Safeguarding Optimism Retro Funding: Key Threats and Solutions

Today, the RetroPGF community is diving into some research on the projects accepted into Optimism’s Retro Funding Round 6, and we came across an especially intriguing one! 🚀

GovXS, a team under Token Engineering Academy, is tackling one of the biggest challenges in Retro Funding: securing fair, strategyproof voting that supports “Impact=Profit”. In our post, we’ll unpack the key threats GovXS identified in current voting designs and explore the powerful solutions they’re proposing to make Retro Funding more robust and impactful.

In June 2024, the Optimism Collective selected GovXS, a research initiative under Token Engineering Academy, to analyze the voting designs used in Optimism Retro Funding Rounds 1-4 and to identify tradeoffs and improvements for Optimism governance accessibility.

What they found may surprise you: none of the voting rules applied so far are strategyproof! In other words, voters can gain an advantage by not voting according to their true preferences! GovXS also identified control attacks that are difficult to detect and prevent. The vulnerability stakes are exceptionally high for Optimism, with over 60 million OP tokens already distributed and 850M OP dedicated in total ($1.36B by the time of writing) since Retro Funding Round 1 in 2021.

Let’s dive into the 3 key threats and solutions identified by GovXS in their design evaluation

Threat 1: “Impact=Profit” fails

Optimism Retro Funding is built on the core philosophy that “Impact=Profit” so that positive ecosystem contributions (impact) are aligned with financial rewards (profit). “Impact=Profit” aims to find the objective truth in funding allocation. There are no instruments or algorithms yet to measure positive impact and the profit it deserves. That’s why Optimism Citizens are asked to assess projects and vote in Retro Funding.

GovXS’ evaluation revealed that none of the voting designs used in Optimism Retro Funding Round 1–4 are strategyproof. This is a major threat as if the voting rule provides voters with wrong incentives, the results are distorted, and Optimism Retro Funding cannot get closer to finding the objective truth in “Impact=Profit”.

Threat 2: Voter Trust and Participation Declines

Voter participation is key to establishing a successful, trusted Retro Funding system. Simplicity for voters plays a crucial role in securing participation. Poorly designed voting systems harm the effectiveness of a Retro Funding system, as highly engaged, reputable expert badgeholders and high-quality projects may lose confidence in the system. GovXS established three metrics to measure simplicity and how well a voting design reflects an “expected outcome”: Monotonicity, Reinforcement and Pareto Efficiency – learn more here.

Threat 3: Vulnerabilities to Malicious Behavior and Value Extraction

GovXS’ Voting Design Evaluation Framework provides Optimism with metrics to assess voter extractable value. Now, it is possible toWe can determine if and under what circumstances an attacker could control the voting and extract funding. More experiments explored the Cost of Bribery, or Robustness. The team found special forms of attacks that are hard to identify, such as the control attack: Could an attacker extract funding just by convincing voters to abstain? Learn more about whether such attacks can be successful and how much funding is at risk here.

Yes, there’s room for improvement in today’s Retro Funding voting. The good news: There are great solutions to address the issues found!

Learn more about GovXS improvement proposals, such as alternative voting roles, along with clear, actionable recommendations for their implementation in Optimism Retro Funding going forward here.

"GovXS has offered valuable insights into the voting mechanisms used in Optimism's Retro Funding, which will help guide the design of voting processes for future rounds." – Jonas Seifert, Retro Funding Lead, Optimism Foundation

GovXS's voting design evaluation is a rich source of insights with major implications for Optimism and Retro Funding programs across ecosystems. Explore the findings in full detail below:

GovXS’s unprecedented governance analytics and findings strengthen the Optimism Retro Funding Program, benefiting badgeholders, experts, guest voters, projects, and the entire Superchain ecosystem. Support the team’s work by voting for their Optimism Round 6 application.

About GovXS

GovXS is a research initiative under Token Engineering Academy. Team members include Nimrod Talmon, PhD, Angela Kreitenweis, Eyal Briman, and Muhammad Idrees.