I believe it’s mostly grants because the everyone believes the outcome of the work is still ‘pre-commercial’ and more in the ‘public interest’. That is to say, no one yet knows what the business models will be to drive the return on investment. Still unknown if nostr is a fad/novelty or a key building block of the future.
Discussion
The grants (including VC funding, which might eventually disappear under a Bitcoin Standard) are used to fund the "big jump" versions, where they move quickly from an idea or simple PoC to a completely revamped and fleshed-out version. Then they are weaned off of the grants or the grants are reduced, and they attempt to quickly match the missing funds with fees, to cover running costs.
There is currently no universally-viable concept for fully returning the costs Big Jumps incurr.
Then there is the question of open source. Most grants require the work to be open source at the outset.Perfectly fine, but negating the possibility of an initial commercial advantage. Many are perfectly happy to give everything away for a few zaps, but others want to invest first for an advantage before giving away.
This will not be feasible, soon, as reverse-engineering automation will make everything de facto open-source. We just have to adjust to FOSS.
