Around a month ago, we embarked on an exploratory journey of the intersection of blockchain technology and public goods. Since then, we analyzed two of the most widespread public goods funding mechanisms in Web3, namely Retroactive Public Goods Funding (RetroPGF) and Quadratic Funding (QF). Today, we’re taking a deep dive into alternative and less popular models which, nevertheless, show great potential.
As it turns out, the blockchain-powered public goods space is a scene of a continuous and bold innovation. There exist a plethora of models that experiment either with the frequency of funding rounds and payments, the incentives they offer donors, or the methods of donating. Let’s examine them one by one.
Gitcoin: Pushing the Web3 Public Goods Funding Forward
As we outlined in our previous publication, Gitcoin is a public goods powerhouse that has funneled millions of dollars towards supporting impactful initiatives and causes. For years, the company has mainly been focused on facilitating Quadratic Funding (QF) programs, but its recently-released Gitcoin 2.0 white paper, demonstrating an ambition to evolve. With it, Gitcoin strives to transition from a centrally-operated platform to a suite of modularized products and protocols which anyone can build on top of, or fork. Moreover, apart from expanding its offering of capital allocation tools to include RetroPGF and direct donations, Gitcoin is piloting other experimental models.
Conviction Voting (CV)
Conviction Voting (CV) is a governance mechanism designed to facilitate the management of shared resources with the purpose of achieving mutual community goals. It is used to fund proposals based on aggregated community preferences. However, unlike QF or RetroPGF, in Conviction Voting preferences are expressed continuously. Let’s break this down.
While other funding mechanisms involve one-time vote casting (or donation), CV requires community members to continuously stake governance tokens and assign their stake to the project or cause they support. The longer a stake remains locked in a particular applicant, the stronger the signal that it deserves to be funded. That model delivers dual utility:
- It helps distinguish long-standing community members from the short-term participants, who might be trying to tip the balance of a particular vote to satisfy short-term interests. As voters are continuously asserting which proposals they would like to see approved, those who frequently change their opinion are trusted less. Overall, the longer one keeps their preference for the same proposal, the stronger their “conviction” and influence within the community.
- It sidesteps Sybil attacks. Since CV entails locking funds up in staking, it makes fabricating numerous identities exponentially more costly.
Gitcoin is piloting a CV program with 1Hive, enabling community members to stake GTC on their preferred Gitcoin grant. The more and the longer GTC tokens have been staked, the more funds can be removed from the treasury and distributed to applicants. Moreover, the program’s goal is to create a template for bottom-up coordination of shared resources, and allow any DAO to implement it in a plug-and-play fashion.
The CV model draws on decades of research on multi-agent coordination and behavioral economics. It asserts that each individual and their reaction to proposals is a “social sensor”, whereas the community as a whole is perceived as an aggregated social signal on which proposal deserves to be funded.
Streaming Quadratic Funding (SQF)
Gitcoin, in collaboration with the augmented and shared reality project Geo Web, and the micropayments’ provider Superfluid, have launched a novel implementation of Quadratic Funding (QF). Their Streaming Quadratic Funding (SQF) model allows for donations to be streamed to recipients in real time, and for QF to be matched to ongoing donations based on the streams’ flow-rate. Instead of running one QF round every 2 weeks, SQF makes it possible to allocate grants daily or even hourly.
Giveth: Bringing Philanthropy Into the 21st Century
Giveth is a crypto fundraising platform that has been activating donations on multiple chains including Ethereum, Gnosis, Optimism, Celo, and Polygon. The Giveth approach aspires to innovate donations and tie them with regenerative economics so that not only do public goods have the opportunity to flourish, but also the projects creating that value benefit directly.
Recurring Donations
Again with the help of Superfluid and with the aim of introducing sustainability into the funding of public goods, Giveth has launched Recurrent Donations. They leverage Superfluid’s streams as an ongoing funding infrastructure, and allow community members to send support on a regular basis. For public goods developers, such a simple upgrade could be a game changer and deliver unprecedented levels of predictability, whereas for donors, it elevates the user experience.
The GIVeconomy: Rewarding Givers
Part of Giveth’s mission consists in transforming philanthropy so that public goods supporters are incentivized to give more. They approach this challenge by integrating market dynamics into the public goods funding. Enter the GIVeconomy.
To shift the economic paradigm of donations, and make the funding of public goods a profitable endeavor, Giveth has established the following system:
- GIVbacks: Giveth rewards supporters with GIV, a governance and utility token, thus making donating to public goods a matter of mutual benefit. GIV tokens can be staked in the GIVfarm, a rewards pool for liquidity providers, to earn a yield;
- GIVpower: GIV holders gain GIVpower proportional to the GIV funds they have staked and locked. They can then allocate their GIVpower to boost the visibility of the projects they vouch for, so they’re ranking higher on the Giveth’s list of grants;
- Gurves: Set to launch in 2025, Gurves will enable nonprofits to issue tokens linked directly to the value they create, establishing a demand for these tokens. It will naturally lead to the emergence of self-sustaining markets around public goods.
The GIVeconomy has the potential to make charity lucrative and philanthropy self-sustaining. Giveth continues to iterate and experiment with the different elements of the system, but the goal is clear – change the mindset around donations, so they’re no longer perceived as a sacrifice.
Glo Dollar: Automatic Public Goods Funding (AutoPGF)
The last funding model we want to examine is Glo Dollar, a donationless form of philanthropy. Glo Dollar is a fiat-backed stablecoin that enables users to support public goods and charitable initiatives just by holding it. The team behind Glo Dollar market this model as Automatic Public Goods Funding (AutoPGF), because the user literally doesn’t need to do anything, and most importantly – doesn’t need to give money away.
Here’s how AutoPGF works:
- One buys Glo Dollar with fiat and selects the funding recipient of their choice;
- The fiat backing Glo Dollar is invested off-chain to generate revenue;
- The Glo Foundation receives that revenue and distributes 100% of it to funding recipients.
Although Glo Dollar’s model poses some centralization and speculation risks, it unburdens users to such an extent that it is poised to significantly boost public goods funding.
Our goal with this blog post series was to depict the wide variety of Web3 mechanisms for public goods funding. We also wanted to highlight blockchain’s immense potential to remedy the limitations of traditional capital allocation, and to modernize philanthropy.
By integrating blockchain technology, donating funds can be as seamless, immutable, and censorship resistant as never before. It can be scalable, programmatically managed, and recurrent, without the need of human intervention. It can also advance accountability and transparency to charity.
DCF is working tirelessly to push Web3 public goods forward. We’re eager to learn about and support innovative schemes that supercharge sustainability, ease of use, and cost efficiency.
Make sure to go through our analyses of public goods funding models like RetroPGF and Quadratic Funding.
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