What issues does the Protocol Guild-funded project see? How can the Ethereum ecosystem be developed sustainably in the long term?

Ethereum core developer Tim Beiko penned an article introducing the concept and operating principles of the Protocol Guild project, aiming to facilitate the smooth operation of Ethereum infrastructure, theoretical research, and security-related development for the ecosystem's healthy long-term growth.

What problems does Protocol Guild aim to solve?

The increasing opportunity cost of foundational research

Ethereum is developed and maintained by a large group of core contributors with expertise in decentralized systems, cryptography, devops, cat herding, and more. These contributors openly collaborate to define and deliver Ethereum's complex technical roadmap while ensuring the network's security is never compromised.

Even with reasonable salaries, as the industry around protocol development on Layer1 matures, the opportunity cost for developers to continue working on Layer1 will increase, leading maintainers to start rationally considering other options.

Relying solely on passion or status as a long-term strategy to retain core contributors will become increasingly unsustainable, resulting in only a small proportion of developers with relatively low rewards being responsible for maintaining the infrastructure to safeguard the multi-billion-dollar asset value of the Ethereum ecosystem.

Protocol Guild aims to narrow the gap between the risks of working on Ethereum Layer1 for developers and the rewards they receive.

Financial Neutrality

On the other hand, external funding often comes with specific intentions, making it crucial to consider the impact of external funding on projects. With financially powerful participants, they can unilaterally exert pressure on the project's development and governance.

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While this risk can never be completely eliminated, and external participants do not need Protocol Guild to attempt to influence protocol maintainers, being entirely on-chain at least provides transparency. Anyone can audit who sent what content to their contract to assess whether a single donor or asset is disproportionately influential.

Protocol Guild's Solution: Donating 1% of Tokens

To address the above two issues, Protocol Guild hopes to provide incentives for the development of foundational research by donating to on-chain project funding while not affecting the direction of research.

Choosing Tokens as the Core of Funding

The difference in rewards between Ethereum Layer1 research and other projects does not stem from differences in base salaries but from the value of the team members' own tokens.

Although no token can guarantee appreciation, continuing to base rewards on fiat or traditional means may not effectively keep up with the excess returns brought about by issuing tokens.

Therefore, Protocol Guild's strategy is to collect the project team's own tokens as donations, which also entails taking on risks.

Choosing 1% of Token Supply as the Donation Standard

As for how many tokens to donate, Protocol Guild hopes that the projects receiving donations can provide 1% of the total token supply.

• Putting all projects on an equal footing: Small projects donating 1% of tokens should receive similar respect to large projects because everyone has made commitments in the same proportion.
• Reducing the need for project teams to think: Project teams may not want to specify a timeline for introducing tokens but may wish to commit early to supporting Protocol Guild. Publicly committing to reserve 1% of future tokens is an easy task for projects to take responsibility for.

Outcomes

In response to Protocol Guild's strategy, the staking project Ether.fi announced at the end of January that they will donate 1% of their own tokens to the former here.

Not only on-chain projects but also non-crypto supporters have begun to emerge. For example, one of the U.S. Bitcoin ETF issuers, VanEck, mentioned before approval that they will allocate 10% of profits to Protocol Guild for at least ten years.

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Long-termism

Blockchain and token design themselves are very suitable for funding open-source or foundational research projects, but early financialization and speculative atmospheres have made this relatively less emphasized.

However, the development of Web3 is not limited to on-chain projects. Research on the security and performance of underlying infrastructure is a more critical prerequisite.

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