Ethereum has come into its own in 2020, and the recent rapid blooming of the reigning smart contract platform’s hit sectors — DeFi, DAOs, NFTs, tokenized bitcoin, social money, and so forth — is a testament to the project’s increasingly dominant presence in the cryptoeconomy.
But Rome wasn’t built in a day, and neither was the teeming Ethereum ecosystem we’re seeing today. The progress and momentum Ethereum is enjoying now comes courtesy of years of infrastructure work by some of the blockchain arena’s most talented builders.
However, Ethereum is an open-source public goods project, and adequately funding worthwhile open-source work around such efforts has been a longstanding problem in the wider software community. Such toiling can be thankless and low-paid at times, to be sure.
Yet Ethereum’s funding angel is already here in the form of Gitcoin, a collaborative community hub for open-source projects. And two headlines out of DeFi this week suggest that, like Ethereum, Gitcoin is also coming into its own as a real tour de force for backing Ethereum’s key infrastructure projects. Allow me to explain.
The Parasitic Protocol Problem
Ethereum has become the de facto home of DeFi in the cryptoeconomy. Indeed, the platform currently powers all of the largest and most popular DeFi apps, like Aave, Maker, Curve, yEarn, Synthetix, Compound, Balancer, Uniswap, and so on.
That said, in the past as DeFi has been going through its adolescent growth, its protocols have brought to the fore the free-rider problem. As Ethereum analyst Anthony Sassano has previously explained in The Daily Gwei:
“This is because they are “free-riding” on top of the platform – the only toll they (and their users) pay is in the form of gas fees which goes directly to miners. This fee is effectively washed back and forth between participants on the network: user buys ETH > user pays fee > miner takes fee > miner may sell the fee (ETH) back into the market > cycle begins…