders, with the aim of creating a sustainable future for the then-PoW network.

Namada pays homage to Zcash

A recent example of retroactive funding in the cryptosphere comes in the form of Namada (NAM), a new layer-1 blockchain focused on multi-chain privacy. For the uninitiated, Namada is based on cryptographic privacy technology – specifically, the zero-knowledge proofs (zk-proofs) first pioneered by Zcash.

According to the Anoma Foundation which manages Namada, the technological legacy or public good created by Zcash is something their foundation wishes to acknowledge and reward. The foundation has therefore pledged up to 20% of Namada’s genesis block proposal to public goods funding.

That funding comes in the form of a direct airdrop of $NAM. The Anoma Foundation projects that around 1 billion $NAM tokens will be airdropped to Zcash holders, in one of the largest examples of retroactive funding to date. The move also marks the first-ever direct airdrop to shielded ZEC holders – Zcash users who opt to keep their transaction details private.

In a recent post to the Zcash community, Namada co-founder Christopher Goes explained the reasoning behind the move: “Namada couldn’t have come into existence without the technical contributions and socio-economic programme of the Zcash community, and we would like to give material thanks back to the Zcash community in addition to verbal credit.”

Zooko Wilcox, CEO of the Electronic Coin Company behind Zcash, welcomed the NAM airdrop which is designed “to give back to the Zcash ecosystem in terms of both money and technology.”

The funding of public goods may be a fairly weighty topic, but with the popularization of digital assets and the novel funding systems it powers, its future could turn out to be much more exciting – and for Zcash holders, much more profitable.