Public goods are good, we all agree on that. But they are even better if funded voluntarily and efficiently by a community that actually cares about their means. In the Ethereum community, we embraced this and paved many novel ways of public goods funding.

Ethereum ecosystem has pioneered several innovative solutions to this challenge, but a gap remains for early-stage projects that need initial capital. Decentralized loans with favorable terms could be the missing piece in the funding puzzle for new projects.

Existing public funding schemes like quadratic voting, retroactive grants, and platforms like Gitcoin or Giveth already helped hundreds of projects in the ecosystem. But building a new ambitious project with no profit model, completely FOSS and public, is still very hard.

Quadratic funding schemes help to sustain maintenance of active projects, while retroactive funding focuses on exit and supports projects that have already proven to be useful. The only current mechanism that helped to fund a project in a decentralized way is the Revealer. Friends from previous cycles might remember ICOs which have successfully funded many initiatives but more often ended up in speculation without clear commitments.

The missing piece making public goods hard is bootstrapping projects that need higher initial investment, whether it's software development, physical spaces, desci research, etc. Building initial capital is a big challenge, even in for-profit projects that try to play the VC game. For community-driven non-profits that have to stay neutral, getting the starting capital is much tougher. Venture capital demands equity, creates bias, and expects profits impossible in free public efforts. Token incentives create unsustainable schemes and are very risky for investors.

Cypherpunk is based around community coordination, it does not serve private and institutional investors to boost their profits with enshittiifying products.

Other sources of funding are grants from various places in the ecosystem, however, they are highly competitive and limited in scope. Grantees need to follow exactly what the provider wants to build and cannot be free in their creativity. Grant schemes come from private entities that might follow public interest, but mostly push their own. Decentralized public bootstrapping mechanism fixes this.

In traditional finance, founders might be able to take a loan to start a project, maybe from a bank or government program. We built an entire ecosystem of decentralized finance so I do believe that we should be able to do the same. There are crypto native people without bank accounts and credit in the traditional system who should be able to leverage their collateral and reputation in a more efficient way, directly on Ethereum.

What happens if we combine decentralized finance, crowdfunding, and public goods?

Defi is huge, and one might imagine there are tons of options for a decentralized loan out there. There are a few important differences to traditional loans:

• Realities of the market make regular defi loans very expensive with high interest, especially for longer-term and non-profit projects

• Borrower is facing the dangers of liquidation and needs to keep a high collateral ratio

• P2P onchain loans solve some of these problems but require a single party to take all the risk and provide all the funding

Considering this, it’s hard to start a project from zero using a regular defi loan, especially as a public good. Founders would need to already have a lot of collateral to begin with and then pay very high interest. Especially if the project needs couple of years to repay the loan, the interest rate becomes very expensive and impossible to pay from nonprofit incomes.

I heard something about regenfi... or should I stay degen?

It’s hard to predict and agree whether a project will be useful, as previously summarized by V. But even if we cannot be sure about what is going to become useful, we can still support the experiment while minimizing risk for everyone.

When talking about bootstrapping new projects in a community, crowdfunding comes to mind. Platforms to crowdfund all kinds of projects, whether for profit or public goods, have been around for a while, and I believe they already peaked in popularity in the past. My favorite example from a community-based, open hardware world, is Crowdsupply which has been a great success. However, crowdfunding largely profited from its popularity while often failing to filter projects or hold them accountable. What if, instead of paying projects as customers/investors, supporters can just lend liquidity?

Today, we have a fully open and verifiable financial system that we can leverage to provide funding coordination while minimizing risks for both lenders and borrowers. A crowdfunded loan is a contract where the borrower locks collateral, and anyone can lock liquidity to lend against it. There can be hundreds of lenders in a single loan, all contributing only a small part while having minimal risk, peer-to-all.

If you want to support a project you like, you can always send a donation. That assumes you can afford it and have a high confidence in the project. In a crowdfunded loan, backers are able to provide more liquidity to support the project because they are not giving it up for good, only changing bracket in their portfolio. To make it easy for a public good project to get started, the loan is longer than a normal Defi loan, and might span even a couple of years. This gives more time for the project to start and mimics a more traditional business loan.

Ethereum became 10 years old this year, now we can be confident to take a 10 year mortgage onchain

The equivalent of a donation is the difference in interest rate for the community loan. The interest rate of crowdloan is meant to be small, therefore the difference between the community rate and market APY represents the donation. For example, a project starting a crowdloan has ETH in their collateral and offers 2% interest for borrowed stablecoins. The lender/supporter could lend their stables on a Defi platform like Aave for 7% APY easily, so they are effectively losing 5% yearly. This is the part that's being actually donated to the project, e.g., with 1000 DAI provided by the lender, they essentially gave the project 50 DAI. Being equal to a 50 USD donation, that deserves a supporter T-Shirt like you would on a regular crowdfunding platform. However, here, the project can leverage the whole 1000 USD liquidity, making it a more efficient use of the capital.

This approach comes with more accountability and incentives to deliver. The project must start paying off the loan and needs to use the capital efficiently. But it also creates skin in the game on the side of the lender, who is incentivized to keep following the project and making sure it delivers to pay back the loan. It's meant to make you engage and actually become a part of the community.

Because the contract doesn’t include a liquidation mechanism, there are no price oracles, making it simpler to implement. The collateral is lost if the loan is not paid in the deadline which can also be implemented as a requirement for continuous payments. The loan then relies on the lender's subjective judgment of whether they are confident enough in the kind of provided collateral and the borrower himself. Although partial repayments make it less risky, this extra risk of bearing the volatility on the lender's side can be considered part of their donation.

Mind that this is not a new concept at all. Borrowing money via the community is a common practice, for example, in cooperatives, many of which we encountered in Catalonia. This is a mere realization that a concept like this should be native to Ethereum leveraging the fundamental transparency of blockchain and decentralized coordination.

To summarize some features and benefits put in practice:

• Lenders can be rewarded in other ways than monetarily. Community projects can offer other ways of recognition like merch, membership, collectibles, etc (Much like rewards in a traditional crowdfunding campaign)

• Mimicking a mortgage, the contract enforces regular partial repayment, therefore lenders are getting their money back faster and borrowers can save on the interest

• The interest rate and collateral ratio is not dictated only by the market but can be reassessed by individual lenders with philanthropic goals, making it possible to start with a smaller capital

• There is no tokenization and therefore no price speculation or risk, lenders are involved because they really care about the project

• Incentives aligned, both lenders and borrowers benefit from the project's success and the creation of a sustainable public good

The borrower can be an individual, community, or of course, a DAO. Lenders receive a deed token based on their contribution that can be used to claim rewards or participate in governance. Same way, borrowers supplying the collateral own a deed token representing their share that can then be used directly in DAO governance, making the whole process even more transparent and easier to trust.

For the past 3 years, we have been running a small community hackerspace in Prague. You might have heard its name during The Merge, if you ever visited EthPrague or met someone from the community. After facing struggles with the space and moving out, we dreamed about building something better, bigger and serving much wider community.

Our plans to build a new community space made us question how we fund public goods and led us to create the concept described above. We found ourselves in an interesting situation - buying a building is a big initial investment, a small community cannot afford, although the space can become sustainable by itself with long term memberships. We are crypto native people without any credit in the traditional system but recognized by our community.

And as a proof of concept, we are starting a loan crowdsourcing to bootstrap our new space. It’s a simple example, doesn’t come with a platform, token or a DAO, but we hope to demonstrate that this sort of funding mechanism is feasible. How does it work?

• Anyone can support us by lending a stablecoin

• Lenders receive a small APY of 2%

• Lenders can claim non-monetary rewards, like membership in the space, event tickets, tshirts and more

And the best part? This is all live! Check out the crowdfunding page at loan.bordel.wtf

But why support us? Who are we?

We are hackers and builders dedicated to the community. We have been building projects in the space, providing space for artists and public education for years. Read more at bordel.wtf

Our goal is to continue this mission, but improve it further. We are building a space for everyone who wishes to experiment, become creative, and needs access to tools and education otherwise not available. We are a community of contemporary cypherpunks, scientists, and artists. We welcome anyone on any kind of spectrum to join us to learn, build, or just relax to have a good time.

are planning to use raised funds to buy a property in Prague to create a public community space that provides tools, education and escape for all local and international hackers. With activities and memberships, we are going to slowly repay the loan and all supports will get their funds back part by part as we grow.

Note that this is an early stage, a prototype of this sort of experiment. There are many more things to add and improve here – creating a DAO, building a platform, and robust smart contracts. But those are outside of the scope of our project. Our goal with Bordel is to pioneer this approach to be able to experiment and build free-open ideas, art, and technologies. If you are reading this and you are in a position to build a proper platform and take this concept further, please do so, ideas are free.

– Bordel is a space!

– Bordel is a philosophy!

– Bordel is the highest form of order!

– Bordel is the lifestyle!

– Bordel is a mess!