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The Puzzling Reality of Optimism Grants Pt 2: the Good, the Neutral, and the Questionable

Castle Capital Research Report

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November 24, 2023

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The Puzzling Reality of Optimism Grants: the Good, the Neutral, and the Questionable

This is the second part of a series that started a few weeks back with a piece regarding Optimism’s Retroactive Public Good Funding (RetroPGF), in which we explored the program’s origination, goals, and the election of recipients.

We unveiled how the program plays a crucial role in channeling essential public goods funding and community-led projects within the Optimism ecosystem. 

However, we were left pondering the overall impact of the program and where the distributed token grants ended up. 

Hence, we decided to complement our initial research with a qualitative research quest tracking the distribution of the funds and what the recipients did with these tokens. 

In the first part of the series, we categorized grant recipients based on their on-chain behavior, revealing patterns of selling (35% of them), holding (25%), and untraceable tokens (40%). 

Given the nature of the grant, we expected the majority of the recipients to liquidate the assets to fund their activities. 

Due to limited public information regarding the recipients’ wallets and our inability to track distribution directly from the Optimism funding address, we were unfortunately unable to provide a full transparent overview. 

Overall, we concluded that the execution of the grants program, the evaluation of its impact, and the recipients’ contribution to public goods is an extremely hard task to quantify. 

All this underscores the importance of ensuring transparency and accountability initially in the process for both the grantor and the grantees. 

In this edition, we will delve deeper into the examination of public goods through the analysis of a select few grant recipients, which will offer a glimpse into the program’s effectiveness. Like before, we do so by categorizing them into three buckets: Good, Neutral, and Questionable.  

Disclaimers

The sample size in this edition is limited and thus our conclusions should be weighted accordingly. Given our limited resources and time, it is impossible for us to cover all 190+ recipients in detail. This is why we decided to handpick a small, but diverse panel of grantees to highlight along with our findings from Part 1. 

However, as this is a qualitative analysis, there will be some subjective bias based on the movement of the awarded tokens and our overall perception of the specific projects, based on their outward appearance and public activities. 

Last but not least, the three categories were chosen based on the fitting name referencing the recipients. 

Be wary that they are highly generalized for the scope of this research, as reality is much more nuanced.

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The Good

Upon quick investigation, over 90% of the recipients would fall under this category.

For our sample, we decided to limit the number to three recipients who have, in our eyes, contributed substantially to the ecosystem and continued to do so after the grant. 

First and foremost, there are a myriad of individual content creators that received grant funding in the second round. We want to start this section off by applauding their efforts. The crypto space can be rewarding, but it can also be incredibly hard for individual content creators to keep their heads up and continue providing valuable content. 

One of the content creators who has consistently provided valuable content regarding the Optimism ecosystem is Subli DeFi. In total, he received a little over 19k OP tokens which were sold for a sum of $36k. 

Initially, the grant was awarded for the Optimistic Series, a YouTube channel and newsletter, that Subli started by himself. 9 months later, he has expanded the team, started a podcast series, and continued to produce quality content for Optimism. He is especially active on the newsletter side, where he has grown to over 10K subscribers, all catered towards the OP Stack community, developers, and the wider public for both French and English audiences. 

Subli is a great example of an individual who used the grant to amplify his current efforts and build something greater than before. 

Importantly, these grants were awarded for prior work, not for future work. So, it is good to see that Subli decided to use the grant to continue his efforts, which ideally is what we’d like to see from recipients. 

The second recipient in the “good” category is the team behind Blobscan, a blockchain explorer focused on EIP-4844 and optimized to index blobs. The explorer is helpful in gaining more insights into this novel way of constructing blockchain transactions on L2s and was built during the hackathon of ETH Bogota. 

The team consists of 4 full-time developers who can be found on Twitter as Blossom Labs. Blossom Labs were rewarded 40k OP for their work, which was sold for around $61k to pay for their ongoing development. Blossom has used the grant to build other public goods. Since then, the team has developed other open-source projects, like EVMcrispr and ENS Wayback Machine. 

The Neutral

This section analyzed projects that we believe have yet to contribute to Optimism, which received a grant that is too large for the scope of their project.

Three major examples in this category are Polynya, ZachXBT, and Beaconcha.in. They received relatively large grants.

1. Zach received 188k OP tokens and sold for $227k

2.Polynya received 98k OP tokens and sold for $200k

3. Beaconcha.in received 100k OP tokens and sold for $200k

We believe that, despite their reputation, the size of their grant was too large compared to their contribution to Optimism – while we acknowledge their massive contribution to the overall crypto space. 

Of course, we recognize Zach’s tremendous job fending off scammers and malicious actors in our space, and in turn, Polynya has done a great job educating the masses on scaling and layer 2 solutions in a sophisticated fashion. 

Lastly, a significant grant was awarded to Beaconcha.in, to build a blockchain explorer as an alternative to Etherscan.

In total, they received 100k OP tokens and are within the top 50 recipients. We believe this sum is not justified by any meaningful contribution to Optimism and appears to be especially high for the scope of this project.

With such a wider range of recipients, it’s quite high to uphold the same standards across different products and services.

With this “neutral” section we have highlighted a sample of recipients that were awarded a grant too large for the scope of their projects. 

We believe that the distribution of funds could have been more geared towards up-and-coming projects and passionate individuals that would have continued deeper into the Optimism ecosystem.

The Questionable

This section is what sparked the inspiration for the title of our research. 

It covers the recipient ‘Where has the OP gone?’ (WHTOG) and shows that due to a lack of oversight and control, less eligible projects can be rewarded huge sums of money, undeservedly. 

WHTOG was the 48th largest recipient of Round 2 and received a total of 65k OP tokens.

The tokens were quickly transferred to Coinbase and assumed to be sold at market during that time for >$100k. 

The scope of the WHTOG projects was to be an updated governance thread analyzing grants at a transactional level, which can be found here. In total, it only ever covered 11 grant recipients, with a total of 17 responses. The thread was active between November 2022 and March 2023.

The scope of WHTOG is similar to what we accomplished in Part 1 of this series, albeit in smaller detail. This highlights the fact that simply being paid for public goods does not guarantee nor incentivize the long-term success of these initiatives.

Our experience in producing a similar research piece showed us the necessary time and effort it takes to provide in-depth and quality analysis on such topics, something that was not readily apparent with WHTOG. 

This case showed the difficulty for voters to properly assess the eligible projects and perhaps overlooking their true impact and scope.

In the absence of good transparency and accountability, less deserving projects managed to fly under the radar and receive their grant. 

Conclusion

This piece was a follow-up on our first part in which we covered the behavior of RetroPGF grant recipients. We uncovered what the recipients did with their airdrops and in many cases how many of the tokens they off-ramped into dollars. 

We decided to highlight a few of the recipients in an effort to highlight where to money went and offer a small insight into the scopes of the recipients’ projects. 

In doing so, our goal was to bring more transparency and accountability to the RetroPGF program and show how these projects have used their grants. 

By providing commentary on this area through case studies we hope to contribute to making the grant distribution more efficient and fair. 

This is something that may fall into the abyss, especially at the size that Optimism is running its grant program with over 190 recipients. Only by holding recipients accountable through self-reporting it is possible to infer the real extent to which the grant program was successful. 

For this reason, we believe in the importance of backtracking these projects and upholding some standards in order to properly evaluate the effectiveness of the grants. 

There is a lot of money involved in the RetroPGF program and it is in the issuers’ (Optimism) best interest to make sure it is distributed as best as possible. 

An evaluation of the grant post-distribution could help identify “over”-receivers or “under”-receivers and contribute to making future rounds more effective. 

Brought to you by Unexployed.

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Virtually yours,

The Castle

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