Solving Alignment with Ethereum by Kevin Owocki

Thank you.

How's it going y'all? My name is Kevin Awake and I am one of the co-founders of Gitcoin. I am here today to talk about solving alignment with Ethereum. Alignment is how we align the interests of principles and agents of capital and labor of layer 2 ecosystems and their developers. And this is some of the latest thinking and research that I've been cooking over at Gitcoin.

So the arc of the talk is we're going to talk about the problem. We're going to talk about uh many different levels of misalignment problems and then we're going to talk about why Ethereum is a gamechanging technology for solving these problems and then I want to talk about where Gitcoin 3.0 is going in accelerating the alignment movement. So a very personnicity part of the alignment problem is that these are complex systems. We are dealing with uh agents whether those are humans or AI agents that have incentive landscapes within.

They are enacting their will on the commons on their local schools and uh communities and then also on the global and a particularly pnikity type of multipolar trap. uh a pnicity type of alignment problem is called a multipolar trap. So basically you can look at this mesh right here as a design space wherein different people within the design space have different levels of incentives and those incentives will lead to either good outcomes at the top of the graph or bad outcomes at the bottom of the graph. Uh there's a famous quote if you show me the incentive I'll show you the outcome. This is basically just some basic game theory uh wherein if you incentivize rationally individual actions that support the common good then you're going to get good outcomes and uh if you don't then you're not going to.

So a multipolar trap is a situation in which individual in individual actions lead to a collectively bad outcome. Okay. So that's a per particularly pnicity type of alignment problem that governments and companies have not been able to solve because we haven't had the right coordination substrates for doing that. So um just to make this really tangible, you can compose many of the most the the worst problems in the world today as multipolar traps. Like take for example climate change uh a situation in which everyone has an individual incentive for their own economic well-being to consume carbon and to ex export it into the atmosphere and that leads to a collective outcome in which we get global warming we get heat waves we get we get worse weather.

Okay. Open source sustainability is the problem that I set out to solve when I got involved in Gitcoin. Why is it that we create $500 billion per year in economic value through open source software, but because the source code is available for free, we can't actually fund the developers that are working on it. This is another example of a multipolar trap. Shared resources are depleted by individual use, and then you get hacks, you get bugs, you get maintainers that are quitting because of burnout because they can't actually support their families while they're working on open source software.

And then a more contemporary version of an alignment problem that you might see in the news is AI misalignment or rogue AI. So basically once we invent these super intellig intelligences, how are we going to make sure that they are going to be aligned with all of humanity. So the multipolar trap here is that every lab rushes ahead. But in doing so that creates global risk. Uh we don't know what we don't know about AGI and how AGI is going to be misaligned.

Okay, so that's multipolar traps. And you might ask yourself, okay, well, why don't just individual rational agents avoid the trap? Well, that's because individual incentives make avoiding the trap alone irrational. If others don't cooperate with avoiding the trap, then you lose while they win. And your action is so small that society falls into the trap anyway.

So, you might as well do the individually rational action yourself. Oh my gosh, there's a bird there. How about that? We're going to take that as a positive omen for my talk. So coordination is required but you have to trust that other people are going to take the same course of action as you are.

Another question that we get when we talk about multipolar traps is why doesn't the government just step in and regulate this and that can be work well if you have a good democratic government that is not captured by special interests. So in theory, yes, governments could uh regulate multipolar traps, but in practice, governments act slow, face lobbying and jurisdiction limits, and lack good enforcement mechanisms. So I think that this has been a really hard problem as civilization complexifies for us to solve. And I think that Ethereum is the place where we can solve the problem of multipolar traps and alignment issues. And I'm really excited to talk about that for the rest of the talk.

So, let's get into why Ethereum is a game-changing technology, which is a post that was written by my friend Virgil Griffith back in 2019, which basically made the point that using Ethereum, we can augment incentive landscapes. Okay, so down here in the bottom of the slide is a famous game theory experiment called the prisoners dilemma. Basically, it's a 2x two matrix where if everyone cooperates, then they'll get some amount of reward and if everyone defects, then they all get punished. But in between there's this pnikity set of slides coordinate defect and defect coordinate where two different members of society are incentivized to defect because of that's their individual landscape. And so Virgil makes in this post the point that Ethereum is a game-changing technology.

You can augment in incentive landscapes with economic incentives or disincentives using Ethereum. They're automatically enforced by smart contracts. And I think that this is a really cool idea and Virgil's kind of the one who pilled me on this idea that now we can build new incentives. Okay, remember these incentive gradients are just a design space of the possible ways that you could configure the economic rational incentives in a design space. And so what we can do is we can add incentives to good outcomes or add disincentives for individuals to have bad outcomes.

And we can even add logic gates on top of these things where you can say that the more people will do a rationally economical thing together then the more then the incentive compounds together. And so this is really a incredible technology for augmenting our incentive landscape. And I think that what we can do is we can take the uh the regulatory power of the state that wasn't working in the 20th century that gets captured that isn't able to enforce uh incentive landscape and we can move it all on to Ethereum and we can solve the alignment problems the pnicity multipolar traps that are out there in the world with Ethereum. So I think that Ethereum is the sword that we can use in order to bring more network-based bottoms up peer-to-peer coordination that is derived by the consent of the govern of the people that are in these communities and not delivered top down by governments that are out of touch unable to regulate and introducing regulatory capture and all the other problems that we're aware of in the 20th century. Okay.

So uh just to come back to the examples in the beginning of my talk of uh various multipolar traps that are out there in the world. So we've got uh a multipolar trap of public goods underfunding stuff like open source software and then you can add a new incentive landscape. In the case of Gitcoin, it's historically been quadratic funding. And then you get a fairer layer of shared contributions wherein the individual incentive is actually to support open-source software when it wasn't possible before. And I want to say that one of the really incredible things about this design space is that Gitcoin is not the only one who's doing this.

There's also Clear Fund. There's also GTH. There's also Deep Funding and lots of other people who are doing really cool uh coordination work in order to make sure that we're solving these problems of of multipolar traps. And so I think that um this is a game-changing technology that we're going to be able to accelerate alignment in the 21st century. Okay.

So this is by far the most uh dense slide that I think that I have in the talk, but I I promise you that it's worth your mental cycles in order to gro it. So this is a slide of Athereum public goods history that we've compiled along with all of our friends in the ecosystem over the last uh couple weeks. And basically the bottom axis is time left to right. And then you can see each of these individual blobs of color are different campaigns in order to support individuals in the Ethereum ecosystem that are doing things that are public goods for the Ethereum ecosystem. So at the bottom in Cyan, you've got the Ethereum Foundation, you've got the Stellar Foundation, you've got the uh the Bloom Network, you've got Arbitrome Optimism, all of these very like traditional campaigns where they're doing grants to their ecosystems in order to incentivize specific types of behaviors.

And what's really cool is that we're starting to see new incentive landscapes that are built that were never possible before Ethereum. And in the top left of the graph, you can see Gitcoin grants, quadratic funding as a early incentive landscape augmentation that was on the scene. And also Molokdal. The release of Mulikdal in 2019, I think really allowed us to pull funds together in order to solve things. And what I really love about the Ethereum public goods funding ecosystem is the plurality of people who care about these incentive alignment problems and are developing non-coercive rationally incentive ways that we can solve these problems.

And the beautiful thing to me here is well if we can solve our own public goods funding problems then we're going to out compete Salana and Cardano and all the other alt layer ones that are out there. But then we could also export this to the world. And I think that governments are one of the most inefficient structures for supporting the public goods that are out there. And what if we could eat their use case of supporting the roads and the bridges and the arts and the and the culture, you know, whatever your local city, state, nation, state government needs to use in order to support its commons, we can now leverage networks and we can leverage Ethereum and AI in order to solve these problems. Okay, so just to simplify what I just showed you, all of the dense plurality of that last graph, um I think that we can stack incentive landscapes on top of each other and create a stronger incentive landscape with more power to solve multipolar traps.

And if you're someone who studies X-risk or if you're someone who studies public goods funding, this is actually a pretty big breakthrough because we've got pluralism. None of these things are captured by any one actor. They're self- enforcing because of smart contracts on Ethereum and together they all stack together to create a augmented incentive landscape in which we're solving multipolar traps. Okay. So, I think that in some ways Gitcoin's been evolving and I'm going to get to what we're doing next, but I think that uh I continue to want to lead the public goods funding space along with my friends at Octin and at Gith and Clear Fund and all of these other projects.

And I think that collectively the opportunity we have is to pull ourselves away from the status quo future in which we have these alignment problems in the world and build a world that is better for solving alignment with the tools of Ethereum by leveraging AI and by building these sort of plurality of ascent incentive alignment things. So, um, one of the things that we're talking about here at DevConnect and, uh, over at the Gitcoin booth, which is just right over there on the stage, which I encourage you to check out, uh, as you're wandering around the venue here, is how could we accel accelerate alignment. So, Gitcoin Grants has historically been a quadratic funding platform. Every 6 months or so, we deploy about a million dollars into funding the commons in the Ethereum space. And we are now uh pivoting to now have a little bit more of a plural mindset around how we fund the Ethereum ecosystem.

So Gitcoin grants will no longer just be a quadratic funding platform, but we're also going to be doing retrofunding and deep funding and uh lots of new types of alignment mechanisms that were never possible before. And so I think that this is an incredible opportunity for the space to help solve the alignment problems that we have between Ethereum and L2s. L2s and their developers and the plurality of complexity that is in there if we deploy more deploy more of these technologies and we want to be the place that accelerates developers who are working on alignment. So, Gitcoin has the distribution, we have the capital, and if you are a mechanism builder who is working on public goods funding or any other sort of alignment problem that is important, then we want to talk to you about how we could build a coalition and in GG25, let's solve for privacy. Let's solve for AI agents.

Let's build more stuff in X42 and let's support the open source builders that are in the Ethereum ecosystem. So, I think that that's the opportunity for Gitcoin. We're going to be more plural. We're going to accelerate alignment. And I think that the opportunity for us from a business perspective is that we've done the math and Gitcoin's been around for a while.

We've been around since 2019 running Gitcoin grants campaigns. And we've done the math and we've seen that if we had just taken investment in some of the projects that we donated to in 2019 and 2020, we'd be up well, it depends on the the way you sort of configure your assumptions, but like 100 to 300x. So there's a really incredible opportunity to not just be solving the the commons problems and the alignment problems by giving donations, but actually to take upside in whatever's next in the Ethereum space. And so I think that Gitcoin 3.3 is going to achieve 33, which just means alignment between our different stakeholders.

And we're going to do that by allowing people to take uh upside in the projects that they're that they're involved in. And I think that what's really cool is that we have this really unfair competitive advantage because we have the data from the quadratic funding campaigns and the crowdfunding campaigns. We see what's going to be next in the space before anyone else is able to to to see it. And so is there an opportunity to have like a venture fund and then have Gitcoin grants provide legitimacy and deal flow into the venture fund and then the venture fund spins the flywheel back into actual capital that funds Gitcoin grants at Infinitum. So basically becoming an an accelerator for alignment is where I think that Gitcoin is going.

Uh join us if you want to be a node in the network. If you want to accelerate alignment within your own ecosystem, then please scan this QR code. Join the Telegram chat for Gitcoin 33. Founders and developers. If you're working on something cool that's a crowdfunding capital allocation or public goods funding mechanism, I want to talk to you.

If you're an ecosystem that's trying to build a developer relations campaign and you want to get a little bit weird and play with the incentives instead of just your documentation and the standard Devril things that you could do, I want to talk to you. And if you're an investor who's looking for early access to what's next and you want to get in on this deal flow, uh like I said, we've done the analysis and I think that Gitcoin has a really unfair competitive advantage with getting this deal flow, then I want to talk to you. And then if you're just an alignment enjoyer, if you like pretty graphs and you think that what I'm doing slaps, then just come join the telegram chat and I'd love to talk to you from there. So uh that is the end of my talk. That is how we're going to solve alignment in a plural non-coercive bottoms up way with Ethereum.

And I think I have five minutes for questions if anyone wants to talk about this. Thank you.

All right. Any questions from the cloud? Any questions? Anybody?

There.

Microphone, please.

Perfect.

Thank you. Hi, Pedro here. Um, pretty cool presentation. I know there's a lot of tech involved. When you talk about alignment, are you specifically referring to things in the Ethereum ecosystem or using Ethereum as a means to solve, let's say, real world problems?

Yeah, great question. Uh, so just to repeat back the question, uh, are we going to use this just for the Ethereum ecosystem or are we going to export it to the world? Um, I think that you start where you are, build with what you have, and share what you learn is kind of my methodology. I learned that from Benjamin Life at Open Civics. That's their theory of change.

So start where you are, build with what you have, and share what you learn. Let's solve this for Ethereum, and then let's export it to the world. I want to live in a world in 15 or 20 years in which uh we actually have if there is taxation and there are governments that say that they're working in the act act in in the public interest that they're using these non-coercive network-based technologies instead of the way it worked in the industrial age. So let's start with solving our own problems and then eventually export this to the world. Thank you.

There's more questions over here looks like. Hi there. Thanks. Um, so you're talking about uh like this plurality of mechanisms and them sort of compounding on each other. Uh is there any thoughts there with this like super position potentially increasing inequality in some ways where like as they add up there's like one really big spike of you know say some small group that gets way more than they otherwise would because there's not this broader visibility.

Yeah. Um so yeah do we increase in in inequality if we have one large spike in the incentive landscape? Yes. I mean whether it's like some small group uh gaming, you know, multiple systems and who knows.

Yeah. Um I think we have that right now. It's called contemporary capitalism. I'm actually a regenerative capitalist. I believe in capitalism, but I think one of the problems is how wealth compounds.

There's this thing called the Matthew effect where the rich get richer and the popular get more popular. Uh but it applies to matters of not just money or fame, but a lot of different runaway games. So one of the things that I think is really cool is that you can design away from this things like quadratic funding really favor the dem democratic uh the plurality of of opinions of the populace and so I think can that mechanisms like that kind of like invert that natural tendency of markets.

Go ahead. uh do you think the solutions uh like the alignment solutions that exist now in Ethereum are network agnostic and if there's like any room to write standards so these things can be ported over to other communities.

Yeah. Um so can we make them network agnostic and write standards so that they can be ported to other communities? Was that the question?

Yeah. Um, you know what's funny is that when we first made Gitcoin into a DAO in 2021, we wanted to take quadratic funding and bring it onchain and make it uh, you know, like build a standard for quadratic funding. But what happened is that we discovered that retrofunding and deep funding and deep governance and all these other things were out there. And so I think that what we've we've sort of like my journey has been Gitcoin sort of coming up with a hammer and being like, oh, we've solved it. And then all of a sudden we realized that oh screwdrivers and pliers and saws are also useful.

Um so I think that we're right now in this like Cambrian explosion of different ways that you could build mechanisms tools in this metaphor and eventually I think that those will all settle into like standardized open-source sets of tools that you can deploy on any EVM based network. That would be my hope at least. And um so this is kind of a bet on more capital going into these things and EVM taking over the world. And then once once we have that we can kind of ride that wave of tokenization to to more and more EVM based alignment networks in the future. Great question.

Cool. Thank you.

All right. The sign up here says as I says I have 40 40 seconds. Can we do one more or should we break?

Yeah. So I believe we have time. We can take two or three more questions.

Okay.

Yep. Any more questions?

Yep. microphone.

Uh thanks. Uh you were mentioning uh you know potential you know I know this is way in the future but potential for uh you know a world without taxation. Um how does that uh like so there's obviously the benefit to the voluntary system uh but even in you know normal capital world there's still this issue with uh instead of taxation the the billionaire is going to be a philanthropist for something and it's a marketing opportunity like and really it's it's not really redistributing the the wealth equitably. Yeah, great question. So, you know, what does this look like in a world without taxation or with taxation is sort of my reductionist summary of your question.

And

I can't.

Sorry, involuntary still is maybe important.

Yeah. Yeah, it might be. Um, I have to be careful here because uh I think that I I'm pro progressivecoded to people like my long hair and being from Boulder, Colorado, people think that I'm progressive and uh uh the libertarian friends in the space have called me a statist before for for you know like endorsing states or something like that. Um, my position is actually much more complicated and I think that it's basically like if we are going to have taxation then it should go to the most effective ways of solving the problems that the people care about and if we're not going to have taxation then we're going to have to find another source of revenue for these things. I mean maybe the the giant AGI techno capital god in the sky is going to you know give us money to to solve these problems.

I I don't know. But um but yeah, I just want to be careful by saying that uh I think that if we are going to have taxes, then it would be great if they didn't go to only the people who have access uh and and it they went to the things that had the most impact would be my position. Great question. Should we should we keep going or do do we have more time? Do we want to break?

We still have a little more time. Any more questions?

All right. Well, thanks so much to Dev Connect team for having me. This was fun.

Perfect. A round of applause for Kevin.

Thank you so much.