Given historical issues, teams are currently experimenting with using some form of staking derived income with the aim of sustainably funding public goods in the ecosystem.
The two main approaches right now:
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RFC: Incentive Pools, where treasury funds are staked and returns are used to fund outcomes based initiatives tied to on-chain metrics with performance fees calculated / earned on top.
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Setting up validators per the Kusamarian and taking a cut of staking rewards to achieve pretty much the same thing.
Challenges
Although using staking returns from DOT offers the perception of sustainability, it is really a mirage since without driving underlying value accrual to the native token, these returns rely purely on the Number Go Up school of financial engineering.
So yes you can have predictable DOT based income, but if you are then selling that immediately to USDT to fund development, there is consistent sell pressure on the currency.
If everyone does this… guess what happens?
In a world where narratives matter - just because DOT is worth a lot now, doesn’t mean it is immune from basic economic reality, especially in the world of crypto where narratives play out at the speed of memes.
So are there other more innovative approaches we could consider that might solve issues more concretely?
Stablecoins
People in the ecosystem are pretty much agreed that stablecoins are a ‘good thing’ when it comes to managing risk irrespective of whether you are a trader, an investor or a contributor.
Given the stated principles and goals of Polkadot / W3F it is worth considering what kind of stablecoins we would like to pursue in the ecosystem - for ethical, impact and narrative reasons.
Stablecoins have been a pretty good business in the past…
USDT: Legacy For Profit Stablecoins
Right now USDT is the primacy stablecoin offered within Polkadot/Kusama, with others such as USDC also offered across the wider ecosystem.
We can use legacy to refer to the fact that the value of these stablecoins is pegged to an existing economy or basket of assets in the legacy (read paper based) world.
Legacy For Profit stablecoins rely on a business model predicated on generating returns for founders and investors via yield on reserves of USD held in banks that ultimately back (collateralise) the stablecoin.
There is more to dig into here, since there are other more opaque methods that underpin much of their growth, but for the sake of simplicity, lets just put them in a bucket of legacy, for profit stablecoins.
Glodollar: Legacy Non-Profit Stablecoins
Glodollar offers an simple but innovative twist on the current for profit models of USDT and USDC stablecoins, choosing to redirect yield to basic income schemes around the world.
Glo Dollar is US regulated and 1:1 backed by a reserve of cash and US Treasuries. When the Glo Foundation receives revenue from the reserve, we donate it to GiveDirectly’s basic income programs that lift people out of extreme poverty.
It serves as an example of how currencies when used for purchasing goods and services can ultimately generate fees and turn the flywheel of economic activity.
The fact that GloDollar is still pegged to USD is really solving half the problem though, since it merely continues the dependence on legacy economies, rather than boostrapping true internet native economies - the original ambition of Bitcoin.
Asset backed community currencies
The issues facing the ecosystem will eventually all come back to the same primary problems - namely creating truly sovereign economic activity that generates useful rather than speculative goods and services and accompanying tax/fee revenues.
The real promise of blockchains is in creating sovereign internet/community currencies.
With the rise of Ethereum and the ‘world computer’ narrative, we have lost sight of the simplest and most powerful usecase out there - money, get that right and you can build all the other stuff on top.
If you work the other way around, you get the sort of financial games and speculation that serves only a short-term profiteering mindset and zero rather than positive sum games.
The road to Substrate Stables aka Native For Profit/Non Profit Stablecoins
To solve the ecosystems underlying issues we need to experiment with new forms of asset backed parachains bootstrapped by the current community - its shared resources, talent and capital.
These parachains will accrue value and income to their assets and can in turn be funded via chain treasuries who build stake in uncorrelated assets which diversify their reserves.
This will in turn drive demand for coretime.
The road to creating something akin to Substrate Stables is then much clearer, since we have the ability to create native asset backed currencies pegged to whatever we like, and a road to a genuine sovereign internet economy that is not constrained or contained by legacy systems or laws and can provide genuinely new alternatives to the incumbents within a more diverse global (and local) economy.