Gitcoin Grants – Quadratic Funding for the World

Overview

Gitcoin was founded in 2017, there are a number of podcasts and blog posts written about why @owocki started Gitcoin, how Gitcoin has grown into the amazing community, and project that it is today. Core to the Gitcoin thesis, funding public goods and specifically funding public goods through quadratic funding are now a critical part of this story. Some might ask, why Public Goods funding? More specifically, why Quadratic Funding?

What Are Public Goods?

Let’s take a quick side adventure and make sure we all understand what public goods are. Toby Shorin, Laura Lotti and Sam Hart did a great job writing about this topic in their post. They share the definition of Public Goods as “anything that is both non-excludable and non-rivalrous, that is, people can’t be barred access, and one person’s use doesn’t degrade another’s.” A common example is clean air. Just because I consume clean air doesn’t mean you can’t also consume it.
 

Public goods are non-rivalrous, non-excludable.

Why are public goods important? Public goods create universally better outcomes for society. For those trapped in poverty, public goods are particularly essential, helping people meet basic needs. Public libraries for example — assuming all else equal, can help educate the population indiscriminately (once again, this assumes the library offers truly equal opportunities to learn, and check out the resources needed). Public Goods also serve those in privilege and power just as equally as those in poverty. We often don’t notice it, but the majority of the value we consume in the world is public goods. After all, what value is your lambo to you if the sky is on fire? Funding Public Goods, ensuring they exist, and are accessible is often paramount to a society’s advancement.

In our digital era, Open Source Software (OSS) is an important public good. OSS is our digital infrastructure. It provides billions of $$$ per year in economic value, but authors of OSS often can’t pay their mortgages with their OSS work because there is no business model for it. Gitcoin wants to create a world where 1000s of OSS devs can quit their corporate jobs + work on OSS.

How Do Gitcoin Grants Work?

Now that we know what Public Goods are, and why OSS is important, let’s walk through the different ways (in web3) that these resources are often funded. 

One common way is through direct grant programs. A grants program often enlists a committee (ideally a credibly neutral committee) who reviews applications for funding to fund a project/idea that someone has. If the project seems strong enough, and like it will advance the cause of those funding grants, it may be directly funded. For those projects that don’t quite make the cut, they are often asked to come back when they have more traction or have thought through specific concerns (much like VC funding). This style of funding is a fantastic first step for most projects/ecosystems to seed capital into their community development.

For those communities large enough to support more democratically fair funding (like the ethereum community at large), Quadratic Funding (QF) models have emerged. QF often occurs in a “round” during a set period of time — in Gitcoin’s case, we run 2 week rounds once a quarter. During a QF round, the community contributes to the projects they feel should be funded and supported; a matching partner offers funds to match the community’s contributions, but not in a 1:1 match. Instead, the match is more aligned to the sentiment of the community as opposed to the sheer dollar value amount raised by any grantee. The number of contributors matters more than the amount funded

Quadratic Funding has been chosen to complement traditional grants programs in multiple blockchain communities because:

  1. It is more democratic, allowing everyday community members to designate where the funding goes by funding themselves. 
  2. It scales, a QF instance can review hundreds of grants per quarter as opposed to just a small handful with a centralized grants team.
  3. It allows communities to co-fund projects along with those holding the matching funds.
  4. It allows influencers to market and talk about  the projects they care about, without being able to sway a single point of authority to fund. The community still decides if the grant is worth funding.
  5. It allows projects to separate signal from noise, and see what the surrounding community really cares about.

To learn more about how the QF mechanism works, check out this resource.

Why Choose Gitcoin? 

At over $20mm funded, Gitcoin is currently the largest experiment of Quadratic Funding used to fund digital public goods — the projects that are open source, highly accessible, and offer non-excludable and non-rivalrous benefits to our web3 ecosystem. Each calendar quarter, Gitcoin runs a Grants Round (often the last month in the quarter) where a matching pool amount is determined through a governance vote (see past proposals here and here) with the goal of offering funds to key categories focused on building different parts of our web3 ecosystem. 

It is worth noting, there is thinking on how to move beyond categorical selection of fund distribution that is also being explored. The matching funds are collected by the community, for the community to sustain the Grants Rounds themselves from altruistic donors (one example is here). The funds are earmarked for future rounds, or specific categories where a donor would like to see development occur. This is often like a company or government posting an RFP. In this case, the funds are contributed to the matching pool, and disbursed based on the community’s sentiment. 

How Does Matching Work?

During an active Gitcoin Grants Round all contributions made during the defined time period “count” towards the matching rewards. This creates a two week long blitz to have our shared community fund the grants they want to see flourish. Shortly after the two week time period, the results are calculated (past round ratification results are here and here), attackers of the system are removed (to the best of our ability) and then matching funds are awarded to project owners. During this two week blitz, all Grant owners (those who created a grant) directly receive their contributions from community members as they “check out” on the site. Gitcoin does not custody these funds, and instead only serves as the coordination layer.

During the round, Gitcoin’s software will provide a match estimate for each contribution, so that users can see how much incremental matching funds their contribution unlocks.

QF has proven to be a terrific way to fund projects in a credibly neutral way that brings about outcomes that have been otherwise improbable to achieve. There are a number of successful stories coming out of Gitcoin Grants that we are excited to share in more detail soon. 

What Kind Of Success Has Gitcoin Grants Had?

As of today, Gitcoin has helped the community deploy over $35M in funding towards Digital Public Goods in the last 4 years. 

This is fantastic and something we should all be proud of. Gitcoin didn’t do this though, our community did this, and we are merely the tool by which they chose to deploy the funds. Gitcoin Grants is a coordination layer to connect these projects to contributors. Gitcoin has been able to do this for some of the most notable projects in the space as well. Uniswap, 1inch Exchange, development for EIP-1559 and many other successful projects have all started as Gitcoin Grants and grown from there.

There is another funding mechanism emerging Gitcoin is also excited about — retroactive public goods funding. You can read more about the details in this post from Optimism, but the premise is to offer larger lump sum payments for those who have avoided seeking cash windfalls themselves. This funding mechanism also offers those building the true infrastructure an opportunity to be rewarded for what is often a thankless job. In a city, it is uncommon for taxpayers to celebrate those who build the sewer systems, but those sewer systems are arguably more important than roads, or other core infrastructure (like stop lights, parks, etc.).

As the public goods funding space, and more broadly the coordination space continues to advance, Gitcoin expects to see more novel ways for rewarding those both within and across communities for their work. Today, this happens with monetary contributions and recognition with the hopes that the building of these digital public goods continues.

At Gitcoin, our mission is to build and fund digital public goods. We are immensely grateful to the community who has used our coordination tools to contribute more than $30M to the developers and projects that seek to build digital public goods with us. We believe Gitcoin’s Grants Rounds are an integral part of how we accomplish our mission. We do not believe they are the only way to accomplish this mission, and those running direct grants programs, or exploring other funding mechanisms we would love to collaborate. Gitcoin Grants has become a pillar in the Ethereum ecosystem and we hope to develop additional decentralized protocols to advance the coordination of communities in the future.

If you want to get involved, or learn more – check out Gitcoin Grants. Contribute to a Grant, or create your own. And it goes without saying that because our community governs Gitcoin Grants, you too can help build, advance and decide on the shape and future of Gitcoin Grants through governance.

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