Years ago, I read an interesting book entitled, “The Go-Giver: A Little Story About a Powerful Business Idea,” by Bob Burg and John David Mann. More recently, I have been considering the lessons conveyed through the narrative of that book regarding the benefits of giving to others and their applicability to expanding cryptocurrency adoption worldwide. The below quote sets the stage for this blog post:
“You give, give, give. Why?...Because you love to...And when you do...then very, very profitable things begin to happen.”
Prominent crypto innovators have addressed the topic of giving in the context of public goods funding. In a blog post from March 2021 entitled “The Most Important Scarce Resource is Legitimacy,” Ethereum’s lead founder, Vitalik Buterin, suggested users stand behind projects which make giving a foundational and ongoing priority:
We can make this nascent public goods-funding ecosystem even stronger [if]…we support projects that contribute a small portion of their treasuries toward the public goods that make them and the ecosystem that they depend on possible. And, crucially, we can deny these benefits to projects that fork an existing project and do not give back value to the broader ecosystem.
Coincidentally, Beanstalk Protocol, as a nascent algorithmic-based stablecoin project built on Ethereum, already has an internal mechanism that would allow for its users to support recurring contributions to public goods funding initiatives via something I would refer to as “Protocol Owned Debt” (POD), and an extension of this potential feature of the project that I would call “The POD Fund.”
Protocol Owned Debt: Giving as a Coordination Game
To maintain the stability of its algo-stablecoin BEAN around its $1 peg, Beanstalk Protocol largely relies on external creditors to lend to it, particularly when the price of BEAN is below $1, via its decentralized credit facility known as The Field. In doing so, creditors purchase Soil when it is available in The Field and burn/sow a corresponding number of BEANs, which reduces the BEAN supply and thus helps restore its price closer to its $1 peg.
In exchange for doing all of this, Beanstalk Protocol’s creditors receive Pods at an amount corresponding to the Weather or yield at the time the BEANs are sown; the Pods represent the protocol’s debt owed to its creditors, and at an unknown future date the Pods become harvestable/redeemable for BEANs at a 1:1 ratio. This occurs when the price of BEAN exceeds $1 for an extended period and Beanstalk Protocol consequently mints new BEAN to increase the supply to help bring its price back down to its $1 peg.
Implicitly, Beanstalk Protocol’s creditors expect the future demand for BEAN to grow, such that their Pods are one day harvestable for BEANs; they may not know how long this will take, or if it will ever even occur, but their positions imply they are all more confident than they are pessimistic that growth is possible. To complement their optimistic stance on Beanstalk Protocol’s growth trajectory, I propose a new “coordination game” mechanism be offered to its creditors, known as “Protocol Owned Debt” (POD).
POD would allow creditors to both directly and voluntarily allocate a portion of their Pods to Beanstalk Protocol itself; accordingly, Beanstalk Protocol would then own the Pods and be able to donate them to help fund public goods. The benefits of “The POD Fund” proposal alluded to above are thus achievable, and will be further expounded upon below.
The POD Fund
Pods become harvestable for BEANs at a 1:1 ratio on a first in, first out basis; as such, Beanstalk Protocol tracks the Pods that its creditors own in accordance to their position in its podline. Irrespective of where Pods are in the podline though, the outlook of its creditors can generally be understood as being synonymous: Beanstalk Protocol will grow in due course as use cases and the value proposition of BEAN as an algo-stablecoin in the broader crypto and DeFi ecosystems expands.
The POD Fund would thus represent a pool of Pods donated by Beanstalk Protocol’s creditors to the protocol itself; the Pods would likely span across various points in the podline, such that some may be redeemable for BEANs earlier than others. Beanstalk Protocol’s DAO could vote on initiatives The POD Fund would help support, though I would propose that certain initiatives be committed to indefinitely to solidify Beanstalk’s position as an unwavering proponent of public goods funding. An example of this could be an ongoing collaboration with Gitcoin Grants, such that a minimum percentage of Pods from The POD Fund could be donated to The Gitcoin Grants Official Matching Pool Fund on a recurring basis, which may then open the door for BEAN to be accepted more broadly on Gitcoin Grants and other crypto funding platforms too.
As a collective pool of Protocol Owned Debt, the benefits of The POD Fund are extensive. By distributing Pods to contributors both within and outside of its ecosystem, Beanstalk Protocol could naturally broaden the user base of BEAN if/when the Pods become redeemable for BEANs. Some contributors may be willing to accept Pods as a sort of deferred payment (akin to the artist David Choe when he painted Facebook’s headquarters in its early days); others may prefer to wait until the Pods are redeemable for BEAN to accept them. Regardless, a positive feedback loop is fostered, as BEAN becomes more readily accepted as a stablecoin payments token through its growth cycles and is more widely recognized as originating from a protocol pledged to public goods funding.
Conclusion
Protocol Owned Debt (POD) is a potential functionality that Beanstalk Protocol may consider implementing, such that its creditors can voluntarily donate a portion of their Pods to The POD Fund as an extension of this proposed feature in order to fund public goods and further establish BEAN as a preeminent stablecoin for use in DeFi and beyond.
The Beanstalk DAO can vote on the allocations for The POD Fund, which would further encourage users to participate in The Silo for governance rights. Personally, I would suggest the distribution breakdown of The POD Fund be as follows:
A continuing minimum percentage commitment to GitCoin Grants in support of the wider crypto/Ethereum ecosystems.
A portion be allotted via an internal grants system that Beanstalk Protocol may develop in conjunction to its upcoming Pods marketplace to support add-ons/extensions of the project vis-a-vis developers interested in building on top of it. Quadratic funding may also be employed to enable Beanstalk’s creditors to donate Pods to particular non-profit initatives of interest to them.
A portion be committed to supporting BEAN liquidity indefinitely through its recent Curve Finance integration and related future implementations (essentially adding a variation on the idea of Protocol Owned Liquidity to Beanstalk’s feature stack vis-a-vis supporting a baseline continuity of BEAN liquidity as a public good).