Public Goods Network (PGN), Gitcoin’s Ethereum Layer 2, Announces Shutdown: What Went Wrong?

In a surprising turn of events for the Ethereum scaling landscape, the Public Goods Network (PGN), a Layer 2 solution backed by Gitcoin, has announced its impending closure. Yes, you read that right. This network, designed to champion public goods funding on Ethereum, is winding down operations, with a target shutdown date of mid-2024. For those in the crypto space, especially those following the evolution of Layer 2 networks and Gitcoin’s mission, this news warrants a closer look. Let’s dive into what happened, why PGN is closing its doors, and what this means for the broader ecosystem.

PGN Shutting Down: The Key Facts

Let’s cut to the chase and outline the essential details of this significant announcement:

• Public Goods Network (PGN) is ceasing operations: The official announcement confirms that PGN will be shutting down.
• Target Closure: Mid-2024: The network aims to complete its wind-down process within approximately six months, targeting June 2024 for full closure.
• Gitcoin-backed Initiative: PGN was a project supported by Gitcoin, known for its dedication to funding public goods and supporting developers in the Web3 space.
• Ethereum Layer 2 Solution: PGN operated as a Layer 2 network built on Ethereum, aiming to provide a more scalable and cost-effective environment.
• Reasons for Closure: The PGN team cited challenges in user migration and operational costs exceeding their allocated budget as primary factors behind this difficult decision.

As stated by the project team, “After a thorough assessment, it has decided to wind down PGN over the next 6 months – tentatively closing in June 2024.” This announcement marks a significant shift for a network launched just last year, initially envisioned as a crucial component of Gitcoin’s infrastructure for public goods and developer funding.

See Also: Ethereum Layer-2 Scaling Network Blast Announces Airdrop

Why is PGN Closing Down? Unpacking the Reasons

The crypto world is no stranger to projects coming and going, but the shutdown of PGN, especially given its backing and purpose, raises important questions. What exactly led to this decision? According to the PGN team, two key challenges proved insurmountable:

• User Migration Hurdles: Encouraging users to migrate to a new network, even with the promise of lower costs and public goods alignment, proved more difficult than anticipated. The team highlighted that “Encouraging people to migrate without the convenience of a scaled network was challenging…”. This suggests that attracting users to a network solely based on its mission, without immediate, tangible benefits in terms of network effects or established applications, can be a tough sell.
• Unsustainable Operational Costs: Running a Layer 2 network, even with the intention of being cost-effective for users, still involves significant operational expenses. PGN stated that “…and the resources needed to support this were out of scope with PGN’s budget.” This underscores the financial realities of maintaining blockchain infrastructure and the need for a sustainable economic model.

Essentially, PGN faced a classic ‘chicken and egg’ problem. Without a critical mass of users and activity, the network struggled to justify its operational costs. And without the network effects that come with a large user base, attracting new users became increasingly challenging. This is a common struggle for many projects in the blockchain space, particularly those focusing on public goods, where immediate financial incentives for users might be less direct compared to DeFi or speculative applications.

PGN’s shutdown announcement on X (formerly Twitter).

What Was the Public Goods Network (PGN)? A Quick Recap

For those less familiar, let’s quickly recap what PGN was all about. It was more than just another Layer 2; it had a specific mission:

• Focus on Public Goods: PGN was explicitly designed to support and fund public goods within the Ethereum ecosystem. This aligned perfectly with Gitcoin’s core mission.
• Low-Cost Ethereum Layer 2: Built as a Layer 2 solution, PGN aimed to offer significantly lower transaction fees compared to the Ethereum mainnet, making it more accessible for applications and users focused on public goods.
• Built with OP Stack: PGN was constructed using the OP Stack, the same technology powering Optimism’s OP Mainnet and other notable Layer 2 projects like Coinbase’s Base, Zora, and BNB Chain’s opBNB. This placed PGN within a growing ecosystem of interoperable and technically sound Layer 2 solutions.
• Collaboration with Gitcoin and Conduit: PGN was a collaborative effort between Gitcoin and Conduit, leveraging Conduit’s infrastructure expertise to build and operate the network.

In essence, PGN was envisioned as a purpose-built Layer 2, optimized for the unique needs of public goods projects and the Gitcoin community. It was a noble endeavor with strong backing and solid technological foundations.

What Does PGN’s Shutdown Mean for the Future?

While the closure of PGN is undoubtedly a setback, it also offers valuable lessons for the broader crypto space, particularly regarding Layer 2 networks and the funding of public goods.

Key Takeaways and Reflections:

• Community & Network Effects are Paramount: PGN’s experience highlights the critical importance of building a strong community and achieving network effects for Layer 2 success. Technology and mission alignment alone are not enough. User adoption and active participation are essential for sustainability.
• Sustainable Economic Models for Public Goods L2s: The challenge of balancing operational costs with the public goods focus raises questions about sustainable economic models for Layer 2s dedicated to this purpose. Perhaps alternative funding mechanisms, stronger integration with existing ecosystems, or more diversified revenue streams are needed.
• The Difficulty of User Migration: Even within the crypto-native space, migrating users to a new platform or network is a significant hurdle. Incentives, ease of use, and clear value propositions are crucial for overcoming this inertia.
• OP Stack Remains Robust: PGN’s closure is not a reflection on the OP Stack technology itself. Many other successful Layer 2s are built using the same stack, demonstrating its robustness and potential.
• Gitcoin’s Commitment to Public Goods Continues: It’s important to remember that PGN was just one initiative within Gitcoin’s broader ecosystem. Gitcoin’s commitment to funding public goods and supporting Web3 developers remains strong. This shutdown might lead to a strategic pivot or a refinement of their approach, but their core mission endures.

Looking Ahead: Public Goods Funding and Layer 2 Evolution

The story of PGN is a reminder of the ongoing experimentation and evolution within the blockchain space. Building successful Layer 2 networks is a complex undertaking, and finding sustainable models for public goods funding in Web3 is still an evolving challenge. While PGN’s journey is coming to an end, the lessons learned will undoubtedly inform future efforts in this critical area. The need for scalable, cost-effective solutions for Ethereum remains, and the pursuit of sustainable public goods funding mechanisms within the crypto ecosystem is more important than ever. As the crypto landscape continues to mature, we can expect to see new approaches and innovations emerge, building upon the experiences – both successes and setbacks – of projects like the Public Goods Network.