Prior to and early in the 20th century, scientific research was frequently funded not by grants but rather by the establishment of prizes to be paid to the first person to achieve some technical goal. The Nobel Prize, established at the beginning of the 20th century is the most famous instance of this practice. The first famous example of such a prize was, according to legend, offered by the king of Syracuse, Hiero in the third century BC in return for a method for determining the gold content in an object, in this case a crown, without damaging it. The story goes that it was won by Archimedes, the mathematician who more importantly discovered the physical laws governing the behavior of simple machines utilizing leverage, but who will always be remembered best for the word “Eureka”, which means “I have found it” upon solving the puzzle. He then leapt from the pool in which he had conceived of his method, the use of water displacement to estimate density, and ran naked to the king to claim his reward. It is worth noting that in ancient Greece this was eccentric, but not nearly as much so as it would be today.
The modern era of scientific prizes began in 1714 when the British government offered the first of a series of prizes for the development of accurate methods of determining the time, which enabled more accurate naval determination of the longitude. When a solution was discovered, the government initially reneged on its promise, but ultimately the inventor was paid. Over the next 210 years, other prizes were offered for the development of solutions to varied technical and scientific problems, particularly in chemistry and in aviation. The most famous of these, and the inspiration for the modern X prizes, was the Orteig prize, $25,000 won by Charles Limbaugh in 1927, less than a decade after it was offered, for the first non-stop flight from New York to Paris.
In 1995, Peter Diamandis learned about the Orteig prize and was inspired to organize the creation of a new prize, of $10,000,000 for the first private vehicle to fly to an altitude of 100km. Money was raised from a number of private donors, most notably Anousheh and Amir Ansari, who donated $1,000,000. The prize was ultimately won in the year 2004 by Tier One, a company funded by Paul Allen, for the use of the vehicle SpaceShipOne, which cost $20,000,000 to build.
Subsequent to the success of the original contest, the foundation that ran the contest expanded its scope to offer further contests for fuel efficient vehicles, rapid and inexpensive gene sequencing, and other achievements. In addition, a number of other prizes were offered in imitation, such as the Methusaleh prize for the demonstration of life extension techniques in mice and the DARPA grand challenges, for the development of robotic vehicles capable of crossing a 132 mile race course. Many smaller prizes have also become popular in the wake of the X-Prize. These are now offered by innovative companies in order to solve the technical challenges they face at a lower expense than would be possible using internal staff. One of the most successful of these prizes, which are also sometimes informally called X-Prizes, was offered by a mining company called Goldcorp. Goldcorp offered $575,000 in prize money for the analysis of their preliminary mining data. Based on the data they were given, independent analysts identified several billion dollars worth of gold.