Each has a purpose, but they’re very different
Bitcoin bounties work well, but they place the risk on the builders
Fiat venture capital takes on substantial risk with the hope of outsized returns but pools the risk among builders and financial partners
I would guess bitcoin bounties will on average attract lower risk projects
They will each move the world forward in their own ways
I think "outsized returns" are a result of exploitating one of the stakeholders, most commonly the customer (via walled gardens, monopolies). It creates perverse incentives to build a moat and extract value instead of just experimenting without the pressure of fundraising rounds to hit every 12-18 months.
Bounties on the other hand are very clear in what needs to be delivered with little strings attached (unlike equity "give me all your future earnings forever and always") which could lead to more "building on the shoulders of giants", experimenting, open sourcing.
They're both early stage funding of an idea. Except with fiat VC you dangle the carrot of follow on investment for the price of your entire future potential earnings. And even then builders aren't guaranteed to get follow on funding.
Bounties are a great tool. They’re particularly appropriate for situations like nostr which are primarily new web/mobile client interfaces to open datastores on the internet. Tons of innovation can be unlocked with appropriate bounties to instigate open source software projects that can provide a net-good for humanity, but end up corrupted in various ways when they’re owned by a centralized party.
Venture capital is a different tool than bounties. It’s useful when you need to marshall a lot of resources (both financial and human) to accomplish something really big in a very short amount of time. For extreme examples think about launching rockets and telecom equipment or designing new pharmacological theraputics. I hope some day we can do this fully open source and with a bounties-like approach, but I don’t want to slow down progress just to wait for that day.
It’s not always clear which of these tools or others should be used at any given time. But if something can be accomplished with a bounty it probably should be, but I don’t believe everything needed to be built can be accomplished with bounties so it’s good to explore other funding/risk-capital sources or even to design new models for financing this risk.
Might seem unrealistic now but I think crowdfunding for large, ambitious projects from stakeholders that benefit directly from the product could replace VC.
Projects could crowdfund from institutions or HNWI directly eg sovereign wealth funds funding a local energy grid infrastructure or MIT endowment funding a rocket for student space programs. There's more alignment of outcomes and incentives there.
Why do we need the VC middlemaning the process and gatekeeping capital? Why do we need a handful of "experts with pattern recognition" to fund things they probably don't even use? Why do they need to take 2/20 on innovation when that capital could be used to invest in builders? Wtf are they building, their net worth?
