In the absence of an effective economic mechanism for public goods, innovation has come to rely almost exclusively on the market mechanism. While the system works well enough for some forms of innovation, it still falls far short of producing economic efficiency. Meanwhile, no significant funding is going toward any forms of innovation where value cannot be directly captured within the market — regardless of the magnitude of impact such innovation may have on the economy.
Government funding for public goods too is both inefficient and inadequate. It is inefficient because funding is allocated according to bureaucratic processes; simply put, the people in charge lack the necessary incentives (and/or expertise) to fund the most beneficial projects, while at times funding decisions may be based on politics rather than merit. Funding is inadequate because it is difficult to explain bureaucratic decisions to constituents, or justify the free-rider effect: for example, why other countries should benefit from public goods that are produced at the expense of taxpayers. It is therefore more politically expedient to reduce funding for public goods and not alienate voters.
What is needed is an economic mechanism where the incentive to produce public goods is comparable to that of producing private goods and services in the market, and where the reward for producing public goods corresponds to their impact on the economy. The mechanism needs to resolve the free-rider problem while avoiding the inefficiency and incentive misalignments of a centralized authority. Such a mechanism would result in greater economic efficiency, sustained economic growth, and benefit everyone in society — an abundance economy.
In this paper, we propose a solution to the problem of public goods using blockchain-based smart contracts to create a decentralized economic system where public goods are funded through a user-validated coin inflation mechanism that is designed to preserve the value of the coin. The protocol uses several mechanisms to maintain the integrity of validations, including: random selection of validators, weighted validations based on on-chain domain-specific reputation scores (expertise), periodic reviews, and coin locking challenge periods for validators and proposers. The protocol is also designed to achieve all of the above while remaining permissionless and preserving user pseudonymity.