Overview
This is a proposal outlining a Conditional Funding Market (CFM) to increase Ethereum’s GDP. It is an example of what could be designed as part of the Ethereum Growth CFM at Edge Esmeralda.
Context
Thinking about blockchains as digital nations, there are two main levers of growth:
- Monetary policy: the design of the blockchain tokenomics including it’s supply, issuance and transaction fees.
- Fiscal policy: initiatives that drive ecosystem growth.
Ethereum’s monetary policy is strong, having been iterated on since launch with key updates such as EIP-1559.
However, Ethereum’s fiscal policy has received less attention. This has caused Ethereum to struggle to respond to competitive threats and fund promising ideas, as seen by metrics such as DAUs being relatively flat since 2022 and application fees never returning to their January 2022 peak.
Screenshot of Ethereum’s GDP as measured by fees paid for apps on L1, from Token Terminal.
How it works
The Ethereum GDP Growth CFM is an initiative to focus attention on Ethereum’s fiscal policy. The CFM will allocate capital to the outcomes most likely to increase Ethereum’s GDP as measured by L1 + L2 application fees.
The key phases of a Conditional Funding Market (CFM), timelines are included as an example.
| Step | Description | Example |
|---|---|---|
| Objective | Deployer defines a clear objective for the market. Butter translates the objective into a robust and manipulation-resistant target metric. | Grow Ethereum’s GDP. |
| Submissions | Projects submit proposals to achieve the objective. The deployer can select which projects are eligible to participate. | Any outcomes aimed at growing L1 + L2 application fees. |
| Predictions | Forecasters predict the expected impact of each proposal on the target metric if they are each funded. | “Which outcome should we fund to maximize L1 + L2 application fees?” |
| Funding | Funding is allocated to proposals based on the markets’ forecasts. | The top outcome(s) with the highest predicted impact receives the funding amount. |
| Resolution & Payout | Later, the markets resolve based on the actual change in the metric. Forecasters realize a profit or loss based on their forecast accuracy. | Outcome B increased L1 + L2 application fees by $6M which is used to resolve the metric. |
Draft Market Requirements
Overview
| Input | Description |
|---|---|
| Market Owner | Butter |
| Tentative Launch Date | May 31, 2025 |
| Objective | Grow Ethereum GDP |
| Target Metric | GDP (L1 + L2 application fees) |
| Target Funding | $5,000,000* |
| Allocation per Proposal | Variable |
| Collateral | USDC or ETH |
*The total amount of capital and allocation per proposal will depend on the total funding commitments received.
Outline
| Input | Description |
|---|---|
| Target Network | Ethereum |
| Objective | Grow GDP |
| Target Metric | GDP (L1 + L2 application fees) |
| Proposers | Any |
| Market Duration | Decision Period: 1 week Evaluation Period: 1 month |
Settings
| Input | Description |
|---|---|
| Question Type | Scalar [$0, $10,000,000] |
| Display Question | “Which proposal should we fund to maximize L1 + L2 application fees?” |
| Decision Market | “Which protocol received [Allocation per Proposer] in funding during Ethereum Growth CFM Round #1?” |
| Conditional Scalar Market | “Between $0 and $10,000,000, how much were L1 + L2 application fees generated by funded_proposal between start_date and end_date?” |
Functions
| Rule | Description |
|---|---|
| Decision Rule | 1. Order proposals by highest predicted metric, e.g., Proposal 1: $6M, Proposal 2: $4.5M, etc. 2. Select top project(s) 3. Cancel all markets for outcomes that do not receive funding |
| Funding Rule | Deployer distributes funding to outcomes as advised by the decision rule |
| Resolution Rule | Metrics Oracle reports the actual L1 + L2 application fees achieved by the funded proposals at a date approx. 3 months after the market concludes |
How to contribute
Support from across Ethereum is crucial to ensuring this experiment is a success. We are looking for individuals, DAOs, and teams for:
-
Impactful proposals. Outcomes that can increase L1 + L2 application fees.
-
Funding commitments. Capital to increase the size of the reward pool.
-
Metrics oracle. A service provider to compile the data and act as the source of truth for the market.
-
Interested communities. Protocols, teams, or individuals to participate in the markets or support in alternative ways.
If you are interested in supporting in any of the above capacities, join the Ethereum Growth CFM, comment below or get in touch with the Butter team.