Optimism is many things: a rapidly diversifying economy, a stack of open source modules for scalable blockchains, and a Collective of companies, contributors, and community members working towards common goals. It is an ethos and a vibe.

Optimism’s vision is to create a global economy with a profit motive for public goods. To reach this vision, Optimism is pioneering a new model for digital governance – one that both echoes our earliest democracies and learns from our industry’s current patterns.

Nearly two years ago, OP mainnet launched. Last Spring, the first branch of the Optimism Collective governance was born when the Token House came online.

Today, Optimism is announcing its second round of Retroactive Public Goods Funding, which dedicates 10m OP tokens to fund public goods. We’re also introducing the first iteration of the Citizens’ House to govern how this funding is allocated.

This is the next step towards delivering on Optimism’s core belief that rewarding public good to the collective with profit to the individual is key to growing a vibrant economy.

Bicameral balance

The Citizens’ House exists as an equal counterpart to the Token House.

The Token House, made up of OP token holders and their delegates, uses a traditional model of coin voting to govern the core economics of the Optimism Collective, including ecosystem grants, oversight of the OP token treasury, and certain network parameters like sequencing.

But a system that serves human utility must be capture-resistant, which pure token voting inherently can never provide.

Enter the Citizens' House: a one-person one-vote system which roots power not in financial capability, but in identity. Together, the Token House and Citizens’ House make decisions for the Collective.

Funding public goods to build a better economy

The primary responsibility of the Citizens’ House is determining how to allocate funding for public goods. Why?

Because our world is built on public goods, and those public goods are crumbling.

Open source software has fueled the internet’s progress, but its production is woefully underfunded. Builders burn out while corporations profit off their free legos. Without financial support, free software becomes unsafe — putting users, companies, and communities at risk.

And when building public goods isn’t profitable, the best and brightest of our generation are drawn to more lucrative work, rationally putting self-interest above the needs of the community.

The Optimism Collective believes that building public goods should be profitable.

This key ingredient to the Optimistic vision is more than just altruism – it’s core to our success. Optimism’s codebase itself is an open-source project, and builds on the shoulders of countless OSS giants which came before it.

This means public goods funding is a critical growth strategy. For Optimism, well-funded public goods means better developer tooling, widespread user education, safer infrastructure, and industry-leading research. It means Optimism can last and thrive.

Once we show that this model can drive a successful economy for the Collective, we can take the principle of impact = profit to the world.

How does RetroPGF work?

The Citizens’ House funds public goods through a process called “retroactive public goods funding” (RetroPGF). RetroPGF is based on the idea that it’s easier to determine what was useful than to issue proactive grants for what might be useful. The process runs as a series of discrete rounds, each with the same structure:

1. First, a scope of funding is declared publicly. What utility or positive externality are we trying to fund? In the initial few rounds of RetroPGF, funding scope is determined by the Optimism Foundation. Eventually Citizens will determine funding scope themselves based on what they determine the Collective needs.

2. Afterwards, impact is evaluated. The Citizens’ House reviews projects and votes on impact against the declared funding scope. The output is a set of scores that determine how much funding each project receives.

Optimism has committed to distributing 20% of the OP token treasury through RetroPGF. RetroPGF 2 will be funded from that allocation. Future RetroPGF rounds will incorporate additional funding sources such as protocol profits.

The cycle is simple, but the details are endless. What criteria do voters use to evaluate impact? What information are projects required to share? What voting algorithm is most effective at revealing group preference? How does the product experience affect voting outcomes? What is our working definition of the “public” we are benefitting?

Keeping to our principle of iterative governance, Optimism will run many rounds of RetroPGF over the coming years to experiment with design and process. These iterations will bring together theory, practice, and feedback from the community to explore how to build a mutually beneficial retroactive funding process.

Announcing RetroPGF 2

RetroPGF 2 is the second instance of Optimism’s ongoing funding experiments. In January 2023, RetroPGF 2 will distribute 10 million OP tokens to fund public goods that support development and usage of the OP Stack.

Work may be nominated in one of three categories:

• Infrastructure + Dependencies: software used to build or deploy the OP Stack; contributions to protocols or standards upon which the OP Stack runs; experiments that support future development of the core OP Stack protocol.

• Tooling + Utilities: work that helps builders create applications on OP mainnet, build on the OP Stack, interact with governance of the Collective, or use applications built on OP Mainnet.

• Education: work to spread awareness and knowledge of how Optimism works, whether technically or socially.

Why this scope? We can’t talk about funding public goods without supporting the free software that powers OP Mainnet itself. From repurposing Ethereum’s codebase, which allows our network to provide unparalleled EVM equivalence, to the countless tools our developers build with, to our own code itself – Optimism bleeds open source.

In aggregate, we call the code which powers Optimism the OP Stack. Supporting the public goods which power it will help Optimism bring a new economy to global scale.

The process for RetroPGF 2 is as follows:

• Anyone may nominate projects or individuals for funding from January 17 - 31 on the Optimism Governance Forum.

• In order to be eligible for funding, nominated projects or individuals must complete a project profile in the RetroPGF Application Manager between January 31 - February 21.

• RetroPGF 2 badgeholders will vote on how to allocate funding to projects. Voting will take place from February 28 through March 14.

• Results will be announced in late February, followed by a public community retrospective.

For more information on the process, visit the RetroPGF 2 documentation. For announcements and updates, follow @OptimismGov on Twitter.

Voting badges

Voting badges for RetroPGF 2 will be distributed to 90 community members:

• Each badgeholder in RetroPGF 1 will receive a new voting badge, and will be able to distribute a voting badge to one community member of their choosing.

• Optimism’s Token House will elect ten badgeholders, each of whom will be able to distribute a voting badge to one community member of their choosing.

• Finally, the Optimism Foundation will distribute 21 voting badges to community members, each of whom will be able to distribute a voting badge to one community member of their choosing.

The Optimism Foundation will distribute badges using the following guidelines, and encourages other badgeholders to consider these criteria in their own distribution:

• 💖 Is this person a proven advocate for the value of public goods, in crypto or beyond?

• 💡 Can this person help advance the process and structure of retroPGF as a funding mechanism?

• 🔎 Is this person a domain expert in any of the categories up for funding in RetroPGF 2?

• 🌱 Has this person shown strong alignment with the long term growth of the Optimism ecosystem and the mission of the Collective?

Voting in RetroPGF 2 does not guarantee permanent participation in the Citizens’ House and future iterations of RetroPGF. Citizenship criteria may change dramatically. Ownership over citizenship distribution is eventually the responsibility of Optimism’s two-house governance system.

For more information on RetroPGF 2 and the Citizens’ House, visit our governance documentation.

Beyond RetroPGF 2

This round of RetroPGF 2 is the next step on an evolving journey. In this phase, the Citizens’ House will only be responsible for voting on RetroPGF within a scope and process provided by the Optimism Foundation.

In future stages, the Citizens’ House role will expand. For example, in addition to voting on RetroPGF funding, the Citizens’ House will work alongside the Token House to govern allocation of protocol profit, collaborate on criteria for participation in the Citizens’ House, and engage in a system of checks and balances to enforce the Collective’s Codes of Conduct.

In its final form, we envision a global Citizens’ House made up of many thousands of Optimists, where a good reputation in the Collective can earn anyone a seat at the table.

To create the foundation for this identity-based governance, Optimism is introducing a simple identity layer called the AttestationStation as part of the Citizens’ House v0.1 launch. The AttestationStation is a straightforward registry contract that serves as the Collective's first experiment for reputation production and consumption in the Optimism ecosystem. Eventually the Citizens’ and Token Houses may grant citizenship based on reputation recorded in the AttestationStation.

We expect this process to be emergent, community-led, and participatory. There’s plenty to explore, including zero-knowledge and private attestations, composability with other teams building decentralized identity, and applications in consumer experiences.

The Collective will continue to run RetroPGF rounds in tandem with growth of this reputation system, increasing the number of citizens over time.

RetroPGF 3 will happen later in 2023; its scope will be announced publicly at the end of RetroPGF 2.

Building together

RetroPGF is a core part of Optimism’s vision. If done right, it will form the backbone for a new type of economy. As with any complex system, though, this new process can’t be centrally planned or designed all at once. The only way to build it well is to build it together. This journey will require care, open-mindedness, patience, and – yep we’re goin’ there – optimism.

Anyone can get involved with RetroPGF by nominating projects during the open nomination period from Jan 14 – 31. More information on how to make nominations will be shared on the Governance Forum and by @OptimismGov on Twitter.

To follow along with RetroPGF 2, future iterations of the Citizens’ House, and happenings across Optimism Governance:

• Sign up for our RetroPGF newsletter

• Follow @OptimismGov and @OptimismFND on Twitter

And, as always: Stay Optimistic! 🔴✨