Aligning Incentives - The Daily Gwei #399
We're on a mission to slay Moloch.
Yesterday the Ethereum Foundation announced the ‘Client Incentive Program’ - a new initiative to reward eth1 (execution layer) and eth2 (consensus layer) teams with validators. Each of the 9 teams will receive 144 validators (4608 ETH/$17.5mil) each immediately with the withdrawal credentials for the ETH vested over several years and the first tranche unlocked at the delivery of Beacon Chain withdrawals.
Most of the core developers and researchers that are working on Ethereum today haven’t actually been around since the early days which means they didn’t get in on ETH when it was at really low prices. Due to this, there’s always been a need to find a way to reward these people appropriately with ETH for their contributions to the ecosystem. There’s been a number of ideas over the years of how to do this from implementing some sort of block reward funding (taking a percentage of the block reward and allocating it to developers) to having the community come together and fund this work (which does happen via Gitcoin Grants).
I believe that this new program from the EF is an amazing way to align incentives and reward Ethereum core developers at the same time. This is because it not only rewards them with ETH, but also gives them control over a generous amount of validators which means they are passively earning more ETH via block rewards (and fee revenue post-merge). Also, by vesting out the ETH, it ensures that the core developers are directly invested in Ethereum for the long-term as they now have a major stake in ETH which tends to appreciate based on their work. Of course, these funds from the EF are in addition to any other funds that the core developers & researchers receive (such as The Daily Gwei communities contribution) which makes this even better.
One last thing that I really like about this initiative is just how transparent it is. Those of you who’ve been around for a while will know that the Ethereum Foundation has been lacking in the transparency department for a while but lately they have gotten much better at it. By making the amounts and plans of this initiative public, the EF is showing that they are committed to transparency around how they’re helping client teams with compensation for their work in not just fiat, but also in ETH and validators.
Aligning incentives (and funding public goods) goes far beyond just the Ethereum core developers/researchers - it’s something that we need to constantly work on to ensure a healthy and sustainable ecosystem. Gitcoin Grants matching rounds and other similar initiatives have helped to move the needle in a positive way over the last few years, but we need to keep pushing forward with public goods funding so that we can eventually slay Moloch once and for all.
Have a great day everyone,
Anthony Sassano
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All information presented above is for educational purposes only and should not be taken as investment advice.