# Direct to Contract Incentives

Funding mechanism that routes capital directly to smart contracts based on onchain usage, performance, or programmable logic — rewarding code that creates value.

**Direct to Contract Incentives** route funding directly to smart contracts rather than individuals or teams. If a contract provides value — facilitates transactions, creates matches, processes attestations — it can earn funding automatically based on usage, performance, or programmable logic. This reframes funding from "who should we fund?" to "what code created the value?"

## How It Works

The mechanism removes human intermediaries from the allocation decision by measuring contract-level value creation.

1. **Contracts are instrumented** for usage tracking — gas consumption, transaction volume, user count, or other performance metrics
2. **A treasury or funding pool** is established with allocation protocols tied to contract performance
3. **Smart contracts measure value** created by each target contract over a defined period
4. **Funds flow automatically** to contracts that meet or exceed performance thresholds
5. **Optional governance** can adjust parameters, add new contracts, or update metrics

## Advantages

- Automates value-dependent funding allocation with minimal subjective judgment
- Supports repeatable infrastructure utility — the same contract gets funded as long as it delivers value
- Enables cross-ecosystem incentive composition
- Removes political dynamics from infrastructure funding

## Limitations

- Cannot recognize offchain or relational labor
- Ineffective for pre-launch initiatives lacking onchain activity
- Unsuitable for nuanced qualitative assessment
- Limited in contexts requiring discretionary judgment about impact

## Best Used When

- Infrastructure underpins multiple systems and can be measured by usage
- Services have programmable interfaces with clear onchain footprints
- Contract-level attribution surpasses contributor-level tracking
- Automated, objective reward systems are preferred over committee decisions

## Examples and Use Cases

### Quadratic Funding Matching Contracts

Matching contracts in QF rounds earn revenue proportional to the volume of matches they facilitate — the more value routed through the contract, the more it earns.

### Oracle and Relayer Incentives

Oracle relayers and zero-knowledge proof generators receive automated compensation based on the number of proofs or data feeds they process.

### Identity Infrastructure

Credential issuers in identity systems earn rewards based on the number of verifications processed, creating sustainable funding for privacy and identity infrastructure.