A new L2 enters the arena, but with a twist that's got everyone talking: 100% donation-funded. No VC vultures, no token presales, just cold, hard… ether in the case of Ethereum. Utopian dream come true or disaster in the making? You decide, but let's unpack this.

Donations Alone Can Build A Future?

Let’s face it, the crypto space is littered with projects that were about decentralization and ended up…not being about decentralization. R1’s method is a double dog dare, a shot directly across the bow of all those projects. They’re rejecting the whole funding model—even the blatant Uncle Sam-ties—that too often result in the top-down agenda and watered-down vision that funders so fear.

The idea is simple: rely on the community's goodwill, believing that if you build something truly valuable, people will support it. It’s a positive feeling indeed, and it harkens back to the early days of open-source software. Think about Linux, Wikipedia, or even Blender. All of it built on the backs of passionate changemakers, fueled by a collective dream.

Can donations sustain a complex, evolving project like an Ethereum L2? We’re not just talking about cool new infrastructure, continuous or smart development and environmental, safety and security mitigations. It's not just about the initial burst of enthusiasm; it's about the long haul. The idea is to continue operating on donation until 2030, at which point fees start getting burned.

Consider this: what happens if the donations dry up? What happens if a key donor suddenly threatens to withdraw their funding, or even more insidiously, begins to lay down demands that threaten R1’s neutrality? The team's commitment to burning all fees after 2030 to align with Ethereum's public good ethos is admirable, but before that, the project is dependent on the kindness of strangers. That’s a tightrope walk with no net.

Neutrality A Blessing Or A Curse?

An R1 goal is to be credibly neutral, which is a term that many in the crypto world have grown to appreciate. They claim to want to be a “neutral rollup,” that isn’t subjugated to the will of centralized actors. While this is certainly a noble goal, it creates some unintended challenges.

One of the biggest concerns is governance. How do you make collaborative decisions about the inevitable future of the project without an explicit decision-making structure? A purely onchain community multisig is a great place to begin, but it’s not a silver bullet. And multisigs can be slow, cumbersome, and, as seen in some recent examples, susceptible to infighting.

The rejection of tokens is yet another intriguing decision. Tokens are a comparatively new and powerful tool that should be used to incentivize everyone’s participation and align the interests of each stakeholder. In eschewing tokens, R1 is not only missing out on an obvious funding source, but an exciting governance rights distribution mechanism.

This is, too, where the genius of R1 truly may lie. Consider the alternative: token sales often lead to pump-and-dump schemes, centralized control, and a focus on short-term profits. Meanwhile, R1 is steering clear of tokens to prove that they mean business. They’re committed to building something valuable and public-oriented, not extracting maximum profits as fast as possible.

It's a bold statement, and it could attract a different kind of contributor: one who's motivated by a genuine desire to improve the Ethereum ecosystem. This would be the true game-changer, luring talent and financial capital that would otherwise flock to more traditional fare.

What Does the Future Hold?

R1’s experiment stands to greatly influence the future of all crypto funding models, for better or worse. Should this initiative be successful, the move will pave the way for a new generation of decentralized projects. These projects will be truly owned and governed by their communities.

Even if it doesn’t succeed, it is sure to offer important lessons for others to follow. To make this happen, we need to face some hard questions around decentralization. Beyond that, we need to understand the function of funding in crypto and public goods sustainability.

The success of R1 will depend on its ability to cultivate a deep, wide, and actively engaged community. An informed community that’s committed to bringing time, resources, and technical expertise to the table on the project. A community that’s invested in the long-term dream of a stable, neutral, decentralized L2.

Ethereum R1 is not ‘just another L2’. It's an experiment in radical decentralization, a test of the community's capacity for self-governance, and a glimpse into a possible future for crypto funding. Whether it's a gamble or genius remains to be seen, but one thing's for sure: it's a conversation starter we desperately need. And that, in itself, is a win.

  • Scalability: Can the donation model scale to support a growing L2 ecosystem?
  • Innovation: Will the lack of financial incentives stifle innovation?
  • Competition: Can R1 compete with well-funded, VC-backed L2s?
  • Regulation: How will regulators view a donation-funded project?

Ethereum R1 is more than just another L2. It's an experiment in radical decentralization, a test of the community's capacity for self-governance, and a glimpse into a possible future for crypto funding. Whether it's a gamble or genius remains to be seen, but one thing's for sure: it's a conversation starter we desperately need. And that, in itself, is a win.