An Emerging Product Class: Digital Public Utilities

Tornado Cash is a set of autonomous smart contracts on Ethereum that help users preserve their privacy. Tornado Cash was revolutionary, but not just because of its functionality. It is an example of an emerging product category: Digital Public Utilities.

Digital Public Utilities are neutral and decentralized services, often in the form of an autonomous protocol, that preserve the rights and freedoms of online communities. As an example, Tornado Cash protected our right to privacy and freedom to trade.

These utilities have four technical characteristics:

• First off, they are non-excludable. In other words, anyone can use the service permissionlessly and without fear of censorship.

• Second, they are persistent. This means that utilities exist whether they are used or not, with a longevity dependent on their ecosystem instead of specific services within it.

• Third, they create a piece of media that is owned by the user. In the case of Tornado Cash, users are given a key they can use to claim funds. In the case of Uniswap, you get an LP NFT. This media, which we can call infrastructure media, ensures users have full agency and can easily exit the service if needed.

• Lastly, public utilities do not aim to maximize profits. The cost of using the service should eventually be equal to the operational cost, or gas in the case of an onchain protocol.

A Proper Definition: What is a Digital Public Utility?

• A Digital Public Utility is a neutral and decentralized service or platform, often in the form of a protocol, that provides essential functionality for networked worlds.

• These utilities are designed to be universally accessible, democratic, and enduring. They serve as a cornerstone for online communities and networked enterprises.

• Founded on principles of universal design, they strive to make digital engagement both affordable and widely accessible. Their aim is to build and maintain the digital backbone of networked worlds, thereby facilitating a more equitable and autonomous digital society.

• Digital Public Utilities embody and preserve the rights and freedoms of the emerging networked civilization. These include, but aren’t limited to: Plurality, Privacy, Exit, Assembly, Due Process, Digital Death (To be Forgotten), Ownership / Sovereignty, Mobility, and Trade.

• Unlike purely private enterprises, Digital Public Utilities have a cost the converges to the cost of gas of the network. They are also interface agnostic and inclusive of autonomous agents (bots and content).

• Examples of emergent Digital Public Utilities today include: ENS, POAPs, Tornado Cash, Uniswap, Snapshot, Jokerace, Hats, MolochDAO, Safe, Chainlink, Tether / USDC, DAI, Arweave, IPFS, Etherscan, etc.

• Digital Public Utilities can be easily forked if corrupted, since their operational exhaust is in the form of Infrastructure Media (portable between protocols).

• Infrastructure Media allows utilities to compose with each other through reliable object standards.

• They are the default service provider (think like municipal wifi, water, electricity) but do not prevent competition by any other entity.

Digital Public Utility Test (Score out of 10)

[ ] Does not infringe on netizen rights or freedoms (e.g. not rent seeking, right to exit)

[ ] Universally accessible (anyone can use it)

[ ] Incentives agent-to-agent cooperation over competition

[ ] Persistent (aim for >50 year lifespan)

[ ] Produces composable infrastructure media (e.g. data/activity is tokenised)

[ ] Democratically governed

[ ] Credibly Neutral

[ ] Costs decrease and converge to Gas

[ ] Can be forked if corrupted (e.g. protocol must be open-source)

[ ] Serves as a default service provider, not a niche or luxury offering

Infrastructure of Rights and Freedoms

Digital Public Utilities support the foundational rights and freedoms of an open web:

• Freedom of Network: The right to choose, participate in, and move between various online platforms, protocols, or networks without undue hindrance.

• Freedom of Communication: The ability to write, share, and implement software without restriction, which is crucial for the development of new cryptographic methods and technologies.

• Right to Assembly: The freedom to come together and communicate online, establish digital communities, and collaborate for various purposes. Allowing people to speak, publish, and transact freely without interference from a centralized authority.

• Right to Fair Due Process: The assurance of impartial arbitration and neutral conflict resolution in digital disputes, supported by legal and educational services.

• Right to Be Forgotten: The option to remove or transfer one's personal data and digital artifacts, enabling users to control their online legacy.

• Right to Privacy: The protection of one's personal data from unauthorized access and the assurance of secure, private communications.

• Right to Property and Soveriegnty: The ability to own, control, and transfer digital assets, respecting the same principles that govern physical property rights.

• Right to Literacy: The provision of essential educational resources and tools that empower individuals to navigate the digital world effectively.

• Right to Exit: Participants should have the ability to voluntarily leave the system, service, platform, organization, or protocol without facing excessive costs, penalties, or roadblocks.

• Freedom of Mobility: The liberty to freely move digital assets and identities across platforms, chains, or digital ecosystems.

• Freedom of Trade: The liberty to engage in digital trade, from simple asset transfers to complex contractual agreements, all underpinned by secure identity management.

• Freedom to Remember: The liberty to securely store, access, and control one's data and digital artifacts, ensuring a durable digital footprint.

• The Right to Pseudonymity: The ability to act without revealing one's true identity.

• The Right to Transparency: The other side of the privacy coin, ensuring that the rules and operations of the system itself are transparent and auditable by its users.

Development and Operational Principles

• Minimal-Cost

• Universal design

• Minimal usage risk

• Interface Agnostic

• Autonomous Agent Inclusive

• Service to the Ethereum Network

Monetization Model

The primary goal of Digital Public Utilities is to harmonize the incentives among all stakeholders—namely, the funders, builders, and consumers of the utility.

On one hand, builders should be adequately rewarded for their role in innovating and maintaining a stable, enduring platform. On the other, consumers should benefit from reduced costs as their reliance on the utility grows over time.

Proposed Incentive Model

We propose an incentive alignment model inspired by the Intellectual Property Law framework used in the United States pharmaceutical industry, coupled with the concept of royalties. Under this model, the fee structure would be composed of three components: network transaction costs ("gas"), a protocol fee, and a period.

Fee Structure

1. Gas: This is the base cost of transacting on the network.

2. Protocol Fee: A supplementary fee allocated for the maintenance and development of the utility. The protocol fee will include a transparent and publicly reported percentage allocated as time-bound royalty payments. These payments are claimable by the founding team and assigned protocol maintainers for a predetermined period.

3. Period: This defines either a time bound or a transaction volume bound where the protocol fee is valid.

Governance and Continuity

Towards the end of the Period, utility consumers will have the opportunity to vote on a contract for the continued maintenance of the utility. This contract, much like a defense contract, would be retractable under specific terms agreed upon by the community.

Competitive Landscape

The model encourages healthy competition, including the potential for forking the utility to reduce fees. The natural defense against such competition lies in the network effect established by the original utility.

Pricing Ethics

The pricing model aims for minimalism, focusing on accessibility. Should any user find the utility cost-prohibitive, this should be solely due to the network's gas fees and not the protocol fee.

Funding Opportunities

If the royalty model is available, funders can purchase the funding stream, a percentage of it, or future airdrops claimable by the utility from the platforms where the utility is deployed.

receive() external payable {
    uint256 currentAmountFunded = rewardToDate;

    if (currentAmountFunded >= rewardableMax) {
        revert FundingExceeded();
    }

    // using memory cache over storage for gas
    rewardToDate = currentAmountFunded + msg.value;  
    emit FundingReceived(msg.value, currentAmountFunded + msg.value);