KEVIN OWOCKI

CAPITAL ALLOCATION
THE NEXT FRONTIER
Capital allocation is a simple concept: it’s the act of deciding how to distribute funding
or resources. If you’ve ever paid bills, taxes, or repaid friends for a meal, you’ve allocated
capital.
BY KEVIN OWOCKI
Capital allocation can become a full time job: governments and grant-making organi-
zations spend vast amounts of time and money figuring out the process, logistics, and
decision-making involved in allocating capital. At scale, capital allocation inevitably be-
comes mired in gatekeeping, rivalrous decision making, and lack of transparency and
accountability. ONCHAIN CAPITAL ALLOCATION
Crypto with its programmable smart contracts, present incredible advantages towards
allocating capital in an efficient, effective, and transparent manner.
HANDBOOK
The internet revolutionized how information was distributed in society. If crypto succeeds
in revolutionizing how society distributes scarce resources, it follows that it will upend,
and improve, how we do capital allocation.
A PRACTICAL JOURNEY FROM PRESENT MECHANISMS TO FUTURE POSSIBILITIES
What if we could solve coordination failures with capital allocation? What if we could
create better, more sovereign, collective action? How might we bring centuries old capital

ONCHAIN CAPITAL ALLOCATION HANDBOOK

allocation strategies onchain? Can we invent new onchain capital allocation strategies
that were not possible before Ethereum?

The next horizon is hard to see alone, but by exploring it together, we can grasp it.

This book is a celebration of the design space, and your no-hype resource to understand-
ing the emergent pluralistic ecology of capital allocation developing in the web3 space.
I’ve enjoyed putting together this handbook of the latest and greatest in what’s possible.
It is my great pleasure to have a front row seat to this movement as a member of Gitcoin.
My hope for this book is that I can pay it forward to you.

- Owocki
1
 2

WRITTEN BY KEVIN OWOCKI

EDITED BY MATHILDA DV

DESIGNED BY ANYA BIAROZKA

 3

ONCHAIN CAPITAL ALLOCATION

HANDBOOK
 4

FOR THE ETHEREUM

ECOSYSTEM CIRCA GITCOIN 2.1
 5

...UNTIL IT ALL LOOKS OBVIOUS WITH HINDSIGHT.

...AND THEN ALL AT ONCE...

...SLOWLY...

...PAINFULLY...

MAY WE FUND WHAT MATTERS...

TA B L E O F C O N T E N T S 6

TABLE OF
CONTENTS
Intro 8
Meta: Onchain Capital Allocation 12
Mechanisms 20
Direct Grants 26
Quadratic Funding 30
Private Quadratic Funding 40
Streaming Quadratic Funding 41
Retro Funding 42
Conviction Voting 52
Request for Proposal 60
Self Curated Registries 64
Delegated Domain Allocation 74
Gift Circles 82
Evolutionary Grants Games 92
Assurance Contracts 98
Dominant Assurance Contracts 100
Social Media Based Capital Allocation 108
Direct to Contract Incentives 114
Impact Attestations 118
Universal Basic Income 124
Cookie Jar 128
Community Currencies 132
Futarchy 128
Angel Investment 144
MolochDAO 148
Stokvel 154
TA B L E O F C O N T E N T S 7

Buidl Guidl Streams 158

Sourcecred 160
Gnosis Safe 162
Honour 164
Mutual Aid Networks 166
Waqf 168
Zakat 170
Bonding Curves 172
Revnets 174
Decentralized Validators 176
Bounties & Hackathons 178
Ranked Choice Voting 180
Meta: Stacking Mechanisms 182
Meta: Mechanism Taxonomy 186
Meta: Slime Mold 198
Meta: MyCoFi 206
Meta: Ephemeral DAOs 214
Meta: DAO of DAOs 220
Meta: Allo Protocol 226
Meta: Gitcoin: The Capital Allocation 236
Strategy Exchange
Meta: Practical Pluralism 244
Meta: Parting Thoughts 250
Meta: Call to Action 260
Meta: Shill Zone 264
INTRO 8

IT’S SPRINGTIME
FOR ONCHAIN
COORDINATION
Crypto, with its programmable smart contracts and
properties of trustlessness and tamper resistance,
presents incredible advantages towards allocating
capital in an efficient, effective, democratic, and trans-
parent manner.

Since these systems are built open source, we can all

learn from them or even fork them when we want to
use or improve them. The result is a rapidly evolving
multiplayer exploration of the design space that com-
pounds and accelerates exponentially over time.

The old world is decaying and a new world is sprouting.

We are in a springtime of onchain coordination. What a
moment to be alive!

It is my great pleasure to have a front-row seat to this

moment as a co-founder of Gitcoin and host of the
Greenpill Podcast. My gift to you is paying it forward
through this book and it’s digital community. This book
is a labour of love & a celebration of this design space.
I’ve put countless hours of research, networking, weav-
ing, and writing into this handbook to give a reader a
peek into the latest and greatest in what’s possible. The
next horizon is hard to see alone, but by exploring it to-
gether & sharing our findings we will discover it faster
and more effectively traverse its cartography.

You will notice that the mechanisms featured in this

book are visualized as though they are ecological net-
INTRO 9

works. This is not an accident. I believe that tending

to communities is like tending to a garden.

Just as organisms in a garden require sun, fertile

ground, water, and nutrients, open-source com-
munities require care, tending, data, and financial
resources. Just as different nutrients can change
the expression of a flower, different approaches to
capital allocation can change how onchain communi-
ties express themselves.

While a primary lense through which I study the

space is through Gitcoin, this book goes way beyond
Gitcoin’s ambitions or roadmap. Given the volume of
grants we’ve managed, Gitcoin is a significant vehicle
for me to explore the space. However, our vantage
point is limited, and our primary mechanisms as of
2024 (QF, RetroPGF) are just scratching the surface
of the possibilities. In places where I mention Gitcoin,
I have gone to lengths to do so as a vehicle for creat-
ing understanding for the reader of the design space
(shilling Gitcoin is only secondary).

The book is not designed to be consumed strictly

linearly. While I have laid out the chapters in a way
that provides a reader with an end-to-end download
of my vision, I invite you to jump around the book
and follow your interests. Just as a hiker uses a field
guide to identify organisms, you can use this book as
your field guide as you explore this frontier of web3.

As you dive in, Mechanism chapters Meta chapters

note that there are
two types of chapters Describes capital allocation Gives context for how to think
in this book. strategies and what they’re about the patterns or space in
good at. between mechanisms.

These two types of content are designed to comple-

ment one another.
INTRO 10

As you explore this design space, I invite you to

envision an emergent pluralistic ecology of capital
allocation mechanisms. Each excels at one thing, but
together they create a diverse tapestry of effective
capital allocation for the entire web3 space. This
book is your guide to progressive elaboration of this
ecosystem!

And it gets better. We are not only mapping this

design space; we are manifesting it. We are in an
strange loop of (1) discovering & (2) creating this
beautiful design space. By following this strange
loop recursively, we are memeing a pluralistic ecol-
ogy of capital allocation mechanisms into existence.
The infinite garden grows & thrives the more we
tend to it.

I believe that we will see these onchain coordination

networks increase in usefulness and proliferate into
many places in the web3 ecosystem (and eventu-
ally in the real world) in the coming years. While
I’ve attempted to make this book timeless, some of
its content will invariably become dated given how
fast the space evolves. If you wish to continue the
discussion, feel free to join the Telegram group of
readers of this book. Maybe we can create a second
edition (or translate it to new languages) together in
the coming years.

In this spirit, this book is licensed CC BY 4.0. You

may permissionlessly fork this book, make chang-
Join the telegram es, and republish them with attribution as long as
group for this book @ proceeds go to the public good or charitable causes.
I especially welcome translations!

Owocki
INTRO 1111
META 12

ONCHAIN CAPITAL
ALLOCATION

Capital allocation is a simple concept: it’s the act of

deciding how to distribute funding or resources. If
you’ve ever paid bills, taxes, or repaid friends for a
meal, you’ve allocated capital.

Capital allocation is a task for most individuals but a

full-time job for many: governments and grant-mak-
ing organizations spend vast amounts of time and
money figuring out the process, logistics, and
decision-making involved in allocating capital. At
scale, capital allocation inevitably becomes mired in
gatekeeping, rivalrous decision making, and lack of
transparency and accountability.

Blockchain and crypto, with their programmable

smart contracts, present novel opportunities in (1)
accumulating (2) allocating & (3) distributing capital
in an efficient, effective, and transparent manner.
Gitcoin has seized this advantage by moving the
entirety of our grants program onchain:
O N C H A I N C A P I TA L A L L O C AT I O N 13

from governance, creation, management, and

disbursement. Moving the grants program onchain
and it being open source also allows us to build a
network of developers, grants programs, and capital
allocators in web3 – all of which ultimately benefit
the Gitcoin ecosystem.

Gitcoin has previously experimented deeply with a

few forms of grantmaking, primarily focused on fair
and effective ways to implement Quadratic Funding.
We’ve created a market for this grants mechanism
and scaled it from $0 to $millions distributed per
year. We’re now starting to see traction with new
mechanisms, like Direct Grants and Retro PGF, and
are poised to scale those as well.

The crypto ecosystem has funded over $1B across

5,900 grants and is continuing to scale to support
blockchain’s enormous growth goals. The potential
of capital allocation extends beyond grants and
represents a game-changing category that Gitcoin
and its extended network of partners and protocol
builders is poised to help accelerate. Our north
star of funding $1B in grants is both an aggressive
growth target for Gitcoin, and only the start of what’s
possible.

CAPITAL ALLOCATION:
THE NEXT GROWTH
FRONTIER
One of the most recognizable forms of capital
allocation is government spending. It also perfectly
depicts many of the limitations of traditional capital
allocation.
O N C H A I N C A P I TA L A L L O C AT I O N 14

LEGACY CAPITAL
ALLOCATION
Governments accumulate funds through levying
taxes – something each citizen is obligated to par-
ticipate in. The funds collected are, in theory, spent
in order to benefit the collective group of taxpayers.
This system also illustrates many of the problems
that traditional capital allocation methodologies
suffer from:

GATEKEEPING NOT SCALABLE NOT PRECISE

Small groups of decision mak- Not taking advantage of the Without the ability to
ers, who may become power primitives the internet (easy programmatically manage
brokers, and are unwilling or access, direct to consumer large amounts of information
unable to be democratic. interfaces) and Ethereum at scale, they are not able
(credible neutrality, compos- to precisely allocate capital
ability, transparency, democrat- resources.
ic decision making, censorship
resistance) have to offer.

Over the past 30 years, advancements in technology

have created opportunities to solve previously in-
tractable problems of capital allocation. The internet
has introduced the ability to communicate at a scale
that was formerly infeasible.

Blockchains have created a transparent ledger to re-

port on activities and create accountability through
easy data availability and the immutability of onchain
actions. By combining internet-speed innovation and
O N C H A I N C A P I TA L A L L O C AT I O N 15

blockchain-level transparency, we will unlock a new

frontier of capital allocation – one where commu-
nities can fund what matters to them in ways that
are not only more effective, but also more aligned to
their values.

ETHEREUM-BASED
CAPITAL ALLOCATION
CAN BE:
Accessible Democratic

Anyone with an internet The ability to easily create and

connection can participate run onchain voting enables
through web or mobile appli- governance that reflects the
cations. will of the people.

Evolutionary Incorruptable

Anyone working with open Leveraging blockchain’s core

source software can easily fork feature of an incorruptible
and modify existing methods public ledger, with audit trails
to evolve according to their available to anyone.
own needs.

Transparent Precise & Scalable

Using programmable smart The mechanisms invented

contracts able to precisely in web3 can scale with high
allocate resources at scale. levels of precision.

The time to solve the problems of capital allocation

is now. We can build capital allocation systems that
solve the constraints noted above. We can remove
barriers to adoption by emphasizing the transparen-
cy and extensibility of these systems. We can build
O N C H A I N C A P I TA L A L L O C AT I O N 16

more effective, efficient or novel capital allocation

methodologies by using democratic voting and cre-
ating accessible systems of participation.

ONCHAIN CAPITAL
ALLOCATION
Today in web3, there are hundreds of DAOs with
$millions of capital to distribute to fund growth in
their ecosystems. These DAOs have unlocked new
global markets to turn ideas and APIs into products
and adoption so much faster than before.

Gitcoin is positioned to help stimulate the creation

of this new category of capital allocation, building on
the success of Quadratic Funding and web3 grants.
Through its grants program, Gitcoin has more expe-
rience with onchain capital allocation than anyone
else. We believe in the potential so strongly that we
spent two years architecting a protocol and product
suite that will easily allow anyone in web3 to partici-
pate in new methods of capital allocation.

GITCOIN STATS
AS OF JUNE 2024

4.2m unique
4k Grantees donations

$60m funded

We believe the impact and reach of next-generation

capital allocation will be felt across many indus-
tries – from web3 social and marketing to traditional
industries like crowdfunding, real estate, scientific
O N C H A I N C A P I TA L A L L O C AT I O N 17

research, and more. Next-generation capital alloca-

tion represents not just a technological evolution,
but an evolution in our social practices around how
we organize, exercise buying power, and own assets.

While Gitcoin’s initial focus is on grant-making for

DAOs and other tokenized communities, we believe
that as more assets become tokenized in various
industries, a wide open design space will emerge
to reimagine how capital allocation is done. These
industries include but are not limited to:

WHO NEEDS CAPITAL

ALLOCATION?
Environmental
& Social Impact

Capital
City, Country and Formation
State Development and Economic Philanthropic
projects Growth Initiatives

Scientific
Research
DAO Ecosystem
development

Each of these industries will demand new levels of

strategy development, thought leadership, con-
stituent engagement, and new applications that
serve their specific needs. The Gitcoin network
has already run pilots in many of these industries,
including collaborations with the American Cancer
Society, DeSci projects, UNICEF, in Boulder Colora-
do, and more.
O N C H A I N C A P I TA L A L L O C AT I O N 18

The potential of capital allocation in each of these

industries feels underexplored yet transformative.
One way to reason about it is by analogy to how
email changed written communications. The average
human sends 100x more messages now than they
sent physical mail decades ago. We believe that the
future of capital allocation will entail 100x higher
volume and higher resolution funding decisions than
are available now.

The evolution of capital allocation has occured in a

skeuomorphic fashion over the last few decades:
physical cash was supplemented by physical checks,
which were supplemented by virtual checks (credit
cards). Credit cards and the internet introduced a
higher speed banking that enabled ecommerce and
crowdfunding platforms like Patreon, Kickstarter, or
Gitcoin Grants.

The next horizon is hard to see today, but by explor-

ing it through this book & through the Gitcoin net-
work we will discover it together. And because it is
built upon blockchains, we believe it will bring more
transparency and accountability to organizations
and more buying power to individuals through new
methods of collective ownership. We can reason
about what this frontier looks like by looking at the
properties of blockchains that it will be built upon. It
This essay originally ap- will be faster, more democratic, more emergent, and
peared in the Gitcoin 2.0 more powerful than what has existed in the past.
whitepaper. It has been
edited and condensed
to fit this book). Read the
whole thing @
O N C H A I N C A P I TA L A L L O C AT I O N 19
MECHANISMS 20

Direct Grants Quadratic Funding Retroactive Public

Goods Funding
Keep it simple. Just send $$$ Send $$$ to projects,
to projects. matched by a matching pool Send $$$ to projets based
according to QF formula on expert (badgeholder) votes
(sum(sqrt(c))^2). after completion of goal. In a
mature Retro PGF ecosystem,
proactive funding sources may
emerge over time because of
the reliability of retroactive
sources.

Requests for Proposal Conviction Voting Assurance Contracts

RFPs, or Requests for Propos- Conviction voting is a deci- Assurance contracts are
als, are formal documents is- sion-making process where agreements where participants
sued by organizations seeking participants allocate contin- pledge to fund a project only if
to procure services, products, uous support to proposals, a minimum number of contribu-
or solutions from external with the weight of their vote tions is reached.
vendors. increasing over time the longer
they support the same option.
MECHANISMS 21

Self-Curated Registry Gift Circles Delegated Domain

Allocation
A self-curated registry, like Pro- Gift circles are a method
tocol Guild, is a decentralized where team members allocate Delegated Domain Allocation
list where members maintain tokens to each other to reward is a system where domain-spe-
and manage their own entries, contributions, enhancing cific experts are empowered
typically to organize contribu- collaboration and mutual rec- to allocate resources or make
tions or credentials within a ognition within the group. decisions within their area of
community. expertise, as implemented by
platforms like Questbook.

Universal Basic Income Bounties & Hackathons Stokvel

A guaranteed, unconditional A bounty is a reward offered A Stokvel is a communal

payment given regularly to all for completing a specific savings and social group in
individuals regardless of their task or project, often used in South Africa where members
circumstances. contexts such as software contribute fixed sums of mon-
development, security, and ey to a central fund for mutual
community contributions. financial benefit.
MECHANISMS 22

Buidl Guidl Streams Sourcecred Mutual Aid Networks

Buidl Guild Streams are SourceCred is an open- A mutual aid network is a com-
streams of money that fill up, source tool for measuring munity-driven system where
and the streamee can then and rewarding contributions members voluntarily support
“pull” the funds out and leave within online communities by each other by sharing resourc-
a note with what they worked assigning scores based on the es, skills, and services without
on. The streamer can then go value of work done. It enables monetary exchange. It empha-
back and see who is contribut- decentralized and transparent sizes collective well-being and
ing and decide to top up (or not recognition of contributions solidarity, often organized to
top up) the stream. using a reputation system. address social and economic
needs within a community.

Honour Dominant Assurance Impact Attestations

Contracts
Honour is a currency that is Impact Attestations are veri-
minted into existence when Ensure a public good is funded fied statements confirming the
needed and is burned when by refunding contributions positive outcomes of a project
no longer needed. Each HON with a bonus if the funding or initiative.
doesnt represent an asset, but goal is not met.
instead is a liability.
MECHANISMS 23

Zakat Social Media Based Revnets

Capital Allocation
Zakat is one of the Five Pillars Revnets are onchain cap table
of Islam, requiring Muslims to With an onchain social graph and incentive machines. With
donate a fixed portion of their and distribution to tens of a revnet, you can bootstrap
wealth to charity, typically thousands of active users, and sustain your open source
2.5% of their savings and web3 social media can shift project, campaign, business,
investments annually. It aims from maximizing attention scene, or meme. No gov-
to redistribute wealth and to maximizing earnings by ernance, no management
support those in need within programming values into the overhead.
the community. platform.

Decentralized Validators Futarchy Ranked Choice Voting

Decentralized Validators are Futarchy is a governance sys- Ranked Choice Voting is an

networks of volunteers who tem where policies are chosen electoral system where voters
run hardware that ensures based on prediction markets rank proposals or candidates
the operation of the network. that forecast their outcomes. by preference, and votes are
In exchange for running the redistributed until a candidate
hardware, node operators are achieves a majority.
rewarded with cryptocurrency.
MECHANISMS 24

Community Currencies Evolutionary Grants Cookie Jar

Games
Community Currencies are Cookie Jar is an optimistic
local currencies designed A competitive grants game governance mechanism that
to complement the national where subDAOs in an ecosys- relies on high social trust and
currency within a specific com- tem distribute funds, report ac- low amounts of funds at stake.
munity or region. They aim to tivities, and are ranked by the It help DAOs reduce gover-
boost local economic activity, community, with successful nance overhead (no one has to
encourage spending within the ones receiving more funding in vote on Cookie Jar proposals)
community, and strengthen subsequent rounds. and track contributions trans-
social ties. parently.

Gnosis Safe Direct-to-Contract Waqf

A Gnosis Safe is a smart con- Direct-to-Contract rewards are A Waqf is an Islamic endow-
tract-based Ethereum wallet incentives that are automati- ment of property or funds,
that allows for multi-signature cally distributed to users who typically for religious or char-
transactions, enhancing complete specific tasks or itable purposes, that is held
security by requiring multiple achievements onchain. in trust and cannot be sold or
approvals for transactions. transferred.
MECHANISMS 25

MolochDAO Bonding Curves Angel Investment

MolochDAO is a decentralized A bonding curve is a mathe- Angel Investments are finan-

autonomous organization matical curve used in econom- cial contributions made by
(DAO) designed to fund ics and finance to define the affluent individuals, known as
Ethereum-based projects relationship between the price angel investors, to early-stage
and improve the Ethereum and supply of a token or asset. startups in exchange for equity
ecosystem. It ensures that as more tokens ownership or convertible debt.
are purchased, the price These investments provide
Its primary innovation was increases along the curve, and crucial funding to startups
Ragequit is a mechanism in conversely, as tokens are sold, that may struggle to secure
MolochDAO allowing members the price decreases, allowing traditional financing.
to exit and withdraw their for dynamic pricing based on
share of funds if they disagree demand.
with the group’s decisions.
 MECHANISM 26

DIRECT 01

GRANTS

Skeumorphic

Existed before onchain

MOST SIMPLE primitives
D IRECT GRANTS 27

TL;DR

Direct Grants are financial awards provided by

governments, foundations, or other organizations
directly to individuals, businesses, or institutions
without requiring repayment. They are often given
to support specific projects, research, education, or
community programs. Recipients typically must meet
certain eligibility criteria and may need to report on
how the funds are used to ensure they achieve the
intended goals.
D IRECT GRANTS 28

WHO SHOULD
USE IT?
Direct Grants should be used by individuals or proj-
ects that need financial support for specific projects,
research, educational initiatives, or community
programs.

They are ideal for those who meet the eligibility cri-
teria set by the grantor and can demonstrate a clear
plan for utilizing the funds to achieve specific goals.
Direct Grants are particularly beneficial for startups,
researchers, educators, and community organiza-
tions looking to fund innovative ideas or expand their
impact without incurring debt.

WHO USES IT?

Uniswap Grants MolochDAO

The Uniswap Grants Program MolochDAO is a Decentral-

Funds Projects That Help ized Autonomous Organiza-
Grow the Uniswap Ecosystem, tion, deployed on Ethereum
including content, events, de- mainnet. Members contribute
veloper tools, and governance. capital with the sole intention
of giving it all away to fund
Ethereum infrastructure as an
Ethereum Foundtion essential digital public good.

The Ethereum Foundation

Ecosystem support program
provides grants and other
support to the builders of the
Ethereum ecosystem.
D IRECT GRANTS 29

A RICH
HISTORY
Direct Grants are a great starting
point in understanding capital allo-
cation strategies because they are
simple, and they have a rich history.

Some notable Direct Grant programs include the Na-

tional Institutes of Health (NIH) grants in the United
States, which provide funding for medical research
projects to advance public health. The Small Busi-
ness Innovation Research (SBIR) and Small Business
Technology Transfer (STTR) programs also offer
Direct Grants to small businesses to support tech-
nological innovation and commercialization of new
products.

Another well-known program is the Fulbright Pro-

gram, which offers grants for international education-
al exchange for students, scholars, and professionals
to study, teach, or conduct research abroad.

Another is the European Union’s Horizon 2020

and Horizon Europe programs provide substantial
funding for research and innovation projects across
various fields, aiming to enhance Europe’s global
competitiveness.
 MECHANISM 30

02
QUADRATIC
FUNDING

Good at

1. Democratic Capital
Allocation
2. Getting small donors and
large donors to fund things
together

Dependencies

Sybil and collusion resistence

- assumes you cannot make up
identities and that people will
not collude with each other.
There are ways to mitigate
collusion such as cluster
mapping.

Not good at

Taking into account the

MOST DEMOCRATIC opinions of experts
Q U A D R AT I C F U N D I N G 31

TL;DR
INVENTED BY VITALIK BUTERIN,
GLEN WEYL, AND ZOE HITZEG

Quadratic Funding is a crowd-funding mechanism

that amplifies available resources by inviting commu-
nity members to make donations (big or small) that
act as votes on where to allocate funds.

Quadratic Funding uses quadratic voting to ag-

gregate individual preferences and democratically
allocate funding to public good. Matching funds are
distributed to recipients more based on the number
of contributors rather than the amount contributed,
ensuring that projects with a larger base get more
funding.

QF encourages wide participation and aligns funding

with the broader preferences of a community, so
it’s useful for allocating funding democratically and
for accurately revealing the preferences of a large
group.
Q U A D R AT I C F U N D I N G 32

WHO SHOULD
USE IT?
Quadratic Funding is particularly well-suited for com-
munities that can provide a matching pool and have
members decide on the allocation of the matching
funds. This includes:

DAOs Networks & Network Large Protocols

States
Decentralized Autonomous Or- Established blockchain proto-
ganizations (DAOs) with large Networks and network states cols with substantial treasur-
treasuries: Quadratic Funding that rely on community partic- ies can leverage Quadratic
can help DAOs allocate their ipation and collaboration can Funding to incentivize the
treasuries towards public benefit from Quadratic Funding development of public goods
goods that benefit the broader by incentivizing the develop- that benefit the protocol’s
community, aligning incentives ment of public goods that im- ecosystem. By allowing token
and fostering a more participa- prove the network’s infrastruc- holders to vote on project
tory decision-making process. ture, security, or usability. By funding, protocols can ensure
allowing network participants that resources are allocated
to vote on funding allocation, towards initiatives that con-
blockchain networks can har- tribute to the protocol’s growth
ness the collective wisdom of and success.
their communities to support
projects that drive long-term
growth and adoption.
Q U A D R AT I C F U N D I N G 33

Quadratic Funding is particularly

valuable for groups that expect to run
multiple rounds over time and lever-
age the preferences revealed by their
community.

By iteratively funding public goods

projects based on community input,
these groups can continuously adapt
and refine their funding strategies,
ensuring that resources are allocated
towards initiatives that consistently
provide value to the community.

POTENTIAL
FUTURE
ROUNDS
VALUE CREATION

SMALL
PILOT
ROUND

TIME
Q U A D R AT I C F U N D I N G 34

FUNDING
STRATEGY

Who is eligible Public goods projects submit an application to be

to receive funding included in a Quadratic Funding round. These appli-
from the pool? cations are typically reviewed by program managers:
the group of people tasked with operating the round.
Eligibility should be determined by some preset
requirements. Projects that are accepted through
this application process are then eligible to receive
individual contributions from community members
and their share of the matching pool.
Q U A D R AT I C F U N D I N G 35

Who is eligible Community members, usually represented by token

to allocate? holders. These are the “voters” in this case, but they
vote by donating tokens to the projects they want
supported, in proportion to how much they want to
support that project.

How are payouts Payouts are calculated after the voting window has
calculated? closed and all the contributions are in.

The share of the matching pool that each project

gets is equal to the sum of the square roots of
their contribution amounts. As a rule of thumb, the
number of contributions a project received is used
to determine their share of the matching funds. This
is what makes QF so democratic: it’s the number of
community members who support a project that de-
termines how much funding it will receive. Libraries
like Pluralistic.js or the Allo Starter kit can help in
doing these calculations.

Note that calculations are generally done off-chain

because the math required would otherwise incur a
high gas cost.

How is the pool After calculating the matching pool distribution in

distributed? the previous step, the managers of the QF round
then distribute the pool. In Allo Protocol (Gitcoin’s
capital allocation protocol), they upload this distribu-
tion to the strategy, then distribute it to the accepted
projects in one transaction.
Q U A D R AT I C F U N D I N G 36

HOW DOES 1. Someone who wants

to support a community

IT WORK?
sets up a funding pool.

This could be a wealthy philan-

thropist that wants to give
back, or a local government
that wants to support commu-
nity projects.

2. Projects that service

the community sign up.

These projects could be any-

thing that helps the commu-
nity (businesses or local civic
groups).

3. A crowdfunding cam-
paign is run where each
contribution is matched
by the matching pool.

Citizens
NETWORK UTILITY

Value $$$

QF
Marketplace

Grantees Ecosystems

$$$$

INTEGRATIONS
Q U A D R AT I C F U N D I N G 37

Here’s the cool thing about Quadratic

Funding. This is the one weird trick that
makes QF into a funding powertool.

Each crowdfund contribution is matched. The match is

based more on the number of contributors than the $
amount given.

Quadratic Funding uses quadratic voting to determine how

funds are allocated. Instead of voice credits (as in quadratic
voting), donating to a public good is how you cast a vote;
the amount you donate is your voice or voting power.

As an example, let’s PROJECT 1 PROJECT 2 PROJECT 3

say a community puts
forward $10,000 for Receives $10,000 Receives $10,000 Receives $10,000
a matching fund and from 2 contributors from 5 contributors from 20 contributors
three projects are
eligible to receive
funding.

Each project receives PROJECT 1 PROJECT 2 PROJECT 3

their $10,000 from
the contributors in full Receives $740 of the Receives $1,8851 of Receives $7,407 of
while the round is live. matching funds the matching funds the matching funds
After voting ends, we
can calculate and dis-
tribute the matching
pool.
Q U A D R AT I C F U N D I N G 38

WHAT MAKES
IT POWERFUL?
We’re giving money to causes supported by every-
day people. This creates crazy matching multiples for
popular projects.

When you give $1 and a community project gets

$100, lots of people open their wallet
and participate.

A regular crowdfunding campaign wouldn’t get as

many contributions from as many people. What’s
better?

Give a $1 and the project gets $2?

Give a $1 and the project gets $100?

AS YOU DONATE MORE... MORE MATCHING IS UNLOCKED

$5000
MATCHING SIZE

MATCHING SIZE

Your Donation: $1000+ Estimated Match:

$134 $243

$0 $0

DONATION SIZE DONATION SIZE

Q U A D R AT I C F U N D I N G 39

Quadratic Funding stimulates en-

gagement from a broader range of
donors living in these communities.

What’s neat about this is that it lets civic leaders

know which projects their constituents care about.

This map shows what goods people care about.

Each dot is a contributor or a project and each line
is a contribution. Using this data, we can give local
civic leaders a high resolution view of their constit-
uent preferences, when before they mostly had low
resolution data.

In analogue democracies civic leaders know what

their constituents want every couple years through
elections. Quadratic Funding campaigns can be a
more frequent (and more high resolution - thou-
sands of data points) signal for democratic leaders.

This data can then be used to create relationships

between civic leaders and the members of their
community doing the most good.
MECHANISM VARIANT 40

PRIVATE 2.1

QUADRATIC
FUNDING

QF + Vote Privately

1. MACI - Minimum Anti Collu-

sion Infrastructure
2. Uses Zero Knowledge Proofs
to hide who you vote for, so
that information can’t be leaked
or used to bribe you.
MECHANISM VARIANT 41

STREAMING 2.2

QUADRATIC
FUNDING

QF + Vote Continuously

1. Uses Superfluid - streaming

money
2. Uses Allo Protocol to allo-
cate capital
3. Pilot Application built by
Geoweb
 MECHANISM 42

RETRO 03

FUNDING

Good at

1. Decision making by experts

2. With benefit of hindsight

Dependencies

A large ecosystem with

enough history to fund retroac-
tively

Not good at

1. Creating opportunities for

everyday people to allocate
capital
2. Funding proactively

BEST AT DECISION
MAKING BY EXPERTS
WITH HINDSIGHT
RETRO FUNDING 43

TL;DR
INVENTED BY VITALIK BUTERIN,
& OPTIMISM, POPULARIZED BY
OPTIMISM

Retroactive Funding is a financial model that rewards

creators and developers of public goods—such
as open-source software, scientific research, and
community projects—after they have demonstrat-
ed a significant positive impact. Instead of funding
these projects upfront, funders assess the outcomes
and benefits generated and then provide grants or
financial rewards based on the achieved results.
This approach incentivizes high-quality work and
impactful projects by ensuring that resources are
allocated to initiatives that have proven their value
and effectiveness.
RETRO FUNDING 44

WHO SHOULD
USE IT?
Retroactive Public Goods Funding should be used by
ecosystems who are looking to establish long term
incentives for contributors.

This funding model rewards impactful work after its

positive effects are demonstrated, encouraging the
development of high-impact public goods over the
long term.

WHO USES IT?

Optimism EasyRetroPGF.xyz

Optimism has been the pio- Gitcoin has partnered with

neer of Retroactive Funding, Optimism to build voting inter-
using it to reward impact with- faces for Retro Funding. Then it
in the Optimism and Ethereum has packed up this experi-
ecosystems. This program has ence up into a product called
distribued over $100m worth easyretropgf.xyz which allows
of rewards in rounds 1-3. anyone to do Optimism-style
Retro Funding. This is being
used by Filecoin, Celo, Libp2p.
DAO Drops

DAO Drops is an experiment in

retroactive funding that direct-
ly empowers Ethereum users
to allocate ecosystem funds.

In Round 1, DAO Drops

distributed $250,000 DAI to
nominees.
RETRO FUNDING 45

PIONEERED BY
OPTIMISM
Here is a summary of Optimism Retro
Funding Rounds 1-3:

Round 1 Round 2 Round 3

(Q4 2021) (Q1 2023) (Fall 2023)

Distributed $1 million among Distributed 10 million OP Allocated 30 million OP

76 nominated projects. 24 tokens among 195 nominated tokens. 145 badgeholders par-
badgeholders were appointed, projects. 90 voting badges ticipated in the voting process,
with 22 participating in the were offered, and 69 badge- with projects self-nominating
voting process. 58 projects holders voted. This round also for funding. There were a total
received funding. saw the launch of the Citizens’ of 1596 applications.
House.
Learnings: The process Learnings: This round high-
highlighted the importance of Learnings: The round under- lighted the limited scalability
means testing and identified scored the need for improved of experts voting on individual
unconscious biases among means testing of applicants projects. The process high-
badgeholders. The round also and emphasized the benefits lighted the need for standard-
stressed the need for balanc- of including a broader range of ized and verifiable impact
ing democratic and techno- contributors. It also explored metrics to reward projects
cratic elements in governance. the impacts of nomination ver- accurately
sus self-nomination processes.
RETRO FUNDING 46

FUNDING
STRATEGY

Who is eligible In Optimism RetroPGF Round 3, the eligibility criteria

to receive funding for receiving funding included:
from the pool?
1. Contributors to the Optimism Ecosystem: This
includes developers, educators, artists, writers,
builders, and evangelists who have made impactful
contributions to the development and adoption of
Optimism.

2. All Contributions Considered: Any contribution

that supports the Optimism ecosystem is eligible,
regardless of when it was made. This means past
contributions are also eligible for funding.

3. Inclusivity: Both VC-funded teams and teams

that have received grants from the Optimism Token
House are eligible for retro funding.
RETRO FUNDING 47

Who is eligible Optimism RetroPGF Round 3, badgeholders were

to allocate? eligible to allocate the funding. All badgeholders
have equal voting power. There were 208 badge-
holders selected through various methods. This
included Round 2 bagdeholders, top 50 recipients
of RetroPGF 2, and 10 badges from the Optimism
Foundation. This diverse selection approach aimed
to ensure a broad representation of knowledgeable
individuals capable of fairly assessing and allocating
the funding.

How are payouts In Optimism RetroPGF Round 3, payouts were calcu-

calculated? lated using a median voting system. Badgeholders
could allocate up to 30 million OP tokens among
the projects, with each badgeholder able to allocate
between 0 and 30 million OP to a single project.
To qualify for payouts, a project needed to receive
17 votes or more. The results were then normalized
to ensure the total allocated amount matched the
round size of 30 million OP.

How is the pool In RetroPGF 3, following KYC completion with the

distributed? Optimism Foundation, projects received their re-
wards via a 90 day stream using Superfluid.

In EasyRetroPGF, the payout strategy is configu-

rable. Funders may send different types of tokens on
any network, and may opt to use streaming protocols
like Superfluid or Hedgey to distribute the tokens.
RETRO FUNDING 48

HOW DOES 1. Project Applications

IT WORK?
Projects self-nominated and/or
submitted their applications.

2. Badgeholder Voting

Badgeholders, who were se-

lected through various meth-
ods, reviewed the applications
and allocated OP tokens to
projects.

3. Calculation of Results
& Distribution of Funds

The results were calculated, a

conflict of interest check was
made, and projects applied to
receive distributed funds.

While each Retroactive Funding

round is a discrete event, Retroactive
Funding rounds can be run periodical-
ly over time in order to reinforce new
behaviors in an ecosystem. The more
predictability, the stronger the assur-
ance that current actions could be
rewarded retroactively in the future.
RETRO FUNDING 49

RetroPGF 3 projects received a power law distribution of

tokens.

RetroPGF3 token distributions

Stats: total = 30.0M OP, n = 501 projects = 45K OP
Received OP

The top 50 projects received

over 100K OP

Num Projects

There was not a strong correlation between the number

of team members and the amount funded.

RetroPGF3 token distributions as a function of team size

Received OP per active developer

OSO: Avg Monthly Active Devs Last 6 Months

RETRO FUNDING 50

YOU DON’T NEED

A TIME MACHINE

UNLOCK THE POWER OF RETROACTIVE FUNDING

Feel free to visit the

website for more
detailed information:
easyretropgf.xyz.
RETRO FUNDING 51
 MECHANISM 52

CONVICTION 04

VOTING

Good at

1. Bottoms-up decision making

2. Addressing voter apathy

Dependencies

Tokenized ecosystem

Not good at

Immediate decision making

BEST AT BOTTOMS-UP
DECISION MAKING
CO NVI CTI O N VOTIN G 53

TL;DR
DESIGNED BY DR. MICHAEL ZARGHAM,
POPULARIZED BY 1HIVE

Conviction Voting is a decision-making process

where participants allocate their voting power to
proposals over time, with the intensity of their sup-
port increasing the longer they back a proposal. This
system allows voters to express the strength of their
preferences and aims to balance minority and major-
ity interests by emphasizing sustained commitment
over fleeting majority opinions.
CO NVI CTI O N VOTIN G 54

WHO SHOULD
USE IT?
Conviction Voting is ideal for decentralized orga-
nizations, cooperatives, and communities where
long-term commitment to decisions is valued. It is
particularly useful in environments where balancing
minority and majority interests is crucial and where
participants need a nuanced way to express the
strength of their preferences over time.

WHO USES IT?

Gardens.fund 1Hive

1Hive recently launched Gar- 1Hive uses conviction voting to

dens v2, a tool that allows any allocate community funds to
DAO to implement Conviction various projects and initiatives.
Voting with their own gover- This system allows members
nance token. to continuously express
their support, with proposals
Gardens is a coordination plat- gaining more funding as they
form that fosters vibrant eco- accumulate sustained backing
systems of shared wealth by from the community.
providing healthy funding
mechanisms to communities
in web3.
CO NVI CTI O N VOTIN G 55

ATTRIBUTES
OF CV
Dynamic Support Intensity over Quantity

Voters can continuously adjust Conviction Voting measures

their support, allowing for the strength of commitment
real-time preference shifts rather than just counting votes,
and more responsive deci- reflecting true preference
sion-making. This is a strong intensity.
hedge against last minute vote
swings.

Enhanced Participation Funding Allocation

Encourages active and It has practical applications,

ongoing engagement from like in 1Hive, where community
participants, fostering a more funds are allocated based
involved and committed on sustained support for
community. proposals.

Minority Protection

It prevents transient majori-

ties from dominating, giving
minority opinions a chance to
gain support over time.
CO NVI CTI O N VOTIN G 56

FUNDING
STRATEGY
Who is eligible In conviction voting systems like the one used by
to receive funding 1Hive, any member of the community can typically
from the pool? propose initiatives to receive funding from the pool.
These proposals are then subject to the voting
process, where community members allocate their
voting power to support proposals. The eligibility
to propose and receive funding often depends on
the specific rules and governance structure of the
organization using conviction voting.

Who is eligible In conviction voting systems any member of the

to allocate? community who holds voting tokens or has voting
rights is eligible to allocate their votes to proposals.
The specific requirements for eligibility to vote, such
as holding a minimum amount of tokens or having
a certain level of participation, depend on the rules
set by the organization implementing the conviction
voting system.

How is Conviction Cal- In conviction voting systems, voting weight is typi-

culated? cally calculated based on the accumulated “convic-
tion” or voting weight that accrues by supporting
a proposal over time. Here are some of the setup
elements affecting this calculation:

1. Proposal Types: conviction voting systems can be

used simply to signal community sentiment, or linked
to funding pools where proposals can request to-
kens in discrete amounts or through token streams.
2. Conviction Growth: a parameter determining the
CO NVI CTI O N VOTIN G 57

rate that a voter’s conviction grows or shrinks over

time. Typically logarithmic and set as a half life.

3. Threshold: Funding proposals must surpass a

conviction threshold to qualify for funding. This
threshold often depends on the total funds available
and the relative support for other proposals.

4. Spending Limit and Minimum Conviction: addi-

tional parameters often used to limit the amount of
funds going to a single proposal, or require a quorum
of community support for proposals to pass.

5. Voting Weight System: separate from the time

weighted element of conviction, various strategies
can also be used to determine total weight, such
as 1 token = 1 vote, quadratic voting, or equal voting
power for all.

The exact formulas and mechanisms can vary, but

the core idea is that sustained and strong support
increases the likelihood and amount of funding a
proposal receives.

How is the pool By nature, conviction voting systems are continuous,

distributed? allowing proposals to be created and considered
over time rather than in epochs or seasonal funding
events.

In this way, conviction voting sacrifices the ability

to make decisions quickly and resolutely, favoring
a more truthful representation of community sen-
timent uncovered over time. Pool distributions can
then happen either continuously or approved one-
by-one as thresholds are met.

In Allo, the funds can be distributed to the accepted

projects in one transaction, or via stream protocols
like Superfluid or drips.
CO NVI CTI O N VOTIN G 58

HOW DOES 1. Setup

IT WORK?
A DAO sets up a treasury of
tokens allocated to Conviction
Voting

Usually this is a DAO that

wants to incentivize and grow
its own ecosystem.

2. Proposal Submission

Community members submit

proposals for funding.

3. Continuous Voting

Members allocate their voting

power to proposals they sup-
port, with conviction growing
over time as votes remain
allocated.

4. Threshold and
Distribution

Once proposals reach the

required conviction threshold,
they receive funding from the
pool, with funds distributed
proportionally based on the
accumulated conviction.
CO NVI CTI O N VOTIN G 59

HOW DOES
CONVICTION GROW
OVER TIME?
Typically, a mathematical formula, such as a weight-
ed average or a decaying logarithmic function, is
used to calculate the conviction, ensuring that
sustained support leads to higher conviction levels.

Conviction Voting emphasizes long-term commit-

ment and sustained support for proposals rather
than short-term, transient voting.

Logarithmic Growth MORE

Curve
voting weight

support added time

LESS
2 4 6 8 10 12 14

MORE support removed

Logarithmic Growth
time
Curve after support
voting weight

removed

LESS
2 4 6 8 10 12 14
 MECHANISM 60

REQUEST FOR 05

PROPOSAL

Skeumorphic

Existed before onchain

primitives

Good at

1. Specific complex scopes

2. Creating competitive bidding
processes

Dependencies

Clear requirements

Not good at

RFPs can be time and resource

intensive

BEST FOR GETTING

VERY SPECIFIC BIDS
FOR PREDEFINED SCOPES
OF WORK
REQUEST FO R PRO POSAL 61

TL;DR

RFPs, or Requests for Proposals, are formal docu-

ments issued by organizations seeking to procure
services, products, or solutions from external ven-
dors.

They outline the project’s requirements, objectives,

and criteria for selection, inviting potential suppliers
to submit detailed proposals. This process allows the
issuing organization to evaluate and compare various
bids to select the most suitable provider based on
factors like cost, expertise, and proposed solutions.
REQUEST FO R PRO POSAL 62

WHO SHOULD
USE IT?
Organizations seeking to procure specialized ser-
vices, products, or solutions that require detailed
proposals and competitive bidding should use RFPs.

RFPs are particularly beneficial when the project

scope is complex, requires specific expertise, or
when the organization needs to evaluate multiple po-
tential suppliers to find the best fit based on criteria
such as cost, quality, and innovation.

WHO USES IT?

Uniswap Grants Optimism

The Uniswap Grants Program This Layer 2 scaling solution

(UGP) issues RFPs to identify uses RFPs for projects that
and fund projects that can align with its vision of promot-
contribute to the growth and ing scalability and user-friendly
development of the Uniswap applications on Ethereum.
ecosystem. These RFPs target
specific areas such as pro-
tocol enhancements, tooling, Ethereum Foundtion
educational content, and
other initiatives that align with Uses RFPs to fund research
Uniswap’s mission to support and development projects that
decentralized finance (DeFi) enhance the Ethereum proto-
and the broader Ethereum col and its ecosystem.
community.
REQUEST FO R PRO POSAL 63

A TYPICAL RFP
PROCESS:
1. Preparation and 2. Drafting the RFP
Planning
Create the RFP document,
including a detailed description
Define the project scope, ob-
of requirements, submission
jectives, budget, and timeline.
guidelines, deadlines, and
Identify the evaluation criteria
evaluation criteria.
and assemble an RFP team.

3. Issuing the RFP 4. Vendor Response

Period
Distribute the RFP to potential
vendors or make it publicly Allow sufficient time for
available through appropriate vendors to prepare and submit
channels. their proposals. Provide a
mechanism for vendors to
ask questions and receive
5. Proposal Evaluation
clarifications.

Review and evaluate the

submitted proposals based on 6. Vendor Selection
the predefined criteria. This
may include scoring, internal Select the vendor(s) that best
discussions, and possibly meet the project requirements
interviews or presentations by and provide the best value.
vendors. Notify all participants of the
decision.

7. Contract Negotiation
and Award 8. Project Execution
and Monitoring
Negotiate contract terms with
the selected vendor(s) and Begin the project according to
finalize the agreement. the agreed terms, monitoring
progress and performance to
ensure compliance with the
contract.
 MECHANISM 64

SELF-CURATED 06

REGISTRIES

Good at

1. Bottoms-up curation
2. Definition of important
domains

Dependencies

Clear domain definitions

proposal submission to get
funding

Not good at

1. Scalability
2. Working in domains
without clear boundaries

BEST AT MAINTAINING
BOTTOMS-UP CURATION
OF CONTRIBUTORS IN
IMPORTANT DOMAINS
S E L F - C U R AT E D R E G I S T R I E S 65

TL;DR
POPULARIZED BY PROTOCOL GUILD

Self-Curated Registries were popularized by Protocol

Guild - a group of Ethereum protocol developers. The
guild is a self curated registry, an onchain list main-
tained by the members of Protocol Guild themselves.
This registry allows members to add, update, or
remove entries without external oversight, ensuring
that the information remains accurate and relevant to
the community’s needs. It empowers participants by
giving them control over the registry’s content, fos-
tering a sense of ownership and responsibility - and
enabling projects built upon Ethereum to directly
contribute to Ethereum developers upon which they
depend.
S E L F - C U R AT E D R E G I S T R I E S 66

WHO SHOULD
USE IT?
A self-curated registry should be used by communi-
ties with clear boundaries. This is particularly benefi-
cial for groups focused on domains where there is no
shared funding source, such as Ethereum protocol
developers.

By allowing members to directly curate the regis-

try, self-curated registries ensure the information
remains accurate, relevant, and reflective of the
community’s evolving needs and contributions. This
makes it easy for parties to fund their shared needs
by just sending tokens to the self curated registry.

WHO USES IT?

Protocol Guild V1

Protocol Guild ran a one year pilot from May ‘22 - May ‘23 to test
their assumptions about the Protocol Guild’s funding mechanism
and how to operate it. As of July 2024, Protocol Guild has re-
ceived 7.9k donations from 600 donors, totalling $88mm in value
at the time of donation The top donors include Ether Fi ($30m),
Taiko ($24m), Layer Zero ($5m) and Arbitrum($2.4m).
S E L F - C U R AT E D R E G I S T R I E S 67

THE PROTOCOL
GUILD PILOT
Protocol Guild was initially conceived as a way to
“boost the incentives around stewarding the core
protocol.” In retrospect, this goal was perhaps not
ambitious enough. A significant portion of core
protocol development is currently being funded by
centralized—and potentially unsustainable—sources,
including the Ethereum Foundation (EF), ConsenSys,
and a few others. To secure the future of Ethereum’s
core development work, the goal was to create a
new equilibrium in core protocol funding, sustained
by the ecosystem built on top of it.

PROTOCOL GUILD’S GOALS:

To serve as a counterbalance To enable a one-stop-shop for
to EF/corporate-funded core funding the entire core proto-
protocol development, or at col (research, implementation,
worst, a funder of last resort. coordination, testing).

To incentivize new contributors To help retain existing core

to join core protocol develop- protocol developers over the
ment. long term.

To normalize setting aside a

portion of ecosystem revenues
to fund core protocol devel-
opment.

Achieving the above in a sustainable and decentral-

ized way will be a years-long process, and require
buy-in from across the Ethereum ecosystem.
Fortunately, it’s the exact kind of challenge that our
community is uniquely suited to rally around!
S E L F - C U R AT E D R E G I S T R I E S 68

FUNDING
STRATEGY

Who is eligible In Protocol Guild, the registry is maintained through

to receive funding a self-curation process by its members, who are
from the pool? typically key contributors to the protocol. Members
coordinate to add, update, or remove entries on a
quarterly basis, ensuring that the registry remains
accurate over time.

Who is eligible Protocol Guild’s eligibility framework includes indi-

to allocate? viduals who have made significant contributions to
the protocol, such as developers, researchers, and
other essential contributors. This ensures that the
registry is curated by those with the most knowl-
edge and investment in the protocol’s success.
S E L F - C U R AT E D R E G I S T R I E S 69

How are payouts Protocol Guild is funded by projects built on Ethe-

calculated? reum, who have a dependency on the continued
development and maintenance of the protocol.

Projects are encouraged to donate their native token

to the Protocol Guild, to give its members access to
a diversified basket of funds representing the value
being created in the ecosystem.

Funds are managed via smart contracts, which en-

sure transparency and automate the disbursement
process. Members receive their allocated funds
according to a linear 4 year vesting schedule.

Each members’ individual allocation is proportional

to the number of months they have been contribut-
ing to eligible projects.

Vesting and time-weighting ensure that the distribu-

tion is fair, efficient, and aligned with the long-term
goals of the protocol.
S E L F - C U R AT E D R E G I S T R I E S 70

HOW DOES 1. Registry Curation

IT WORK?
Objective criteria are set up
for inclusion in the registry.
Proposals can be made to add
or remove members to the
registry.

2. Fundraising

Once a registry is deemed to

have met the attributes of the
desired domain, fundraising
can begin. DAOs are then ap-
proached to fund the registry.
Governance proposals are
submitted.

3. Vesting & Payouts

Funds sent to the contract

will vest over the course of 4
years. Members of the registry
can withdraw vested funds
from the contract.

4. Repeat

Protocol Guild and other Self

Curated Registries are ongoing
processes - registry curation
can happen in parallel with
fundraising and vesting.
S E L F - C U R AT E D R E G I S T R I E S 71

Protocol Guild has several distinctive

attributes that set it apart from other
onchain mechanisms:

Focus on Protocol Funding from Ecosystem

Development Stakeholders

The guild is designed to The guild is typically funded

support and incentivize key by stakeholders within the
contributors to the protocol, ecosystem who have a vested
such as developers, research- interest in the protocol’s
ers, and other critical roles, success, such as apps, L2s or
fostering an ecosystem of DAOs built on Ethereum,, as
continuous improvement and well as philanthropic entities
innovation. focused on funding public
goods.

Contributor-Centric
Vesting Self-Curated Registry

Tokens or rewards are vested Members of Protocol Guild

to contributors over time, maintain and update the reg-
aligning their incentives with istry autonomously, ensuring
the long-term success of the that the most knowledgeable
protocol and encouraging contributors manage the rele-
sustained contributions. vant information.

Decentralized
Governance

Decisions about the registry

and other guild activities
are made collectively by the
members, often through pro-
posals and voting, ensuring a
decentralized and democratic
governance structure.
S E L F - C U R AT E D R E G I S T R I E S 72

Differences from other onchain

mechanisms (cont’d):

Member-Driven Curation Long-Term Incentives

Unlike many other onchain The vesting schedule for

mechanisms that might rely on rewards in Protocol Guild is
external parties or automated designed to promote long-term
systems for updates, Protocol engagement, whereas other
Guild relies on its members mechanisms might provide
for maintaining the registry, immediate or short-term
ensuring that the information is incentives.
curated by those most involved
in the protocol.

Direct Community Targeted Support for

Funding Key Contributors

Protocol Guild only works The guild aims to support indi-

when ecosystem stakeholders viduals who play critical roles
opt-in to fund the mechanism, in the protocol’s development,
as opposed to mechanisms whereas other mechanisms
that might rely on transaction might distribute rewards more
fees or other indirect funding broadly or based on different
sources. criteria

Wen Protocol Guild forks?

“The ecosystem needs to more fully recognize

that cross-L2 infrastructure is a type of Ethereum
infrastructure, alongside L1 clients, dev tools and
programming languages, and should be valorized
and funded as such. We have Protocol Guild; maybe
we need Basic Infrastructure Guild.” - Vitalik Buterin,
2024
S E L F - C U R AT E D R E G I S T R I E S 73
 MECHANISM 74

DELEGATED DOMAIN 07

ALLOCATION

Good at

1. Targeting funding
2. Driving decisions by experts

Dependencies

Clear requirements

Not good at

1. Involving everyday citizens in

decision making
2. May require more setup than
other types of rounds

BEST AT DOMAIN BASED

FUNDING BY EXPERTS
D E L E G AT E D D O M A I N A L L O C AT I O N 75

TL;DR
POPULARIZED BY QUESTBOOK

Dedicated Domain Allocation, as popularized by

Questbook, refers to the practice of assigning
specific funding streams or resources to particular
domains or areas within a project or organization.
This method ensures that resources are consis-
tently directed towards designated areas, facilitat-
ing better management and tracking of funds. By
clearly delineating which resources are allocated to
which domains, DDA aims to enhance transparency,
accountability, and efficiency in the management of
project resources and funding.
D E L E G AT E D D O M A I N A L L O C AT I O N 76

WHO SHOULD
USE IT?
Dedicated Domain Allocation is best suited for orga-
nizations that require precise control and account-
ability over the allocation of resources to different
areas or projects. This approach is particularly
beneficial for large enterprises, government agen-
cies, and non-profit organizations managing complex
operations with diverse funding streams and distinct
project domains. By implementing Dedicated Domain
Allocation, these organizations can enhance trans-
parency, streamline resource management, and
ensure that funds are directed towards priority areas
in alignment with their strategic objectives.

WHO USES IT?

Questbook

Questbook has been the pioneer of DDA. They have used it to

power the Compound Grants Fund of $800K USD (22k COMP),
spread across two quarters, to find and fund a wide variety of
teams building on Compound.

They’ve also used it to run an Arbitrum grants program with a bud-

get of $1M spread across two quarters to fund a wide variety of
teams building apps on top of Arbitrum in a transparent manner.

Each of these programs have budget that is managed by four indi-

viduals called domain allocators - chosen from the community and
by the community. These domain allocators manage grants for a
domain. These domains are strategic areas of focus for which the
customer wants to disburse grants.teams building apps on top of
Arbitrum in a transparent manner.
D E L E G AT E D D O M A I N A L L O C AT I O N 77

ATTRIBUTES
OF DDA
These attributes collectively Resource Segregation Transparency
contribute to the effec-
tiveness and success of
Clearly delineates and segre- Enhances transparency by
dedicated domain allocation
gates resources for specific making resource allocation
strategies.
domains or areas. visible and accountable.

Efficiency Accountability

Streamlines resource manage- Facilitates accountability as

ment processes by allocating resources are allocated based
resources directly to designat- on predefined criteria and
ed domains. objectives.

Flexibility Focus

Provides flexibility to adjust Enables focused investment

resource allocation according and attention on particular
to changing needs within each areas or projects within an
domain. organization.

Optimization Risk Mitigation

Supports optimization of Helps mitigate risks by ensur-

resource utilization by aligning ing resources are allocated
allocations with domain-specif- strategically and monitored
ic goals. effectively.

Performance Evaluation Collabortion

Facilitates performance evalu- Promotes collaboration and

ation and impact assessment coordination within and across
within each domain. domains to achieve common
goals.
D E L E G AT E D D O M A I N A L L O C AT I O N 78

FUNDING
STRATEGY

Who is eligible Eligibility often hinges on demonstrating how the

to receive funding proposed activities will contribute to the advance-
from the pool? ment of domain-specific objectives, address identi-
fied needs or challenges, and align with the overar-
ching mission of the organization or project.

Who is eligible Eligibility to allocate funding is often based on

to allocate? factors such as expertise in the domain, knowledge
of project priorities, and accountability for ensuring
effective resource utilization.

These individuals are entrusted with making in-

formed decisions about how to distribute resources
within the allocated domain, aligning allocations with
strategic objectives, and maximizing the impact of
the funding to achieve desired outcomes.
D E L E G AT E D D O M A I N A L L O C AT I O N 79

How are payouts In Dedicated Domain Allocation, payouts are typical-

calculated? ly calculated based on predetermined criteria and
guidelines established for each domain.

Each domain can use a different capital allocation

strategy. Typically, decision-makers responsible for
allocating funds assess funding requests submitted
by eligible entities within the domain, taking into
account the alignment of proposed projects with
domain objectives, available resources, and overall
strategic priorities.

Payouts are then determined through a systematic

evaluation process that aims to ensure equitable
distribution of resources while maximizing the effec-
tiveness and efficiency of funding allocation within
the designated domain.

How is the pool The pool may be distributed at the end of each DDA
distributed? rouind, via a normal ERC20 txn on an L2.

In Allo DDA build (coming soon), the funds can be

distributed it to the accepted projects in one trans-
action, or via stream protocols like Superfluid
or drips.
D E L E G AT E D D O M A I N A L L O C AT I O N 80

START AT THE
BEGINNING
When contemplating a dedicated domain allocation
round, it’s crucial to begin by clearly defining the do-
mains and their objectives, ensuring they align with
the organization’s overarching goals. Understanding
the specific needs and priorities within each domain
will inform resource allocation decisions and facili-
tate targeted investments.

Next, establish transparent and legible processes

for soliciting and evaluating funding requests. This
involves developing clear guidelines for proposal
submission, outlining evaluation criteria, and estab-
lishing decision-making mechanisms that involve
stakeholders from relevant domains. By fostering in-
clusivity and accountability in the allocation process,
organizations can ensure that resources are distrib-
uted effectively and in accordance with domain-spe-
cific objectives.

Finally, prioritize communication and collaboration

throughout the allocation round to foster engage-
ment and buy-in from stakeholders. Regularly com-
municate updates on the allocation process, solicit
feedback from stakeholders, and provide opportuni-
ties for input to enhance transparency and trust. By
actively involving stakeholders in the decision-mak-
ing process and maintaining open lines of commu-
nication, organizations can maximize the success of
their dedicated domain allocation round and drive
meaningful impact within targeted areas.
D E L E G AT E D D O M A I N A L L O C AT I O N 81

& GO STEP Needs Assessment

BY STEP
Evaluate the resource
requirements and priorities
within each domain.

Funding Request
Submission

Entities eligible for funding

submit proposals outlining
their projects or initiatives
aligned with domain objec-
tives.

Review and Allocation

Decision-makers assess
funding requests, considering
alignment with domain goals,
available resources, and
impact potential, and allocate
funds accordingly.

Monitoring and
Evaluation

Track the progress and

outcomes of funded projects,
ensuring accountability and
effectiveness in achieving
domain-specific objectives.
 MECHANISM 82

GIFT 08

CIRCLES

Good at

1. Decentralized recognition
2. Community engagement
3. Transparency

Dependencies

Tokenized ecosystem

Not good at

1. Objective evaluation
2. Preventing bias
3. Scalability

GOOD AT FACILITATING
BOTTOMS-UP COMPENSATION/
TRUST NETWORKS
GIFT CIRCLES 83

TL;DR
POPULARIZED BY CHARLES EISENSTEIN
& COORDINAPE

A gift circle, as popularized on Coordinape, is a

decentralized, community-driven process where
members of a team or organization allocate virtual
tokens, known as GIVE, to recognize and reward
each other’s contributions. Participants receive a
set amount of GIVE tokens to distribute among their
peers based on perceived value and impact. This
method fosters collaboration and appreciation within
the community, ensuring that rewards are aligned
with collective insights and efforts.
GIFT CIRCLES 84

WHO SHOULD
USE IT?
Gift Circles are best suited for decentralized organi-
zations, collaborative teams, and communities that
value peer recognition and collective decision-mak-
ing.

They are particularly effective in environments

where contributions are diverse and not easily quan-
tified by traditional metrics. Teams in open-source
projects, DAOs, and cooperative groups can benefit
from gift circles to foster a sense of appreciation,
enhance engagement, and align rewards with com-
munity values.

WHO USES IT?

Coordinape ecosystem

Coordinape is a decentralized platform designed to facilitate

peer-to-peer recognition and reward distribution within commu-
nities, particularly in DAOs. It leverages a system where members
allocate virtual tokens, known as GIVE, to each other based on
perceived contributions and value added. This process, known as
a gift circle, promotes a more bottoms-up and transparent method
of acknowledging efforts and distributing rewards, reflecting the
collective insights and values of the community.

By utilizing Coordinape, organizations can enhance collaboration

and engagement, ensuring that rewards are aligned with the
actual contributions recognized by peers rather than top-down
management. The platform’s decentralized nature helps fosters a
sense of community and mutual appreciation, making it partic-
ularly suited for collaborative environments and projects where
traditional hierarchical reward systems might fall short.
GIFT CIRCLES 85

ATTRIBUTES
OF GIFT CIRCLES
Decentralized Peer-to-Peer Recognition

Contributions are recognized Members allocate virtual

and rewarded by peers rather tokens to each other based on
than centralized management. perceived value.

Transparent Flexible

The process is open, allowing Adaptable to various types of

everyone to see how rewards contributions and efforts.
are distributed.

Engaging Community-Driven

Encourages active participa- Reflects the collective values

tion and appreciation among and insights of the community.
community members.

Incentive Alignment Bias-Prone

Rewards are aligned with the Can be susceptible to favorit-

community’s understanding ism or popularity contests.
of value.

Scalability Challenges Inconsistent Evaluations

May become less effective in Variability in how different

larger organizations. members perceive contribu-
tions.
GIFT CIRCLES 86

FUNDING
STRATEGY

Who is eligible In gift circles, all participating members of the com-

to receive funding munity or organization are eligible to receive funding
from the pool? from the pool. Each member is typically allocated a
set amount of virtual tokens, which they can distrib-
ute to their peers based on perceived contributions
and value. This ensures that anyone who actively
contributes to the community has the opportunity to
be recognized and rewarded by their peers.

Who is eligible In gift circles, all participating members of the

to allocate? community or organization are eligible to allocate
virtual tokens. Each member is given a set amount
of tokens, which they can distribute to their peers
based on their perceived contributions and impact.
This peer-to-peer allocation process ensures that
recognition and rewards are distributed according
to the collective judgment of the community rather
than a centralized authority.
GIFT CIRCLES 87

How are payouts In gift circles, payouts are calculated based on the
calculated? virtual tokens allocated by participants to their
peers. Each member distributes a set amount of
tokens to others based on their perceived contribu-
tions. The total amount of tokens received by each
participant determines their share of the funding
pool. The more tokens a member receives from their
peers, the larger their payout from the pool, ensuring
that rewards are proportional to the community’s
recognition of their efforts.

How is the pool Typically, DAOs use their own tokens to reward
distributed? contributors to a gift circle. These tokens can be sent
out in an ERC20 transfer.

In Allo Gift Circles (coming soon), the funds can

be distributed it to the accepted projects in one
transaction, or via stream protocols like Superfluid or
drips.
GIFT CIRCLES 88

HOW DOES Preparation

IT WORK?
Before the ceremony begins,
participants are informed
about the process, rules, and
timeline. They are given a set
amount of virtual tokens to
allocate.

Funding Request
Submission

During the ceremony, each

participant distributes their
tokens to peers whom they
believe have made valuable
contributions.

Review and Allocation

During the ceremony, each

participant distributes their
tokens to peers whom they
believe have made valuable
contributions.

Conclusion

The ceremony concludes after

a set period, and the final token
distributions are recorded.

Once the ceremony is over,

the tokens each participant
received are tallied, and the
payouts are calculated and
distributed accordingly.
GIFT CIRCLES 89

After gift circles, participants often receive various

types of feedback, which can facilitate meaningful con-
versations and cultural changes within the community.
Here are some key aspects:

Types of Feedback: Qualitative Feedback Quantitative Feedback

Comments and notes from Participants see how many

peers explain why they tokens they received, providing
allocated tokens to specific a clear numerical represen-
individuals, offering insights tation of their contributions’
into what contributions were perceived value.
most appreciated.

Comparative Feedback

Participants can see how their

token allocation compares to
others, helping them under-
stand their standing within the
community.

Facilitated Appreciation and Transparency

Conversations and Recognition
Cultural Changes: The open nature of token dis-
Regular feedback fosters a tribution and comments pro-
culture of appreciation, where motes transparency, making it
members feel valued for their clear why certain contributions
contributions. are valued.
GIFT CIRCLES 90

Collaboration Constructive Criticism

Understanding what contribu- Qualitative feedback can high-

tions are most valued can lead light areas for improvement,
to more effective collaboration encouraging personal and
and alignment on goals. professional growth.

Open Dialogue

The feedback process can

open lines of communication,
allowing for discussions about
roles, responsibilities, and
expectations.

Addressing Tensions: Community Cohesion Conflict Resolution

By addressing and resolving The transparency and open

tensions openly, the communi- feedback can help bring under-
ty can become more cohesive lying tensions to the surface,
and supportive, fostering a allowing for constructive
healthier working environment. conflict resolution.

Mutual Understanding

Through feedback and

dialogue, participants can
gain a better understanding
of each other’s perspectives
and contributions, reducing
misunderstandings.

Overall, the feedback from gift circles can significantly

impact the community’s culture, encouraging recognition,
transparency, and open communication while addressing
and resolving tensions constructively.
GIFT CIRCLES 91
 MECHANISM 92

EVOLUTIONARY 09

GRANTS
GAMES

Good at

1. Pluralistic design
2. Capture resistance

Dependencies

Grants SubDAOs

Not good at

Low Turnout

BEST FOR CONTINUALLY

IMPROVING CAPITAL
ALLOCATION
E VO LUTI O N A RY G R A NTS GA M ES 93

TL;DR
INVENTED BY DAO MASONS

Grant Ships is an “evolutionary grants game” where

subDAOs (Grant Ships) compete to effectively
distribute funds within any ecosystem. The process
begins with electing and funding Grant Ships and
a game facilitator team. Each round, Grant Ships
receive capital, evaluate applications, and distribute
funds. They report their activities, which the eco-
system community then ranks through a weighted
token vote. Successful Grant Ships get more funding
in subsequent rounds, while underperforming ones
may be replaced. This system emphasizes pluralism,
accountability, and adaptive improvement.
E VO LUTI O N A RY G R A NTS GA M ES 94

WHO SHOULD
USE IT?
The customer is an ecosystem such as a DAO or
large grants program that can recruit and field mul-
tiple such Ships. It is a useful tool for compressing
governance overhead and fractalizing funding from
large sources

Grant Ships is ideal for subDAOs within an ecosys-

tem aiming to receive and distribute funds for eco-
system projects. It suits teams seeking to prove their
efficiency in managing and allocating resources, as
well as communities interested in fostering pluralism,
accountability, and adaptive improvement through a
competitive and evolutionary grants mechanism.

BEST WHEN COMBINED WITH

OTHER MECHANISMS...

Meta Grants Framework

Evolutionary Grants Games like Grant Ships are less of a grant

giving or capital allocation framework, and more of a Meta grant
framework. Instead of designing a grants program, Grant Ships
allows many grants programs to co-exist and compete for funding
within the same ecosystem.
E VO LUTI O N A RY G R A NTS GA M ES 95

ATTRIBUTES
Accountability Pluralism

Grant Ships report their Multiple subDAOs participate

activities and are ranked by in the ecosystem.
the community.

Adaptive Competitive
Improvement Distribution

Successful Grant Ships receive Grant Ships compete to dis-

more funding in future rounds. tribute funds effectively.

Community Enhanced UX
Involvement
Improved user experience with
The community votes to rank aligned data sources.
the performance of Grant
Ships.

Increased Capture Better Record-Keeping

Resistance
Improved data handling and
Funds can only be withdrawn storage for better reporting.
by specific roles to one
address.
E VO LUTI O N A RY G R A NTS GA M ES 96

ROLES AND
MAJOR ACTIONS

GAME FACILITATORS GRANT SHIP(S) RECIPIENTS

Create Funding
Round

Register / Apply

Approve Reject

Create Ship

Allocate

Distribute

Start Funding Round Register / Apply

Approve Reject

Declare Milestones

Accept Milestones

Allocate Funds
Submit Milestones
Distribute Milestone Payment
Stop Funding Round
E VO LUTI O N A RY G R A NTS GA M ES 97

STEP BY 1. Create Funding

Round

STEP Then Grant Ships (grant

SubDAOs) are invited to apply.

2. Allocate

Individual Grant Ships will

compete to allocate capital
against each other.

3. Reporting

Grant Ships report their

activities.

4. Ranking

The community ranks Grant

Ships through a weighted
token vote, influencing future
funding allocations.

3-SIDED MARKETPLACE

Ecosystems
NETWORK UTILITY

Outcomes $$$$

Grant
Ships

Recipients Ships

$$$$

INTEGRATIONS
 MECHANISM 98

ASSURANCE 10

CONTRACTS

Good at

Funding projects that need to

be kickstarted

Dependencies

Clear goals

Not good at

1. Low engagement fundraises

2. Projects that require ongo-
ing funding

BEST AT KICKSTARTING
PROJECTS
ASSURAN CE CO NTRACTS 99

TL;DR
INVENTED BY GORDON TULLOCK

An Assurance Contract is where people agree to

contribute money to a project, but only if enough
others also commit to funding it. If the project
meets its funding goal, everyone pays their pledged
amount, and the project goes ahead. If the goal isn’t
met, the project is canceled, and no one has to pay.
This way, contributors are assured that their money
will only be used if there are sufficient funds to com-
plete the project.
 MECHANISM VARIANT 100

DOMINANT 11

ASSURANCE
CONTRACTS

Good at

Funding projects that need

to be kickstarted and with
clear leadership and aligned
incentives

Dependencies

Clear goals and charismatic

leader

Not good at

1. Low engagement fundraises

BEST AT KICKSTARTING 2. Projects that require ongo-
PROJECTS ing funding
(D O MINANT) ASSURAN CE CO NTRACTS 101

TL;DR
INVENTED BY ALEX TABBARROK

A Dominant Assurance Contract is a variant of

an assurance contract with additional incentives.
People pledge money with the promise that if the
project doesn’t get enough funds to proceed, they
will get their money back, plus a bonus. This bonus
comes from the project organizer and serves as an
extra incentive to encourage people to contribute,
making it a smart choice to pledge money regardless
of what others do.
(D O MINANT) ASSURAN CE CO NTRACTS 102

WHO SHOULD
USE IT?
Assurance Contracts and Dominant Assurance
Contracts should be used by project organizers
and fundraisers who are seeking to overcome the
free-rider problem and ensure sufficient participation
in funding public goods or collective projects. They
are particularly useful for crowdfunding campaigns,
community initiatives, and other collective endeav-
ors where reaching a funding threshold is critical for
project viability. By offering a financial incentive to
contributors if the funding goal isn’t met, organizers
can significantly increase the likelihood of achieving
the required funding.

WHO USES IT?

Public Radio and Kickstarter Environmental
Television Campaigns
Kickstarter operates similarly
Assurance Contracts are often to an assurance contract. On In 1999, the Save the
used in fundraising campaigns Kickstarter, project creators set Redwoods League used an
for public radio and television. a funding goal and a dead- assurance contract to secure
Stations pledge to provide line. People pledge money to the purchase of the Headwa-
programming if they reach a support the project, but their ters Forest in California. The
certain funding threshold. contributions are only collect- campaign required raising a
ed if the total pledges meet or significant amount of money
exceed the funding goal by the from donors, which was only
deadline. If the goal is not met, collected once the target
no money is collected, and amount was reached.
backers are not charged.
(D O MINANT) ASSURAN CE CO NTRACTS 103

HOW DOES
IT WORK?
Proposal

A project proposer outlines a

public good or project and sets
a funding goal.

Pledging

Individuals pledge contribu-

tions towards the project,
contingent on the total pledges
meeting the funding goal.

Assurance Premium

An assurance premium is
promised to contributors if
the funding goal is not met,
incentivizing participation.

Funding Goal Met Funding Goal Not Met

If the total pledges meet or If the funding goal is not

exceed the funding goal, the reached, the pledged funds
funds are collected and given are returned to the contribu-
to the project proposer. tors along with the assurance
premium.
(D O MINANT) ASSURAN CE CO NTRACTS 104

FUNDING
STRATEGY

Who is eligible In a Dominant Assurance Contract, the project

to receive funding proposer(s) are eligible to receive funding from the
from the pool? pool if the contract’s conditions, such as reaching a
sufficient number of pledged contributions, are met.
If these conditions are not met, the contributors are
refunded their money, and they may also receive an
assurance premium as an incentive for their initial
pledge.

Who is eligible In a Dominant Assurance Contract, the eligibility

to allocate? to allocate typically lies with the contributors who
pledge funds to the project. These contributors
decide whether to pledge their money, effectively
allocating funds toward the project if the funding
goal is reached. If enough pledges are made to meet
the contract’s conditions, the project receives the
funding; otherwise, the funds are refunded to the
contributors, along with any assurance premium.
(D O MINANT) ASSURAN CE CO NTRACTS 105

How are payouts In dominant assurance contracts, payouts are cal-

calculated? culated based on whether the funding goal is met.
If the required amount of contributions is pledged,
the project proposer receives the pledged funds
to carry out the project. If the goal is not met, the
pledged funds are returned to the contributors, often
with an additional assurance premium paid to them
as an incentive for their participation. The premium
compensates contributors for the risk they took in
pledging to a potentially unfunded project.

How is the pool In dominant assurance contracts, the pool is distrib-

distributed? uted based on the project’s funding outcome. If the
funding goal is met, the entire pool of pledged contri-
butions is given to the project proposer to carry out
the project. If the funding goal is not met, the pool is
returned to the contributors, with each contributor
receiving their pledged amount plus an assurance
premium. This premium serves as an incentive for
their participation, compensating them for the risk
they took in pledging to the project.

The funds can be sent as an ETH or ERC20 txn. In

Allo, the funds can be distributed it to the accepted
projects in one transaction, or via stream protocols
like Superfluid or drips.
(D O MINANT) ASSURAN CE CO NTRACTS 106

THE GAME
THEORY
A Dominant Assurance Contract is a mechanism in
game theory designed to overcome the free-rider
problem often encountered in the provision of public
goods. In a traditional assurance contract, individu-
als pledge to contribute to a project only if enough
others do the same, ensuring that the project will
only proceed if it is sufficiently funded. However, this
can still lead to suboptimal outcomes if individuals
choose to wait for others to contribute first, hoping
to free-ride on others’ contributions.

To address this, the Dominant Assurance Contract

introduces an additional incentive structure. The
organizer promises to compensate contributors if
the project fails to reach its funding goal, typically by
offering a bonus or refund that exceeds their initial
contribution. This turns the decision to contribute
into a dominant strategy, meaning that contributing
is the best option regardless of what others do. Even
if the project does not go ahead, contributors are
better off than if they had not contributed, due to the
compensation offered.

By aligning individual incentives with the collective

goal, dominant assurance contracts ensure higher
participation rates. Participants are motivated to
contribute because they are guaranteed to benefit
either from the successful completion of the project
or from the compensation if the project fails. This
mechanism effectively solves the coordination prob-
lem and leads to the successful provision of public
goods that might otherwise be underfunded.
(D O MINANT) ASSURAN CE CO NTRACTS 107

AN ASSURANCE GAME

AGENT I / OTHERS DO NOT CONTRIBUTE CONTRIBUTE

Do Not Contribute (0,0) (0,0)

Contribute (0,0) (900,900)

A DOMINANT ASSURANCE CONTRACT

COLUMN PLAYER DO NOT CONTRIBUTE CONTRIBUTE

Do Not Contribute (0,0) (0, Bonus)

Contribute (Bonus, 0) (900,900)

 MECHANISM 108

SOCIAL MEDIA BASED 12

CAPITAL ALLOCATION

Good at

Leveraging torrents of atten-

tion social media provides

Dependencies

Social Graph

GOOD AT BEING Not good at

WHERE THE FLOW OF
ATTENTION IS Funding non-visible things
WEB3 SOCIAL MEDIA 109

TL;DR

What kind of onchain coordination would you be

able to create if you had an onchain social graph and
distribution to tens of thousands of active users?

In 2024, people worldwide spend an average of

approximately 2 hours and 23 minutes per day on
social media. The design space of web3 social media
is exciting because there are lots of opportunities to
leverage open social graphs and the attention that
people spend on social media. What will we design
now that we can program our values into social
media?
WEB3 SOCIAL MEDIA 110

WHO SHOULD
USE IT?
Software developers who want distribution into ac-
tive social media communities or need a social graph
can leverage web3 social networks to build their
killer onchain coordination networks.

WHO USES IT?

Farcaster Frames Quadratic Lenster

Farcaster Frames are inter- In the summer of 2023, we

active elements embedded built microtips with Quadratic
within Farcaster posts, allow- Funding matching directly into
ing users to create and engage Lenster. The pilot round which
with dynamic content such as allowed for QF tips on top of
polls, live feeds, and interactive posts about #ethcc received
galleries. As of mid 2024, there 581 contributions from 181
are over 100 applications built unique contributors and allo-
using Farcaster Frames. cated $14.9k (18.9k wMATIC).

IDriss Twitter Plugin Rounds.wtf

During GG18, IDriss released a Rounds.wtf is an experiment in

browser extension that allowed doing capital allocation in Far-
users to contribute to Gitcoin caster channels. Using rounds.
Grants directly on Twitter. wtf, channel participants
can stimulate activity in their
By replacing likes with micro- channel by providing tokenized
tips (augmented by Quadratic incentives. And participants
Funding matches), creators are can tip creators of posts.
now earning a living based on
the public goods they create.
WEB3 SOCIAL MEDIA 111

A social graph is a digital represen-

tation of the relationships and inter-
actions between individuals within a
social network. It maps out the con-
nections between people, such as
friendships, family ties, professional
relationships, and other social inter-
actions.

This graph helps social media platforms and other

online services understand user behavior, suggest
connections, and provide personalized content.
Essentially, it visualizes how users are linked to each
other, enabling better insights into social dynamics
and network structures.
WEB3 SOCIAL MEDIA 112

SOCIAL TRUST
--> VALUE
CREATION
Using Social Graphs, anyone can build advanced
capital allocation networks that significantly enhance
funding processes and investment efficiency. One
possible example is a decentralized venture network
that leverages social graphs to map relationships
between entrepreneurs, startups, and investors.
This network could facilitate precise matchmaking,
ensuring that capital is directed to startups with the
highest potential based on trust and previous suc-
cesses within the network. It would streamline the
investment process by enabling investors to identify
promising ventures through trusted connections and
shared interests.

Another innovative application is peer-to-peer

lending platforms that utilize social graphs to create
trust-based lending networks. These platforms would
allow individuals to lend money to peers within their
social network or extended community, reducing de-
fault risks and fostering a sense of community-based
financial support. Additionally, social graphs can en-
hance crowdfunding efforts by identifying potential
backers within a project’s social network, increasing
engagement and funding success rates.

In summary, these networks leverage the power

of social connections and trust to optimize capital
distribution, improve funding outcomes, and promote
collaborative financial ecosystems.
WEB3 SOCIAL MEDIA 113
 MECHANISM 114

DIRECT - TO - CONTRACT 13

Good at

1. Incentivizing growth
2. Definition of important
domains

Dependencies

1. Clear specifications of what

to incentivize
2. Onchain data about import-
ant events.

Not good at

Manipulation of inceitives

GOOD AT PROVIDING
VERY MODULAR INCENTIVES
TO EVM EVENTS
D IRECT TO CO NTRACT IN CENTIVES 115

TL;DR
POPULARIZED BY BOOST
(FORMERLY RABBITHOLE)

Direct-to-Contract rewards are incentives that are

automatically distributed to users who complete
specific tasks or achievements onchain.

These rewards are sent directly to users’ smart

contract addresses, ensuring a decentralized and
transparent distribution process. This mechanism
encourages participation and engagement by pro-
viding immediate and verifiable compensation for
contributions and accomplishments.
D IRECT TO CO NTRACT IN CENTIVES 116

WHO SHOULD
USE IT?
Communities who want to incentivize certain activity
within their ecosystems.

Service Provider Network-Wide

Discovery Campaigns

Direct-to-Contract Incentives Challenges represent some of

are open access. So SPs can the most interesting gamifica-
independently and concurrent- tion campaigns in incentives
ly test strategies at low cost, DTC infrastructure allows chal-
proving viability in the system lenges to take place across
and disrupting competitors. dozens of projects.

Standardized Data Modularity

Structurally consistent When built on scalable

infrastructure means incentive infrastructure, this degree
data is standardized across of modularity creates a new
each action type. This allows design space and a playground
easy comparison, streamlined for innovation in network-level
analysis, and accessible public incentives.
data.

One to Many
Incentives

Incentives can be created for

strategic pairs (ETH/stETH),
validated across 1 of X Dexes
on the network.
D IRECT TO CO NTRACT IN CENTIVES 117

DIRECT-TO-CONTRACT
INCENTIVES PROGRAMS
Quest Protocol introduces open-source plugins that
establish a network-wide distribution infrastructure.
This infrastructure allows for the scalable distribu-
tion of incentives across an entire ecosystem. As
a result, networks can now strategically implement
objective-based approaches rather than relying on
protocol-based strategies for the first time.

INCENTIVE BUDGET

Complete
Rewards Users Actions

INCENTIVE MARKETPLACE
Incentives Fees
Incentive
Marketplace
Incentive Incentive
Creators FrontEnd

Fees Users
PROTOCOLS

Thanks to @t__norm
for spelling this out
CONTRACTS
for us!
 MECHANISM 118

IMPACT 14

ATTESTATIONS &
CERTIFICATES

Good at

1. Rewarding some types of

value creation
2. Transparency and verifiabili-
ty domains

Dependencies

Accurate data collection and

methodological rigor

Not good at

1. Predicting future impact

2. Addressing all nuances

GOOD AT CREATION OF
MARKETS FOR IMPACT
I M PA C T AT T E S TAT I O N S 119

TL;DR

An Impact Attestation is a formal declaration or

documentation that verifies the positive effects or
outcomes of a specific project, action, or interven-
tion. It often includes quantitative and qualitative
data to support claims of impact, providing evidence
that the initiative has achieved its intended goals
and benefited its target audience or community. This
process is crucial for transparency, accountability,
and demonstrating the value of investments in public
goods or social projects.

An Impact Certificate is a transferrable financial

asset that represents a financial stake in the impact.
Impact Certificates are built upon Impact Attesta-
tions, and have the important function that they are
owned by the funders who can claim the impact
they bought, i.e. it is also a signalling device for the
funders (could be used for industry norms, e.g. it
becomes an industry norm to buy XX “impact” every
year, or for proving to comply with some regulation,
esp. regarding nature regeneration, for the prestige,
etc.).
I M PA C T AT T E S TAT I O N S 120

WHO SHOULD
USE IT?
DAOs can benefit from Impact Attestations to
demonstrate the effectiveness of their programs,
ensure accountability to donors and supporters,
and guide strategic decision-making for future
investments. Additionally, Impact Attestations can
be valuable for researchers to assess and compare
the outcomes of different interventions and promote
evidence-based practices.

WHO IS USING IT?

The Gates Foundation Gavi, the vaccine

alliance
The Gates Foundation uses
Impact Attestations to evaluate Gavi uses Impact Attestations
the effectiveness of its global to measure the success of its
health initiatives, ensuring that vaccination programs in low-in-
their funding leads to measur- come countries, verifying that
able improvements in health millions of children have been
outcomes. immunized against deadly
diseases and that vaccination
The Rockefeller coverage rates have increased
significantly.
Foundation

The Rockefeller Foundation

employs Impact Attestations
to validate the success of its
climate resilience projects,
demonstrating the tangible
benefits to communities affect-
ed by climate change.
I M PA C T AT T E S TAT I O N S 121

THE GAME
THEORY
The Strategic Interaction of
Stakeholders

In a game theoretic context, Impact Attestations can

be seen as a strategic tool used by various stake-
holders to align incentives and ensure cooperation.
For funders, such as governments, non-profits, and
philanthropic organizations, the attestation acts as a
verification mechanism to ensure that their resourc-
es are being used effectively. By providing trans-
parent, evidence-based reports on the outcomes
of funded projects, Impact Attestations encourage
recipients to align their actions with the desired
outcomes. This creates a scenario where both
parties benefit: funders achieve their social or policy
objectives, and recipients gain continued support
and credibility.

Signaling and Credibility

Impact Attestations also function as a signaling

mechanism. Organizations that can provide credible
attestations signal to potential funders and stake-
holders their capability and effectiveness. This helps
in differentiating them from less effective organiza-
tions, thereby attracting more funding and support.
For funders, requiring impact attestations from
grantees reduces the information asymmetry, as it
provides a reliable means to assess the true impact
I M PA C T AT T E S TAT I O N S 122

of their investments. This signaling leads to a more

efficient allocation of resources, as funders can iden-
tify and support the most effective initiatives.

Risk Management and Assurance

Funders face the risk of their resources being

misallocated or not achieving the desired impact.
By requiring Impact Attestations, funders shift
some of this risk onto the recipients, who must then
prove the efficacy of their projects. This creates an
environment where recipients are incentivized to
design and implement high-quality interventions
that can withstand rigorous evaluation. Additionally,
Impact Attestations serve as a form of assurance
for funders, providing them with the confidence that
their investments are yielding the intended social
benefits. This assurance can encourage further
investment and long-term partnerships, fostering
a sustainable ecosystem of funding and impactful
social initiatives.

3-SIDED MARKETPLACE

Impact
Funders
NETWORK UTILITY

Impact $$$$
Evaluation

Impact
Marketplace
Impact Impact
Evaluatuators Creators

Impact
Claims

INTEGRATIONS
I M PA C T AT T E S TAT I O N S 123
 MECHANISM 124

UNIVERSAL BASIC 15

INCOME

Good at

Providing financial footing to

citizens of your ecosystem

Dependencies

Ongoing source of funds

Citizen Registry

GOOD AT PROVIDING
A FINANCIAL FOOTING
TO CITIZENS
UNIVERSAL BASIC INCOME 125

TL;DR
INVENTED BY THOMAS PAINE

Universal Basic Income is a social welfare program

where all citizens receive a regular, unconditional
sum of money from the government, regardless of
their income, employment status, or wealth. The
primary goal is to reduce poverty and inequality,
provide financial security, and support economic
stability by ensuring that everyone’s basic needs
are met.
UNIVERSAL BASIC INCOME 126

WHO SHOULD
USE IT?
Universal Basic Income should be considered by
policymakers seeking to address economic inequal-
ity, reduce poverty, and provide a safety net for all
citizens, especially in economies facing job automa-
tion, unemployment, or underemployment. It can also
benefit individuals in precarious employment situa-
tions, ensuring everyone has a basic level of financial
security regardless of their work status.

WHO IS USING IT?

Finland Ontario, Canada
(2017-2018) (2017-2019)

Finland conducted a two-year Ontario launched a pilot pro-

experiment providing 2,000 gram offering a basic income
unemployed individuals with to 4,000 low-income individu-
a monthly payment of €560, als aimed at understanding the
unconditionally, to study the impact on health, education,
effects on employment and and employment.
well-being.

Stockton, California
(2019-2021)

Stockton’s SEED program

provided 125 residents with
$500 per month for two years,
with results showing increased
financial stability, improved
mental health, and higher full-
time employment rates.
UNIVERSAL BASIC INCOME 127

THE GAME
THEORY
In game theory, UBI can be viewed as a mechanism
to shift the Nash equilibrium in a society. Without
UBI, individuals might compete intensely for limited
resources, often leading to suboptimal outcomes
like poverty and inequality. UBI aims to change this
dynamic by ensuring a basic level of resources for
everyone, potentially leading to more cooperative
behaviors and reducing the competition for survival.

In a UBI, the assurance of a basic income reduces

the desperation that drives individuals to accept
poor working conditions or exploitative wages. This
could result in a new equilibrium where employers
must offer better wages and working conditions to
attract and retain employees, as workers are not
forced to take any job out of necessity. This change
can lead to a more balanced labor market, where
power is more evenly distributed between employers
and employees.

UBI can impact social cooperation and trust. In

game theory, trust and cooperation are crucial for
achieving optimal outcomes in repeated interactions.
By providing a financial safety net, UBI may reduce
the economic stress that often drives short-term,
self-interested behaviors, encouraging long-term
cooperative strategies instead. As individuals feel
more secure, they might be more willing to invest
in education, entrepreneurship, and community
engagement, fostering a more inclusive and resilient
economy.
 MECHANISM 128

COOKIE 16

JAR

Good at

1. Reducing governance
overhead
2. Creating bottoms-up lead-
ership

Dependencies

Clear data about membership

in a group.

Not good at

1. Low trust environments

2. High funding amounts

GOOD AT BOTTOMS-UP
FUNDING
COOKIE JAR 129

TL;DR
INVENTED AT RAID GUILD

Cookie Jar is a smart contract that contains a small

amount of tokens in it that anyone in a DAO can
withdraw from. The withdrawer must leave a note
saying what the tokens are going to be used for, and
DAO members can upvote/downvote those notes.

Cookie Jar is an optimistic governance mechanism

that relies on high social trust and low amounts of
funds at stake. It helps DAOs reduce governance
overhead (no one has to vote on Cookie Jar propos-
als) and tracks contributions transparently.
COOKIE JAR 130

WHO SHOULD
USE IT?
People who want to reduce governance overhead
and create more bottoms-up leadership should use
Cookie Jar.

USE CASES

Want to host a party? Went above and beyond

at work last week?
Don’t make a proposal that the
whole DAO has to vote on. Grab some $$$ from the
Just take the money out of the Cookie Jar and treat yourself.
Cookie Jar.

Spend $20 on a saas

tool?

Don’t ask your boss for the

funding. Withdraw it from the
Cookie Jar.
COOKIE JAR 131

WHO IN YOUR
DAO DESERVES
A TREAT?
 MECHANISM 132

COMMUNITY 17

CURRENCIES

Good at

1. Stimulating local economies

2. Creating economic resil-
ience

Dependencies

1. Community buy-in
2. Trust and legitimacy
3. Economic health

Not good at

1. Wide aceptance
2. Scalability

GOOD AT COORDINATING
AROUND LOCAL GOODS
& VALUES
CO MMUNITY CURREN CIES 133

TL;DR
POPULARIZED BY MICHAEL UNTERGUGGENBERGER

Community Currencies are local currencies designed

to complement the national currency within a spe-
cific community or region. They aim to boost local
economic activity, encourage spending within the
community, and strengthen social ties. By circulating
only within a defined area, these currencies help
keep money within the community, support local
businesses, and often promote sustainable and ethi-
cal economic practices.
CO MMUNITY CURREN CIES 134

WHO SHOULD
USE IT?
Community Currencies are best suited for use by
geographically or memetically local communities
seeking to strengthen their local economies, sup-
port small businesses, and foster social cohesion.
They are particularly beneficial in areas looking to
enhance economic resilience, promote sustainable
practices, and encourage community engagement.
Community currencies can be valuable for DAOs
towns, cities, and regions aiming to keep wealth
circulating locally and reduce reliance on national
currencies.

WHO IS USING IT?

Bristol Pound (UK) BerkShares (USA)

Launched in 2012, the Bristol Started in 2006 in the Berk-

Pound is a local currency shires region of Massachu-
designed to support indepen- setts, BerkShares are a local
dent businesses in Bristol. It currency aimed at boosting the
can be used in physical and local economy. Businesses and
digital forms, promoting local residents can use BerkShares
spending and sustainability. to support local enterprises,
with over 400 businesses
Ithaca HOURS (USA) accepting them.

Introduced in 1991 in Ithaca,

New York, Ithaca HOURS is
one of the oldest and largest
local currency systems in the
U.S. One HOUR is valued at ten
dollars, and the currency can
be used for various goods and
services within the community.
CO MMUNITY CURREN CIES 135

THE GAME
THEORY
Game Theory and Community
Currencies: Incentives and
Cooperation

The success of a community currency hinges on the

cooperation and participation of local businesses
and consumers. From a game-theoretic perspective,
individuals are incentivized to use the currency if
they believe others will also participate. This creates
a positive feedback loop where increased usage by
some members encourages others to join, enhancing
the overall utility and acceptance of the currency.
The key to initiating this loop is ensuring enough
initial buy-in and trust in the system’s value, akin to
achieving a critical mass in a coordination game.

Trust and Reciprocity in Community

Currency Systems

Trust and reciprocity are fundamental components in

the game theory of Community Currencies. Partic-
ipants must trust that the currency will be widely
accepted and retain its value over time. This trust
can be modeled as a repeated game, where ongoing
interactions between participants foster mutual trust
and cooperation. In such a setting, businesses and
consumers engage in reciprocal behavior: business-
es accept the currency, expecting customers to use
it, and vice versa. Successful community currencies
CO MMUNITY CURREN CIES 136

often employ strategies to build and maintain this

trust, such as transparent governance, community
involvement in decision-making, and backing the
currency with tangible assets or services.

Overcoming Free-Rider Problems and

Ensuring Stability

Community Currencies face potential free-rider

problems, where some individuals might benefit from
the system without actively participating or contrib-
uting. Establishing clear rules and ensuring consis-
tent enforcement can help maintain the currency’s
integrity and stability, creating a sustainable system
where all participants benefit from mutual coopera-
tion and contribution.

2-SIDED MARKETPLACE

Supply
NETWORK UTILITY

Consumers

Community
Currency
Producers

Demand

INTEGRATIONS
CO MMUNITY CURREN CIES 137
 MECHANISM 138

FUTARCHY 18

Good at

1. Reducing governance
overhead
2. Creating bottoms-up leader-
shipience

Dependencies

1. Onchain data
2. Prediction market

GOOD AT CREATING MARKETS

FOR CAPITAL ALLOCATION
DECISIONS
F U TA R C H Y 139

TL;DR
POPULARIZED BY ROBIN HANSON

Futarchy is a form of governance where policies are

chosen based on prediction markets. In a futarchy,
elected representatives define and measure the
metrics that reflect the well-being of the population.
Then, prediction markets are used to forecast the
impact of proposed policies on these metrics. The
policies predicted to have the best outcomes are im-
plemented. This system aims to combine democratic
values with the informational efficiency of markets to
make better-informed decisions.
F U TA R C H Y 140

WHO SHOULD
USE IT?
Futarchy is best suited for organizations, gov-
ernments, or communities seeking to make evi-
dence-based decisions using the predictive power
of markets. It is particularly useful in contexts where
there is significant uncertainty about the outcomes
of various policies and where stakeholders value
empirical, data-driven approaches to governance.
Futarchy can be effective for entities that prioritize
optimizing for well-defined metrics of well-being
and are open to innovative governance models that
leverage collective intelligence.

PREDICT THIS
Predictive Power Outcome-based
governance
Futarchy relies on prediction
markets, which have been Unlike traditional governance,
shown to outperform tradi- which often relies on elected
tional forecasting methods by officials’ judgment, Futarchy
aggregating diverse informa- bases decisions on measurable
tion from multiple participants outcomes of well-being, deter-
with financial incentives to be mined and agreed upon by the
accurate. electorate.

Founding Story

The concept was proposed

by economist Robin Hanson
in 2000, aiming to combine
democratic values with the ef-
ficiency of market mechanisms
to improve policy decisions.
F U TA R C H Y 141

THE GAME
THEORY
Futarchy leverages the principles of game theory to
enhance decision-making processes by aligning in-
centives with accurate predictions. At its core, Futar-
chy relies on prediction markets, where participants
buy and sell shares based on their expectations of
future outcomes. These markets harness the col-
lective wisdom of participants, who have a financial
stake in predicting correctly, thus incentivizing them
to utilize all available information and expertise. This
setup ensures that the market prices reflect a con-
sensus forecast, which theoretically represents the
best possible prediction of future events, reducing
the likelihood of biases or uninformed decisions.

In Futarchy, the interplay of incentives is crucial. Par-

ticipants are motivated to provide truthful informa-
tion because their financial gains or losses depend
on the accuracy of their predictions. This creates
a self-correcting mechanism where misinformation
or poor predictions are penalized, and accurate,
informed predictions are rewarded. The competitive
nature of prediction markets, a fundamental aspect
of game theory, ensures continuous improvement
of the information available to decision-makers. As
more participants engage in the market, the aggre-
gate knowledge increases, leading to more reliable
and precise forecasts.

Futarchy addresses common issues in traditional

governance, such as information asymmetry and the
principal-agent problem. In traditional systems,
F U TA R C H Y 142

decision-makers might not have access to all rel-

evant information or may act in their self-interest
rather than the public good. In contrast, Futarchy
decentralizes the decision-making process, distribut-
ing it across a diverse group of market participants.
This diffusion of power and reliance on market-driven
predictions helps mitigate the risks associated with
centralized decision-making and the potential for
corruption or misalignment of interests. By using
game theory to structure these markets, Futarchy
aims to create a more efficient, transparent, and
accountable governance system.

3-SIDED MARKETPLACE

Cititzens
NETWORK UTILITY

Incentives Bets

Prediction
Policy
Outcomes
Makers

$$$$

INTEGRATIONS
F U TA R C H Y 143
 MECHANISM 144

ANGEL 19

INVESTMENT

Good at

1. Reducing governance
overhead
2. Creating bottoms-up lead-
ership

Dependencies

For-profit projects to invest in

Not good at

1. Non profit projects

2. Projects without value
capture

GOOD AT STIMULATING
FOR PROFIT
ENTREPRENEURSHIP
AN GEL INVESTMENTS 145

TL;DR

Angel Investments are financial contributions made

by affluent individuals, known as angel investors, to
early-stage startups in exchange for equity owner-
ship, convertible debt, or tokens.

These investments provide crucial funding to start-

ups that may struggle to secure traditional financing.
Angel Investors not only offer capital but often bring
valuable expertise, mentorship, and industry connec-
tions to help startups grow and succeed.
AN GEL INVESTMENTS 146

WHO SHOULD
USE IT?
Angel Investment is ideal for early-stage startups
and entrepreneurs who need capital to launch or
scale their businesses but may not qualify for other
types of loans. These startups often have innova-
tive ideas or products but require financial support
and mentorship to navigate the challenges of early
growth. Angel Investment is particularly beneficial
for companies seeking not only funding but also stra-
tegic guidance and networking opportunities from
experienced investors.

FAMOUS ANGEL
INVESTORS
Esther Dyson Ron Conway

Esther Dyson is a prominent Ron Conway is often referred

angel investor and entrepre- to as the “Godfather of Silicon
neur with investments in start- Valley.” He has invested in
ups such as Flickr, 23andMe, numerous successful startups,
and Evernote. including Google, Facebook,
and Twitter.

Chris Sacca

Chris Sacca is the founder

of Lowercase Capital and is
known for his early invest-
ments in companies like Twit-
ter, Uber, and Instagram.
AN GEL INVESTMENTS 147

NOVEL ANGEL
INVESTMENT
EXPERIMENTS:
Equity Crowdfunding Revenue-Based
Financing
Platforms like SeedInvest and
Republic let startups raise This model offers startups
funds from a large number of funding in exchange for a per-
smaller investors, democra- centage of future revenue, pro-
tizing access to investment viding a non-dilutive alternative
opportunities and allowing to traditional equity financing
non-accredited investors to and aligning investor returns
participate in early-stage with company performance.
funding.

Syndicates Composable Funding

AngelList Syndicates enable Angel Investments can be

lead investors to pool capital composed with other web3
from multiple backers, allowing capital allocation protocols to
smaller investors to partici- provide novel ways of gaining
pate in deals they otherwise exposure to the ecosystem.
couldn’t access while diversify-
ing risk across many investors.

Rolling Funds

Platforms like AngelList Rolling

Funds allow investors to com-
mit smaller amounts of capital
on a quarterly basis, providing
continuous funding to startups
and more flexible entry points
for investors.
 MECHANISM 148

MOLOCH 20

DAO

Good at

Cohering a group of people

around a treasury

Dependencies

Funding sources and engaged

community

Not good at

Minimizing governance

BEST FOR MINIMUM

VIABLE DAOS
M O LO C H DAO 149

TL;DR
INVENTED BY AMEEN SOLEMANI

The original MolochDAO was a decentralized auton-

omous organization (DAO) focused on funding and
advancing Ethereum infrastructure and public goods.
It operates with a minimal governance model to
reduce complexity and streamline decision-making.
Members contribute funds, which are then allocat-
ed to projects through a collective voting process.
MolochDAO aimed to overcome the “tragedy of the
commons” by incentivizing collaborative funding
efforts within the Ethereum community.
M O LO C H DAO 150

WHO SHOULD
USE IT?
MolochDAO forks are ideal for groups focused on
funding and developing public goods, particularly
within the Ethereum ecosystem. They are well-suited
for communities and organizations seeking a stream-
lined, low-governance model to collaboratively
allocate resources to public goods and infrastructure
projects. Members who value the ability to easily exit
the organization and withdraw their contributions if
they disagree with its direction will find the ragequit
feature particularly beneficial.

WHO USES IT?

MolochDAO LAO

The original DAO designed to A MolochDAO-inspired orga-

fund Ethereum infrastructure nization that funds blockchain
projects and public goods, startups, providing a venture
known for its minimal gover- capital-like structure within a
nance and ragequit feature. decentralized framework.

Metacartel

A MolochDAO fork focused

on funding and supporting
decentralized applications
(dApps) and early-stage Ethe-
reum projects.
M O LO C H DAO 151

WHAT IS
RAGEQUIT?
Ragequit is a mechanism in certain DAOs, notably
MolochDAO, that allows members to exit the orga-
nization and withdraw their share of the treasury at
any time. This feature is designed to provide security
and flexibility, enabling members to leave if they dis-
agree with the direction of the DAO or its decisions.
By offering a way out, ragequit helps mitigate risks
and conflicts, ensuring that members can always re-
claim their proportional share of the collective funds.
M O LO C H DAO 152

HOW HAS
MOLOCHDAO
EVOLVED?
MolochDAO V1 MolochDAO V2

1. Launch Date: February 2019 1. Launch Date: March 2020

2. Focus: Funding Ethereum 2. Focus: Enhancing flexibility
2.0 development and inclusivity
3. Key Features: Simple 3. Key Features: Guild bank,
structure, ragequit mechanism, multiple token support, granu-
single token standard. lar permissions, improved vot-
ing and proposal mechanisms,
shares and loot.
MolochDAO V3

1. Launch Date: August 2021

2. Focus: Advanced gover-
nance and modularity
3. Key Features: Plugin archi-
tecture, advanced treasury
management, DAO-to-DAO
interactions, customizable gov-
ernance modules, enhanced
security features.
M O LO C H DAO 153
 MECHANISM 154

STOKVEL 21

Good at

Creating mutual aid

Dependencies

Community buy-in

BEST FOR CREATING

MUTUAL AID
STO KVEL 155

TL;DR
INVENTED IN SOUTH AFRICA

A Stokvel is a type of informal savings club or ro-

tating credit association commonly found in South
Africa. Members of a Stokvel regularly contribute
a set amount of money to a common fund, which is
then distributed to each member in turn. This system
allows individuals to save collectively and access
larger sums of money for significant expenses or
investments. Stokvels also often serve as social and
support networks, fostering a sense of community
and mutual aid among members.
STO KVEL 156

WHO SHOULD
USE IT?
A Stokvel is suitable for individuals who:

Need access Value community

to lump sums and support

Those who might need access Individuals who appreciate

to larger amounts of money the social and mutual support
periodically for significant aspects of pooling resources
expenses like education, home and sharing financial responsi-
improvements, or starting a bilities with others.
business.

Lack access to formal Desire financial

banking services education

Those who may not have People interested in learning

access to traditional banking about money management
or credit facilities and need an within a trusted community
alternative means of saving setting.
and borrowing.

Want to save collectively

People who prefer a disci-

plined approach to saving with
the support of a group.
STO KVEL 157
 MECHANISM 158

BUIDL GUIDL 22

STREAMS

Good at

Optimistic hiring

Dependencies

Benevolent dictator

BEST FOR OPTIMISTIC

HIRING
BUIDL GUIDL STREAMS 159

TL;DR
INVENTED BY AUSTIN GRIFFITH

When Austin Griffith meets a new developer that he

likes, he hires them by streaming them money. The
streams fill up, and the developer can then “pull” the
funds out and leave a note with what they worked
on. Austin can then go back and see who is con-
tributing and decide to top up (or not top up) each
stream across his developer collective, the Buidl
Guidl.

Buidl Guidl Streams allow Austin to give new devs

$$$ without a bunch of hiring process (several
rounds of interviews, ref checks). This form of opti-
mistic funding has attracted dozens of great devel-
opers into the space.
 MECHANISM 160

SOURCECRED 23

Dependencies

Rich contribution graph

Reliable data sources

GOOD AT MEASURING AND

REWARDING CONTRIBUTIONS
IN OSS PROJECTS
SOURCECRED 161

TL;DR
INVENTED BY DANDELION MANÉ

SourceCred is an open-source project that creates a

reputation protocol for open collaboration, enabling
communities to measure and reward contributions.
It uses a graph-based algorithm to track contribu-
tions and interactions within a community, assigning
“cred” to contributors based on the value and impact
of their work. This system aims to fairly recognize
and compensate contributors, fostering more sus-
tainable and equitable open-source ecosystems.
 MECHANISM 162

GNOSIS 24

SAFE

Good at

1. Simplicity
2. Creating new DAOs

BEST FOR SIMPLICITY

& CREATING NEW DAOS
GNOSIS SAFE 163

TL;DR
INVENTED @ GNOSIS

Gnosis Safe is a multi-signature wallet that allows

users to manage digital assets securely and collab-
oratively. It requires a predefined number of signa-
tures to execute transactions, enhancing security by
reducing the risk of unauthorized access.

Gnosis Safe supports various digital assets and

integrates with DeFi applications, providing a robust
solution for individuals, teams, and organizations to
manage their crypto funds safely.

Using Gnosis Guild and Zodiak, DAOs built on Gnosis

can evolve new constraints and abilities over time.
 MECHANISM 164

HONOUR 25

WEIRD MONEY
HONOUR 165

TL;DR
INVENTED BY ANDY THUDHOPE

Honour is a currency that is minted into existence

when needed and is burned when no longer needed.
Each HON doesn’t represent an asset, but instead is
an obligation. Honour implements social credit of a
kind inspired by David Graeber, in a single smart con-
tract which could, if widely adopted, lead to many
communities of use who all price and use a single,
global token differently.
 MECHANISM 166

MUTUAL AID 26

NETWORKS

HIGHEST LINDY
MUTUAL AID NETWORKS 167

TL;DR
Mutual Aid Networks are community-based groups
where members voluntarily support each other
through the exchange of resources, services, and
assistance. These networks operate on principles of
solidarity, cooperation, and reciprocity, often filling
gaps left by traditional social services. Mutual Aid
Networks are as old as humanity, can address a vari-
ety of needs, such as food, healthcare, housing, and
financial support, fostering a sense of community
and collective responsibility among participants.

Mutual Aid Networks are not so much a mechanism

in themself, but a category of mechanisms. They
might include:

1. Social Credit Systems 2. Work Vouchers

A social credit system is a pro- Work vouchers are a form of

gram that assigns individuals currency or credit given in
a score based on their social exchange for labor, which can
behaviors and trustworthiness, be used to obtain goods and
influencing access to services services within a specific eco-
and opportunities. nomic system or community.

3. Rotational Labor 4. Mutual Credit Sys-

System tems

A rotational labor system is A mutual credit system is a

a work arrangement where community-based exchange
employees rotate through network where members trade
different jobs or shifts on a goods and services using a
scheduled basis to ensure a credit system that balances
balanced distribution of tasks accounts to zero, eliminat-
and skills. ing the need for traditional
currency.
 MECHANISM 168

WAQF 27

Good at

Creating sustainable public

goods funding

Proper Management

Proper management, adher-

ence to Islamic legal principles,
and community support for its
ongoing effectiveness

GOOD AT PROVIDING
SUSTAINABLE FUNDING
FOR PUBLIC GOODS
WA Q F 169

TL;DR
INVENTED IN ISLAMIC FINANCE

A Waqf is an Islamic endowment of property or

funds for religious, educational, or charitable purpos-
es, where the assets are held in trust and managed
to benefit the community perpetually. The Waqf
assets cannot be sold or inherited, and the income
generated is used for specific purposes defined by
the founder, such as supporting mosques, schools,
hospitals, or helping the poor. This system ensures
long-term community support and preserves the
donor’s legacy.

Like Endowments, Waqf’s can be based upon yield

(not interest) for more stability. Yield is the returns
from productive assets, whereas interest is an in-
vented monetary phenomenon.
 MECHANISM 170

ZAKAT 28

Good at

Creating sustainable public

goods funding

Proper Management

Proper management, adher-

ence to Islamic legal principles,
and community support for its
ongoing effectiveness

GOOD AT PROVIDING
SUSTAINABLE FUNDING
FOR PUBLIC GOODS
Z A K AT 171

TL;DR
INVENTED IN ISLAMIC FINANCE

Zakat is a form of almsgiving in Islam that requires

Muslims to donate a fixed portion of their accumu-
lated wealth, typically 2.5%, to those in need. It is
mandatory for eligible Muslims and aims to redistrib-
ute wealth, alleviate poverty, and support the welfare
of the community, encompassing various categories
such as the poor, the needy, those in debt, and oth-
ers specified in Islamic law.
 MECHANISM 172

BONDING 29

CURVES

GOOD AT CREATING AUTOMATED,

SCALABLE PRICE DISCOVERY, &
LIQUIDITY MANAGEMENT
FOR TOKENS
BO ND IN G CURVES 173

TL;DR
POPULARIZED BY SIMON DE LA ROUVIERE

A Bonding Curve is a mathematical concept used in

economics and blockchain to describe the relation-
ship between the price and supply of a token or
asset. As more tokens are bought and the supply
increases, the price rises along the curve; converse-
ly, as tokens are sold and the supply decreases, the
price falls. Bonding Curves are often used in decen-
tralized finance (DeFi) to create automated market
makers (AMMs) and to manage the issuance and
redemption of tokens, ensuring liquidity and price
stability based on demand.
 MECHANISM 174

REVNETS 30

Dependencies

Tokenized Treasuries

GOOD AT STIMULATING
FOR-PROFIT
ENTREPRENEURSHIP
REVNETS 175

TL;DR
INVENTED BY JUICEBOX

Revnets are onchain cap table and incentive ma-

chines. With a Revnet, you can bootstrap and sus-
tain your open source project, campaign, business,
scene, or meme. No governance, and no manage-
ment overhead.

Revnet contracts are designed to be safer than

SAFEs, more powerful than SAFTs, and are easy to
use across borders and blockchains. Simple enough
for a group of friends, and powerful enough for high
net-worth, global communities, products, and brands.
 MECHANISM 176

DECENTRALIZED 31

VALIDATORS

Good at

Creating distributed compute

networks

Dependencies

Very well-defined protoocol

BEST FOR CREATING

DISTRIBUTED COMPUTE
NETWORKS
D E C E N T R A L I Z E D VA L I D AT O R S 177

TL;DR
INVENTED BY SATOSHI NAKAMOTO

Bitcoin is a decentralized digital currency that op-

erates on a peer-to-peer network without a central
authority, using blockchain technology to secure
transactions.

Ethereum is a decentralized platform that enables

the creation and execution of smart contracts and
decentralized applications (dApps) using blockchain
technology.

Hivemapper is a decentralized mapping platform that

uses dashcam footage from contributors to build and
maintain up-to-date maps.

Helium is a decentralized wireless network that uses

blockchain technology to incentivize the creation
and maintenance of a global network of hotspots for
IoT devices.

What do each of these have in common? They are

networks of volunteers who run hardware that en-
sures the operation of the network. In exchange for
running the hardware, node operators are rewarded
with cryptocurrency.
 MECHANISM 178

BOUNTIES 32

& HACKATHONS

Dependencies

Well-defined tasks

BEST FOR INCENTIVIZING

ACTION
B O U N T I E S & H A C K AT H O N S 179

TL;DR

Bounties are incentives or rewards offered for

completing specific tasks or challenges, often used
in open-source projects, cybersecurity, and com-
munity-driven initiatives to motivate individuals to
contribute skills, solve problems, or find vulnerabili-
ties. These rewards can be monetary or in the form
of recognition and aim to harness collective effort for
achieving particular goals.

Bounties can be organized into Hackathons, where

participants work intensively over a short period
to solve challenges or complete tasks for rewards.
Hackathons provide a collaborative environment
that encourages innovation and rapid problem-solv-
ing, attracting diverse talent to tackle the bounties,
which can lead to creative solutions and accelerated
project development.
 MECHANISM 180

RANKED CHOICE 33

VOTING

GOOD AT ENSURING
A WINNING PROPOSAL
OR CANDIDATE HAS
BROAD SUPPORT
RANKED CHO I CE VOTIN G 181

TL;DR
INVENTED BY WILLIAM ROBERT WARE

Ranked Choice Voting is an electoral system where

voters rank candidates or proposals in order of
preference. If no candidate wins a majority of first-
choice votes, the candidate with the fewest votes
is eliminated, and their votes are redistributed to
the remaining candidates based on the voters’ next
preferences. This process continues until one candi-
date has a majority, promoting broader support and
reducing the likelihood of strategic voting.
META 182

STACKING
MECHANISMS
S TA C K I N G M E C H A N I S M S 183

WHAT IF THESE
MECHANISMS COULD
FEED INTO EACH
OTHER?
In 2023, tens of millions of $$ flowed through
public goods funding mechanisms.

Two things will change New easy to use products will There will be more funding
come online allowing anyone than ever to PGF.
in 2024 & beyond:
to do PGF.

What if these mechanisms start to interoperate with

each other?

$$$ $ $

Project Project $
RetroPGF
$ $ $
CV Project
Project Project $
RetroPGF
NESTED PUBLIC GOODS FUNDING

$ $
Project
$ $
Project Project
$ $ $
RetroPGF Project
RetroPGF $ $
$ $ Project
QF
$
QF Project
$ Project
$
Project
$
Project
$ $
Project
QF Project
$

Project
S TA C K I N G M E C H A N I S M S 184

This presents many opportunities

ahead:

Lots of bottom-ups A community should decide This will help create pockets
the distribution of PG within its of bottom-up governance that
curation now becomes
own ecosystem. makes top-down decisions
possible
easier, because you can ab-
stract away capital allocation
decisions to subsidiary local
communities.

As more and more A. it diversifies funding sourc- B. as more and more tools
es and mechanisms, helping us come online to make it happen,
communities do this
reach fund the commons in a it could become (1) very easy
more pluralistic way. (2) very powerful to run PGF.

C. As the funding trickles out,

there will be more long tail
public goods funding.

There’s an opportunity to A. build Impact Attestations B. help web3 communities see

through open standards that funding their public goods
(EAS, Hypercerts), creating is a sustainable competitive
an emergent web of trust that advantage. Over time, this will
measures impact throughout grow into an arms race to fund
web3. public goods.

C. build a “web3 grants com- D. get many different types

mon app.” Such an app would of projects flowing tokens
allow people to manage their between them.
grant in one place and push
it to multiple grant programs.
saving time and energy, saving
Read the whole
time and energy in a world
thing @
where there are many grant
programs running concurrently.
S TA C K I N G M E C H A N I S M S 185
META 186

EXPLORING
THE DESIGN
SPACE

WITH MECHANISM
TAXONOMIES
M E C H A N I S M TA X O N O M Y 187

HOW DO WE
CLASSIFY THESE
MECHANISMS?
Taxonomy is the science of naming, describing and
classifying organisms.

How might we arrive at a way of classifying the

mechanisms we’ve discussed in this book? In this
chapter, I will try to cut through the “fog of war” of
the design space and sketch out a path to a taxono-
my of mechanisms.

THE DESIGN SPACE

By reflecting on the growth of the internet empir-
ically, and by reasoning about the a priori parallels
between web1 and web2, we can reason about how
web3 might play out…

The internet of The internet of

information money

- Computers can send infor- - Computers can send value

mation across a computer across a computer network
network
- This radicaly changed any-
- This radicaly changed any- thing in society that relies on
thing in society that relies on value transfer
information
- (banking, insurance, finance,
- (entertainment, media, poli- art, jobs)
tics, social media)
M E C H A N I S M TA X O N O M Y 188

Just as email, IMs, Twitter and Tik Tok, and LLMs

changed how we transfer information, the internet of
money could change how we transfer money. How
we Fund What Matters.

We have Massively Multiplayer Online Role Playing

Games (MMORPGs). Now that we’ve got web3,
will we have Massively Multiplayer Online Funding
Games (MMOFPs)? Can large networks of people
coordinating resources be more powerful than large
corporations/governments/billionaires?

I have an instinct that peer-to-peer funding games

may be the biggest wedge we have to create 21st
century collective action. There is a greenfield
opportunity to explore the design space around
Gitcoin’s mission, to “Fund What Matters.”

FUNDING WHAT MATTERS

Gitcoin’s mission, “Fund What Matters,” is a direc-

tive emphasizing the importance of investing in or
financially supporting causes, projects, or initiatives
that hold significant value or impact. It suggests
prioritizing spending in areas that make a meaningful
difference, whether socially, environmentally, cultur-
ally, or economically.

This phrase often encourages individuals or organi-

zations to think critically about where their money
can have the greatest positive effect. It’s a call to
action for responsible and purpose-driven allocation
of resources, aligning financial decisions with core
values and priorities.
M E C H A N I S M TA X O N O M Y 189

THE MISSION
X THE DESIGN SPACE
By leveraging blockchain technology, the attributes
of it that make it powerful (transparency, corruption
resistance, global, open source, programmable), and
the wave of innovation surrounding the EVM, we
can help evolve how people “Fund What Matters” to
them.

Just as the internet accelerated the flow of infor-

mation, web3 can accelerate the flow of capital. We
can ride this wave to build and scale new funding
experiments.

THE PAST
In 2019, the bear market had just hit, and projects
in the Ethereum ecosystem needed funding. At the
time, the major forces in Eth public goods funding
were the Ethereum Community Fund, the Ethereum
Foundation, and Consensys. The EF/ECF had grants
programs or you could get hired at Consensys.

Gitcoin discovered Quadratic Funding in late 2018

and launched Gitcoin Grants in January 2019. We
were differentiated from the existing players by the
decentralized decision making introduced by Qua-
dratic Funding.

I think the design space kind of looked like this:

1. Technocratic = small group of decision makers.

At the ECF/EF back then, you had to go through a
grantmaking process where a small commitee would
M E C H A N I S M TA X O N O M Y 190

got funding. At Consensys, you had to be hired by

Joe Lubin or his disciples.

2. Democratic = larger more permissionless group of

decision makers. At Gitcoin, anyone can help allocate
the funding due to Quadratic Funding. This scales
because 1000s of projects can get funded at once.

ECF

Early EF Grants Gitcoin

Consensys

TECHNOCRATIC DEMOCRATIC

Of course, this doesn’t tell the full story. If you were

to add a 2nd axis showing the amount of funding
being deployed, the design space would look some-
thing like this:
AMOUNT OF FUNDING

Consensys

Early EF Grants
Gitcoin GR12

Gitcoin GR1
ECF

TECHNOCRATIC DEMOCRATIC
M E C H A N I S M TA X O N O M Y 191

THE PRESENT
Over the course of 2022, more players entered the
space and we began to see the rise of retroactive
public goods funding experiments like Optimism
RetroPGF and very simple but effective mechanisms
like the Protocol Guild’s self-curating registry.

Trying to further map the design

space, adding another 3rd dimension
looks like this:
AMOUNT OF FUNDING

Optimism RetroPGF

Consensys
EF Grants
Gitcoin GR12 retroactive

proactive
ECF Gitcoin GR1

TECHNOCRATIC DEMOCRATIC

If we were to make the 3rd dimension

“simplicity,” then it would kind of look
like this:
AMOUNT OF FUNDING

Protocol Guild
Consensys
EF Grants
Gitcoin GR12 simple

complicated
ECF Gitcoin GR1

TECHNOCRATIC DEMOCRATIC
M E C H A N I S M TA X O N O M Y 192

Optimism & Protocol Guild evolved

the design space forward in import-
ant ways

1. Retroactive Public Goods Funding is based off the

idea that it is easier to fund projects based on the
impact they’ve already had. As opposed to specu-
lating on the impact they might have in the future.
After RetroPGF is established, we can then bet that
projects could receive proactive funding based on
future retroactive rewards.

2. Protocol Guild built a very simple mechanism, a

self-curating registry. This registry allowed projects
to easily contribute to protocol development.

LET’S GET WEIRD

Lets look at what this new design space looks like all
together. If we combine the two 3D cubes, we get a
tesseract (4-dimensional cube) showing us the new
design space.

retroactive

Optimism RetroPGF
proactive Consensys
EF
AMOUNT OF FUNDING

Grants Protocol Guild

ECF ECF
simple
Gitcoin GR12
complicated
Gitcoin GR1

TECHNOCRATIC DEMOCRATIC
M E C H A N I S M TA X O N O M Y 193

Since us humans have evolved to understand 3D

images, this 4D visualization is a bit hard to grok
visually. That said, once you spend some time staring
at it, you will can internalize that we’ve found a way
to conceptualize the entire design space across all 4
dimensions:

1. Technocratic vs democratic
2. Amount of funding
3. Proactive vs retroactive
4. Simple vs complex

This is where things get interesting to me. As people

begin launching projects that are empirically effec-
tive at funding what matters to them (maybe using
the mechanisms in this book), we can start to build
up a multi-dimensional space of what the design
space looks like.

1D DESIGN SPACE

ECF

EF Grants Gitcoin

Consensys

TECHNOCRATIC DEMOCRATIC

2D DESIGN SPACE
AMOUNT OF FUNDING

Consensys

EF Grants Gitcoin GR12

Gitcoin GR1
ECF

TECHNOCRATIC DEMOCRATIC
M E C H A N I S M TA X O N O M Y 194

3D DESIGN SPACE
AMOUNT OF FUNDING

Optimism RetroPGF

Consensys
EF Grants
Gitcoin GR12 retroactive

proactive
ECF Gitcoin GR1

TECHNOCRATIC DEMOCRATIC

4D DESIGN SPACE

retroactive

proactive Optimism RetroPGF

Consensys
EF
AMOUNT OF FUNDING

Grants Protocol Guild

ECF

simple
Gitcoin GR12
complicated
Gitcoin GR1

TECHNOCRATIC DEMOCRATIC

Now we are really starting to cartography the design

space. By creating visualizations of how these
mechanisms relate to each other, and extracting the
criteria that makes them different, we’re starting to
get a visual of the design space! We’ve started to
beat back the fog of war of the possibilities.
M E C H A N I S M TA X O N O M Y 195

What dimensions would we even care to splice the

design space by? And would each dimension justify
the complexity of thinking in higher dimensional
thinking? Since it’s hard to think in higher than 3
dimensions, maybe we’d be better off focusing on
design spaces 3 dimensions or less.

That said, there might be value in exploring what

dimensions to even look at. We can make some
educated guesses here. Here are all of the addition-
al dimensions I think would ever matter within the
design space of “how do you build a mechanism that
helps people fund what matters?”

1. Mature projects vs seed projects - Is the mechanism more for

mature projects or seed stage projects?
2. Age of the mechanism - Was it invented in pre-history, during
the industrial era, early internet, or the onchain internet era?
3. Web2 vs web3 UX - Is the UX usable for web2 natives?
4. Effective or not - Is the mechanism actually effective at what-
ever its goal is (in Gitcoin’s case, funding what matters)? How big
is the TAM?
5. Return expected vs not - Is a return expected as part of the
fundraise? Or not?
6. Virality vs no is virality - a big part of the mechanism? Like for
Quadratic Funding, where people tend to share their grants on
social media.
7. Does it depend on Impact Attestations? Does the mechanism
depend on impact attestations? Do we have a reliable proof-of-
impact?
8. Oracle-limited or not? If the mechanism depends on some
external data source, is it limited by having reliable oracles or not?
Eg if you were trying to fund a project to stop deforestation, what
is the data-trail between the forest and the blockchain?
9. Credibly neutral vs not - Does the mechanism’s constituents
care that its credibly neutral, or does it allow for rent-seeking
intermediaries?
10. Desktop vs mobile - Is the mechanism experience desktop first
(okcupid, match.com), or mobile-first? (like Tinder)
11. Built into social media? Is the mechanism a standalone website,
M E C H A N I S M TA X O N O M Y 196

or built onto a web3 social network like Farcaster/Lens Protocol?

12. Massively multiplayer? Will the mechanism work at scale?
Will it enable Massively Multiplayer Online Funding Games
(MMOFPs)?
13. Are assets fungible or not? Do the primary assets in the mech-
anism resemble fungible things like ERC-20s? Or are they more
based on ERC-721 like assets?
14. Are they stateful or stateless? Ephemeral like a QF round or
persistent like Protocol Guild?
15. Can it be built on top of Allo? This is a germane question for
Gitcoin. Does Allo help make it easier to bring to market?
16. Can it be built on top of Passport? Does the mechanism bene-
fit from sybil resistance? If so, does Passport newly enable it?
17. Where does the coordination breakthrough happen? Through
novel onchain primitives, shared identity/high trust communities,
novel game theory?
18. Single mechanism or multi-mechanism. These mechanism are
composable after all..
19. Is the funding continuous/recurring? Is it based off dependably
economically exothermic funding sources? Does the mechanism
depend on fickle things like people donating? Or does it depend
on continuous sources of funding (like sequencer fees or yield)?
20. There are probably more ....

Which combinations of these criteria have bil-

lion$$$ potential to ‘Fund What Matters’? Where
is the TAM very large now, and what design spaces
have billion $$$ potential next cycle? Which will only
be enabled by new UX breakthroughs (like PWAs,
gasless apps, account abstraction)?

Would we be served well by building/researching

many of these tools internally, or enabling 1000s of
devs to build in these design spaces, on top of Allo?
And perhaps finding (3,3s) with these builders?

Right now Gitcoin Grants Lab is focused on

Grants-centric mechanisms. But there is a roadmap
beyond that, which we call Grants+ and Grants++ for
things that are over the horizon.
M E C H A N I S M TA X O N O M Y 197

IN CLOSING

In this chapter, we reasoned about how the design

space for Funding What Matters has evolved so far.
We attempted to sketch out what a taxonomy of
mechanisms might look like. We then visualized it.

From there, we made some educated guesses about

what other types of experiments for Funding What
Matters may exist in the future. The design space is
vast, and we expect it will be cartographied emer-
gently as it is explored in the coming years.

I hope that articulating these dimensions of self-sim-

ilarity between mechanisms helps orient you into the
rapidly evolving world of onchain capital allocation.

There is still much to do to cartography the design

space, build taxonomies, and build awareness of
these mechansisms. I hope to see members of this
books telegram community step up and help each
other progressively elaborate the design space to-
gether. Maybe this book will become a shelling point
for those efforts :)

This essay was originally

published on the Gitcoin gov
forum. It has been edited and
condensed. Read the original @
META 198

EXPLORING
THE DESIGN
SPACE

LIKE A SLIME MOLD

SLIME MOLD 199
SLIME MOLD 200

SLIME MOLDS
ARE A SOURCE OF
INSPIRATION
Slime molds are a source of inspiration for me
because they are a networked organism. This makes
them a rich source of biomimetic inspiration for how
to design DAOs. Some may even say your DAO is a
slime mold.

Slime molds have a unique and fascinating method

of finding food. They do not have a brain or central
nervous system, but they use a form of spatial mem-
ory and optimized search patterns.

When a slime mold encounters a food source like

bacteria, fungal spores, or decaying organic matter,
it forms a network of tube-like structures, or pseu-
dopodia, to engulf and absorb the nutrients. As it
moves, it leaves behind a trail of extracellular slime.

This slime trail plays a critical role in the organism’s

search for food. It acts as a memory system, allowing
the slime mold to avoid revisiting areas it has already
explored. This efficient search strategy, where it
extends its network towards unexplored areas while
retracting from nutrient-poor or already explored
regions, enables slime molds to find the most direct
routes to food sources and optimize their foraging
efficiency. Remarkably, this simple organism can
solve complex mazes and spatial problems to locate
food, demonstrating a form of intelligence and prob-
lem-solving ability without a brain.
SLIME MOLD 201

HOW DOES THIS

APPLY TO US?
We are economic agents searching for value in a
multidimensional design space with multiple billion
$$$ opportunities to build new crowdfunding mech-
anisms/applications within it.

billion $$ oppy?

billion $$ oppy?

billion $$ oppy?

As we traverse this design space, we can be mindful

of the two modes slime molds have when looking for
resources:

1. Explore - how do we find the resources?

2. Enrich - how do we use the resources when we
find them?
SLIME MOLD 202

1. EXPLORE
How do we find the biggest (ideally billion $$$ +)
opportunities?

Memory - In biology, the slime trail plays a critical

role in the organism’s search for food. It acts as a
memory system, allowing the slime mold to avoid
revisiting areas it has already explored.

Perhaps the lesson for us here could be to learn in

public. What if we created some sort of memory
system wherein we (or anyone else in the regen
space) learns about something new and important,
they publish it. We could all then benefit from each
other’s explorations of the design space. Groups like
regenlearnings.xyz can serve this purpose.

Efficiency - The slime mold’s efficient search strate-

gy, where it extends its network towards unexplored
areas while moving on from from nutrient-poor or
already explored regions, enables slime molds to find
the most direct routes to food sources and optimize
their foraging efficiency.

Perhaps the lesson for us here could be to search

efficiently and in parallel. We should retract from nu-
trient poor regions. We should be lean as we explore
new design spaces. In particular, I think its really
exciting how new Allo Protocol-enabled apps can be
created in a matter of days/weeks.

2. ENRICH
When a slime mold finds food, such as bacteria or
organic particles, it engulfs these particles using a
part of its cell membrane. This process is known as
SLIME MOLD 203

phagocytosis. Essentially, the slime mold surrounds

and encapsulates the food source with its mem-
brane, creating a small internal pocket or vacuole.
Enzymes are then secreted into this vacuole to
break down the food into smaller, absorbable nutri-
ents. These nutrients are absorbed into the slime
mold’s cytoplasm, providing energy and materials
for growth. This method allows the slime mold to
efficiently process a variety of food sources in its
environment.

Takeaways

1. The tactics used in finding 2. Engulf the problem and

resources are completely break it down into composite
different than those used once parts.
they have been found.

3. The resources we invest into

finding/exploiting opportuni-
ties should be relative to how
big the resources we find are.

EXPLORATION SO FAR

The design space we are aware of

so far, as identified by Gitcoin DAO,
includes three resource-rich areas:

QF RetroPGF

TAM of ~ $20m/year - Located TAM of ~ $100m/year - Locat-

in the democratic and sybil-re- ed in the retroactive part of the
sistant part of the design. design space.
SLIME MOLD 204

Direct Grants

TAM of ~$10-100m/year -
Located in the “simple” part of
the design space.

The Grants Labs team is working within those op-

portunities.

Yet, there is a lot of potential in the design space

we’ve not yet explored yet. But the ecosystem is
exploring those areas in parallel to the threads fo-
cused on the known opportunities (QF, Direct Grants,
RetroPGF).

unexplored design space

QF

unexplored design space

unexplored design space

Direct Grants

unexplored design space

This essay was
originally published on RetroPGF
the Gitcoin gov forum.
It has been edited and
condensed. Read the unexplored design space

original @
unexplored design space
SLIME MOLD 205
META 206

EXPLORING
THE DESIGN
SPACE

LIKE A MUSHROOM
MYCOFI 207

DESIGNING
FROM FUNGAL
FOUNDATIONS
In our search for regenerative economic design
patterns, the answers we seek may be hidden right
beneath our feet. Over billions of years of evolution,
mushrooms - and the underground mycelial net-
works to which they belong - have been iterating
design patterns for distributed, autonomous infra-
structures used for intelligent resource distribution
and collective signaling between countless living
organisms worldwide. Decades of study into the
interaction patterns of mycelial networks in natural
ecologies have offered us a glimpse into a coop-
erative underground world where resources flow
dynamically between flora, fauna, and funga to gen-
erate thriving ecosystems. If web3 technology holds
the potential to craft new economic paradigms,
mycelial design patterns may just show us the way
back to a more ecological future.

MYCELIUM = NATURE’S
PUBLIC GOODS
INFRASTRUCTURE

As one of the oldest and largest organisms alive,

mycelium is a grand architect of nature. Fungi were
among the planet’s earliest multicellular
lifeforms, and along with their algae symbiotes,
they terraformed Planet Earth from a ball of cooled
MYCOFI 208

magma into the green paradise we know today.

Mycelia form underground in a structure of net-

worked tubes, which provide the “pipes” for a
large proportion of nutrient distribution within and
between most plants worldwide. From the earliest
days of life on earth, fungi have been breaking rock
and networking through the soil, building a vast and
interconnected mesh across the face of the planet.

Like most well-operating public goods infrastruc-

ture, they remain underground and almost entirely
invisible, even as they serve as a keystone network
of species sustaining life on earth.

MYCOFI IS ECONOMIC
BIOMIMICRY
MyCoFi is a movement to consciously apply lessons
from the mycelial world to cryptoeconomics, and
encourage web3 builders to “think like a mushroom”
about the systems they are designing. Incorporating
nature’s evolutionary design patterns into our econo-
mies could alleviate much of the disharmony we see
between human economies and nature’s ecologies,
gesturing towards a future of economic permacul-
ture. This is also the basic premise of ecological
economics - that we must move away from singular
notions of value and orient our economies to reflect
the interdependent coevolution of multiple forms of
value flows, just as we see in nature.
MYCOFI 209
MYCOFI 210

BLOCKCHAINS
ARE COORDINATIVE
INFRASTRUCTURES
One of the core value propositions of blockchain
technology is based on the use of distributed net-
work architectures to serve as coordination sub-
strates for new forms of organizing. This offers us
a unique opportunity to rethink many of the power
asymmetries we see in legacy systems, some of
which were the inspiration for blockchain technology
in the fi rst place. Every time technology has opened
a path toward new coordinative infrastructures from
the printing press to the telegraph, to the internet,
the world has experienced massive shifts in geopo-
litical structure. Distributed ledger technology holds
the same potential for paradigmatic and socio-evolu-
tionary shifts.

DAOS AS DIGITAL FUNGI

Mammals are more closely related to fungi than to
any other kingdom of life. A key difference is that
while mammals internalize digestion by putting food
into their bodies, mycelia externalize it by putting
their bodies into the food, breaking down and con-
suming the environment around them. Some of the
nutrients are absorbed and transported throughout
the mycelial network to other organisms, while other
nutrients are left to enrich the soil, enabling new life
to form and thrive. When a mushroom feasts, it is
a communal banquet, a public good for the whole
ecology.

In contrast to mammalian private corporations that

MYCOFI 211
MYCOFI 212

enclose resources and intellectual property within

the boundaries of the firm, DAOs could be consid-
ered the mycelia of the digital world; they network
amongst themselves and expand into emergent
collaborations to build shared value through open-
source tooling and an ethos of permissionless
participation.

If we were to ask this ancient, sen-

tient network its secrets, perhaps it
would whisper to us of design pat-
terns it has iterated in the depths of
deep time, patterns such as:

Network Infrastructure Fractal Nature

“We are the mycelial networks, “In us, the fractal patterns of
the ancient weavers of nature’s the cosmos are echoed. With
oldest decentralized web. minimal energy, we replicate
Our threads stretch across these universal designs of
the world, silently sharing re- self-similarity, from
sources with all, creating life’s the smallest seashell to the
sustaining mesh.” vastest galaxysustaining
mesh.”

Adaptive Sense and Mutual Reciprocity

Response
“In our world, a delicate bal-
“At the edge of the known, we, ance of give-and-take prevails.
the mycelium, innovate without We, the fungi, alongside flora
requiring permission from our and fauna, partake in a life-sus-
ancient roots. Here we thrive, taining dance, each exchange
at the frontier, adapting to the nurturing the reciprocal cycle
mysteries of life’s sustaining of existence.”
mesh.”
MYCOFI 213

Polycentric Pluralism Dynamic Flow

“Within us thrives diversity, a “Our network pulses with

celebration of life’s myriad of life, a never-ending flow of
forms. Responsive and varied, resources. Like a symphony,
each part of our network con- nourishment courses through
tributes its unique voice to the us, shared freely, never still,
chorus of nature.” never hoarded.”

“In our search for regenerative eco-

nomic design patterns, the answers
we seek may be hidden right beneath
our feet.” - MyCoFi book

This essay was

originally published in
the MyCoFi book by
Jeff Emmet & Jessica
Zartler. It has been
edited and condensed.
Read the original @
META 214

EXPLORING
THE DESIGN
SPACE

WITH EPHEMERAL DAOS

EPHEMERAL DAOS 215

EPHEMERAL DAOS:
VEHICLES FOR FASTER
EXPERIMENTATION

Ephemeral DAOs exist for a finite period of time to

achieve specific goals or objectives. Once the goals
or objectives of the Ephemeral DAO have been
achieved, the DAO is dissolved, and its assets, if any,
are distributed back to the participants or trans-
ferred to another entity.

Ephemerality and We can learn from decentral- Without the burden of having
ized movements of the past, to last forever, we can make
DAO-iness are powerful
many of which ebbed and more pragmatic decisions
because:
flowed, (Occupy Wall St or the about what to do over a short
Civil Rights movement are two period of time without worry-
examples) and transcribe their ing about entrenching power.
lessons into our ephemeral
DAO experiments.

Without the burden of having

to last forever, the stakes are
lower, which enables more
experimentation.

Examples of Gitcoin-style Quadratic Fund- Optimism style Retro Funding

ing rounds (weeks long) Rounds (weeks long)
Ephemeral DAOs:

Point in time fundraisers like Protocol Guild’s first cohort

ConstitutionDAO or The Free (1 year long)
Alexey & Roman Legal Defense
Fundraise 1 (weeks long)
EPHEMERAL DAOS 216

Examples (cont’d) Projects like Meta Cartel, Investment DAOs like those
which dissolved itself after created by Hydra Ven-
transferring all their remaining tures 1 last only as long as they
assets to the lawyers of torna- have capital to deploy (years
do cash devs (years long). long).

(other capital allocation

experiments built on ideas in
this book)

There is a spectrum of “how much longevity is baked

into each Ephemeral DAO?” Ephemeral DAOs can
be shorter lasting (like a SealOrg Whitehat op which
could be hours-long) or longer lasting (or MetaCartel,
which wound down after several years).

MetaCartel
(years)

RetroPGF
Round (weeks)

QF Round
(weeks)
SHORT LASTING

LONG LASTING

Point in time
fundraise
(moments)

SECONDS MINUTES HOURS DAYS WEEKS MONTHS YEARS

EPHEMERAL DAOS 217

The faster the Ephemeral DAOs lifecycle, the faster

designers can spin its OODA Loop. The loop of Ob-
serve Orient Decide Act is how mechanism design-
ers can iterate towards their potential. Iteration is
the key to Ephemeral DAOs becoming evolutionary.
By launching ephemeral DAOs that last for only a
short amount of time, then tweaking their designs,
and then launching the next one, DAO designers can
iterate towards a design goal. Here is a visual exam-
ple of how Public Goods Funding rounds (each is a
Ephemeral DAO) can be evolutionary experiments
creating more value over time through learning and
iteration.

Observe
Orient
Decide
Observe Act
Orient
Decide
Act
Observe
PGF Round
Orient
Decide
Act

PGF Round
VALUE CREATION

LEARNING

PGF Round

TIME
EPHEMERAL DAOS 218

From the perspective of this evolution, software

communities like Gitcoin are kind of an Ephemer-
al DAO factory. Gitcoin launches Grants rounds
(Ephemeral DAOs) and then round over round,
tweaking the protocols they run on to launch pro-
gressively better and better Ephemeral DAOs.

Ephemeral DAOs exemplify a transformative frontier

in the realm of decentralized organizations, where
the temporary nature of these entities not only
promotes innovation but also allows for agile, pur-
pose-driven engagements that dissolve upon goal
completion.

This design strategy minimizes long-term commit-

ments and facilitates rapid experimentation and
learning, offering a fresh perspective on collabora-
tive efforts and governance.

This design strategy relies on extituons (soft things

like culture and relationships) over institutions (har
things likesmart contracts) in some ways. Like other
networked organisms, there is a symbiosis between
the soft parts and the hard parts as the design
space is traversed.

As this underexplored space continues to evolve, it

holds the promise of reshaping our understanding of
collective action and organizational life cycles in the
digital age.
This chapter originally
appeared on the Gitcoin
gov forum. Read the whole
thing @
EPHEMERAL DAOS 219
META 220

EXPLORING
THE DESIGN
SPACE

WITH THE DAO

OF DAOS
DAO OF DAOS 221

The DAO of DAOs is the structure

that emerges as DAOs begin to in-
teroperate with each other.

AN EXAMPLE (2020)
One example of DAO of DAOs is the structure of Git-
coin Grants Matching Pool sponsors from GR7-GR15.
Each sponsorship of the matching pool that sup-
ports Ethereum public goods weaves the ecosystem
together into a mesh network of relationships.

THE DAO OF DAOS

D_D
DAO OF DAOS 222

DAO OF DAOS WILL

BE A THING
As DAOs begin to specialize and mature, there will
be many opportunities for mutually beneficial DAO to
DAO relationships to occur.

1. Token Swaps
2. Technology Swaps
3. Marketing Relationships
and so on..

A RECENT EXAMPLE (2023)

Another example of a DAO of DAOs is the network
of public goods funding organizations that have
evolved in order to fund public goods in the ethe-
reum ecosystem. Together, these projects form a
mesh network of different mechanisms, memes, and
economics to support Ethereum ecosystem public
goods. This is an example of “stacking mechanisms
in practie!”

Here’s how the funds flow between them:

Public Public Public

Goods Goods Goods

DAO CLR.fund
Drops
Public Public
Optimism
Goods Goods

Gitcoin Giveth

Public Public
RetroPGF
Goods Goods

Public Public
Goods Goods

Public
Goods
DAO OF DAOS 223

THESE PROJECTS
COORDINATE TO SUPPORT
THE ETHEREUM ECOSYSTEM
Each of these DAOs has a way of funding public
goods, and a different way of distributing those
funds.

Funding Distribution

Funding Distribution

Funding Distribution

The diversity in mechanisms and funding sources

creates a more anti-fragile and rich source of funding
for projects within the ecosystem.

Here is what the volume of these

fund flows look like as of early 2024:

$250k $100m

$3m $50m

$10m $3m
DAO OF DAOS 224

THREE LAYERS TO A DAO

TO DAO PARTNERSHIP
There are three layers to a DAO to DAO partnership.
In order from more casual to more serious (from less
commitment to more commitment).

1.SOCIAL
INTEROPERABILITY
In this stage, there are strong relationships being
built between members of each DAO across DAO.

A Gitcoin example: DAO members might be invited

to speak at Gitcoin events like Schelling Point or
our Public Goods are Good Twitter spaces, or DAO
Vibes. This is the relationship/rapport/trust building
stage of of a DAO-to-DAO partnership.

2.PRODUCT/TECHNOLOGY
INTEROPERABILITY
The product/technology interop stage is when the
DAOs start to invest resources into seriously building
protocol and tooling interop between the products
of each system.

Examples of 1. Gitcoin leverages Proof of 2. Developers building on top

Humanity, BrightID or Idena for of Allo Protocol or participat-
this I’ve seen at
Gitcoin Grants. ing in the Capital Allocation
GitcoinDAO
Srategy Exchange.

3. Gitcoin launches a podcast (I’m sure there are many

on the Bankless network. others).
DAO OF DAOS 225

3.ECONOMIC INTEROP
Economic Interop occurs when DAOs begin to share
economics with each other.

This can occur as a rev share or as a token swap

between the entities.

Examples that we’ve 1. Gitcoin and Radicle doing a 2. Rev share agreements on
token swap. Allo Protocol.
seen or hope to see:
3. Stablecoins that fund public
goods like gtcUSD.

IN CONCLUSION
DAO to DAO partnerships are the atomic building
block of a DAO of DAOS.

The DAO of DAOs is the harbringer of the transition

from single ceullar to multi-cellullar life for the web3
ecosystem. By specializing and interoperating with
others, we will build a mesh network of projects that
rise and fall together - both by coordinating within
themselves and between each other.

As Gitcoin evolves into becoming a capital allocation

This essay was originally strategy exchange, the DAO of DAOs is an explicit
published on the Gitcoin part of the strategy. By allowing others to explore
gov forum. It has been the design space and then finding a (3, 3) with them/
edited and condensed. Gitcoin, we strengthen Gitcoin as an attractor for the
Read the original @
regen movement. This cycle could reflexively feed on
itself and accelerate over time.
META 226

EXPLORING
THE DESIGN
SPACE

WITH ALLO PROTOCOL

A LLO P R OTO C O L 227

As of June 2024, Gitcoin has run 20 rounds of its

Quadratic Funding grants program, and has distrib-
uted over $60M to early-stage builders and other
grantees.

Gitcoin’s capital allocation protocol, Allo Protocol,

launched in early 2023 and has powered the Gitcoin
Grants program ever since. In this chapter, we go in-
depth into Allo, which marks a strategic cornerstone
of Gitcoin’s approach to facilitating more dynamic,
pluralistic, and inclusive funding models. Allo’s
architecture is designed for extensibility, supporting
a diverse array of allocation strategies such as Direct
Grants, Retroactive Public Goods Funding, Quadratic
Funding, and many future mechanisms.

By leveraging Gitcoin’s momentum and by building

and proliferating capital allocation strategies, we
aim to surmount the limitations faced by traditional
capital allocation practices - often hindered by a
lack of transparency, democratic participation, and
accessibility.

As tokenization eats the world, our ambition is to

enhance our collective capability to finance critical
endeavors and create collective action across vari-
ous fields. We envision Allo Protocol as an engine of
exploration of this space. By stewarding a core re-
pository of the best allocation strategies, rigorously
audited and well-documented smart contracts, best
practices, a social movement that leverages these
tools, and other supporting collateral - we position
Allo as a pivotal player in the decentralized capital
allocation space.

This chapter investigates the opportunities enabled

by Allo, and articulates a pluralistic ecology of capital
allocation tools, methodologies, and culture. We en-
A LLO P R OTO C O L 228

vision a diversity of types of capital allocation which

enable collective action for different combinations of
peoples, cultures, and causes.

For web3 developers and participants, the advance-

ment of Gitcoin and the rollout of Allo represent new
opportunities in the pursuit of more equitable and
effective capital distribution mechanisms.

We now have programmable money, so we can

program our values into our money. We can build
capital allocation systems that solve the problems
of preciseness, scale, and remove gatekeepers. We
can build democratic, accessible, transparent, and
powerful capital allocation systems.

Gitcoin 2.0 is well positioned to help facilitate this

vision. Throughout the distribution of $60M to build-
ers through the Gitcoin Grants program, we’ve wit-
nessed the immense impact of capital allocation in
action. Organizations that are able to make effective
funding decisions to invest in their ecosystem see
higher builder activity, user onboarding, and transac-
tion volumes – in short: grants create growth.

Driven by these learnings, we’ve re-

cently launched Gitcoin 2.0. Gitcoin’s
transformation from 1.0 to 2.0 breaks
down as the following:

Transformation from Ethere- Transformation from only Transformation from a central-

um-only to being deployed Quadratic Funding to many ized, Gitcoin-operated platform
across many EVM-based types of capital allocation to a suite of modularized prod-
networks (Optimism, Arbitrum, mechanisms (Quadratic Fund- ucts and protocols that anyone
Base, Polygon, zkSync, Scroll, ing, Direct Grants, Retroactive can use and build on top of.
Avalanche, and more). Public Goods Funding, and
more).
A LLO P R OTO C O L 229

1 centralized product

Gitcoin 1.0 2 just QF

3 for Ethereum

1 decentralized / modular protocols

Gitcoin 2.0 2 many mechanisms

3 for any EVM-based community

DESIGN
PHILOSOPHY
Throughout the design and development of Gitcoin’s
tech stack, we’ve adhered to a design philosophy
grounded in key principles. These tenets are crucial
for capturing our understanding of the broad spec-
trum of capital allocation design, yet they maintain
the flexibility needed as we, along with others
venturing into this domain, continue to learn and
innovate.

1. SECURITY FIRST
Allo Protocol brings capital allocation onchain. We
believe that this is a foundationally important step
forward for the capital allocation ecosystem because
it means we can now introduce credible neutrality,
A LLO P R OTO C O L 230

censorship resistance, and democratic deci-

sion-making into capital allocation schemes.

2. SIMPLE CORE, RICH

PERIPHERY
This tenant of the Allo design philosophy is how we
express the Unix philosophy in the protocol. The core
of the protocol (Allo.sol) creates and funds pools
and assigns them an allocation strategy (“make each
program do one thing well”).

We expect (and hope) that the output of an allo-

cation strategy will be used for a variety of things,
including potentially funding other pools in Allo
(“expect the output of every program to become the
input to another, as yet unknown, program”).

3. LAYERED APPROACH
GITCOIN’S STACK IS SEPARATED INTO MULTIPLE LAYERS

PROTOCOL LAYER APP LAYER PROGRAM LAYER

INCUBATED BY Grant Stack Zuzalu Grants

GITCOIN Nocode platform Program
for running grant Rounds 1 - 2
programs
Gitcoin Grants
Allo Starter Kit Program
Allo Protocol Developer Starter Kit GR1 - GG20
Gitcoin’s Capital to get you up and
Allocation Protocol running on Allo
quicky

BUILT IN
GITCOIN’S
EXTENDED
NETWORK
MORE EXTENSIBLE MORE TARGETED
A LLO P R OTO C O L 231

We have designed Allo to have

a simple, stable, and secure, core of
four modules.
These modules follow the Unix Philosophy of doing
one thing and doing it well, but being interoperable
with each other. This has allowed us to effectively,
precisely, and scalable allocate capital.

THE BASIC MODULES

OF ALLO’S SIMPLE
CORE ARE:

Registry - list of projects

Strategy - how to distribute that could be funded.
capital to the projects in the
registry.

Allo - the central nexus which

coheres the above three
Tokens being ingested elements together.
into Allo.

THE FLOW OF CAPITAL

THROUGH ALLO
Recipient

Tokens Recipient
Allo Strategy

Registry Recipient

Recipient
A LLO P R OTO C O L 232

REGISTRY
Allo serves as a protocol for capital allocation tai-
lored for tokenized communities, featuring a novel
concept of a registry of projects.

The registry stands as a core foundation of data

intelligence regarding the activities of projects, in-
dividuals involved, their reputation, and attestations
about their impact.

STRATEGY
Capital allocation strategies decide where tokens
should go - often with the help of outside data, espe-
cially voting data.

The strategy is the core foundation of computation

that takes data from the registry and other impact
oracles, and computes a distribution of tokens.
Which is then given to a seperate distribution con-
tract.

Each of these modules is overridable. From this

simple core, a rich periphery is enabled. We hope
Allo eventually supports (and provides off-the-shelf
to builders) many possible permutations of capital
allocation registries, tokens, and strategies.

Recipient

Aqueduct Tokens Recipient

Allo Strategy
Registry Recipient

Recipient
A LLO P R OTO C O L 233

It is our belief that all permutations of this possibility

space = (sum of all possible aqueducts) x (sum of all
possible onchain assets) x (sum of all possible regis-
tries) x (sum of all strategies).

The design space here is vast. We anticipate that

there will be many valuable configurations of Allo
Protocol in the future.

THIS DESIGN SPACE

INCLUDES:

All possible tokens.

All possible project

registries.
All possible aqueducts.

All possible strategies.

INCLUDING..
1. Strategies that Allo already supports (Direct
Grants, RFPs, QF, RetroPGF).

2. Strategies that Allo could support (many of which

are detailed in this book!)

Recipient
Recipient
Aqueduct Tokens Recipient
Aqueduct Tokens
Strategy
Aqueduct Tokens Recipient
Strategy
Aqueduct
Allo Strategy
Aqueduct
Registry Strategy Recipient
Registry Strategy
Registry Recipient
Recipient
A LLO P R OTO C O L 234

Exploring the design space through brute force–

testing every possible model permutation– is ineffi-
cient.

Instead, we refine our strategies by running Allo

funding rounds and learning from the outcomes,
employing an iterative OODA loop (Observe, Orient,
Decide, Act) process that has previously matured
Gitcoin Grants Stack and the Gitcoin Grants pro-
gram.

A BETTER DESIGN

Round 5
VALUE CREATION

Round 4

Round 3
Round 2

Round 1

SEARCH SPACE
A LLO P R OTO C O L 235

This essay originally ap- While we endeavour to find the optimal designs for
peared in the Gitcoin 2.0
capital allocation strategies, we are mindful that
Rainbowpaper. It has been
there is not global optimal design. Instead, it is our
edited and condensed to
fit this book. belief that the design space is pluralistic. There will
be many different capital allocaiton strategies that
Read the whole thing @ are good at differnet things.

We need a way to discover the most important

capital allocation strategies, starting with the simpler
ones and then progressing to the more complicat-
ed ones. This book is an early cartography of that
design space.

Allocation
Strategy B
VALUE CREATION MEASURE X

VALUE CREATION MEASURE Y

VALUE CREATION MEASURE Z

good at Y

Allocation
Strategy A
good at X
Allocation
Strategy C
good at Z

SEARCH SPACE
META 236

EXPLORING
THE DESIGN
SPACE

WITH GITCOIN 2.1:

THE CAPITAL ALLO-
CATION STRATEGY
EXCHANGE
G I T C O I N : T H E C A P I TA L A L L O C AT I O N S T R AT E G Y E X C H A N G E 237

2023 was the year that Gitcoin fell to 3rd place in

the ETH public goods funding space. Measured by
volume, Gitcoin’s distribution ($7m) was surpassed
by Protocol Guild ($10m) and Optimism ($100m).

In 2019-2020, Gitcoin was a darling of the Ethereum

ecosystem. Powered by Quadratic Funding—a novel
mechanism at the time—Gitcoin gained prominence
as one of the top crowdfunding platforms in the
Ethereum ecosystem.
But it was not meant to last. Gitcoin transitioned
slowly from company to DAO, and the market moved
on from QF to RetroPGF, Self Curated Registries,
and more.

NETWORK MECHANISM GMV (2023)

Optimism RetroPGF $100m

Protocol Guild Self Curated Registry $10m

Gitcoin QF (mostly) $7m

(To be clear, we <3 Protocol Guild and Optimism.

Not only for their impact, but for their leadership in
designing allocation strategies. They are our friends.
This chapter is not about competing with them in a
zero sum way, but learning from them and develop-
ing positive sum relationships with them).

About Making Gitcoin Lead Again: in this chapter,

I propose a path towards catching up (and making
sure we are uniquely positioned in a strategic way to
deal with future competition). I propose that Gitcoin
2.0 facilitates a capital allocation strategy exchange.
G I T C O I N : T H E C A P I TA L A L L O C AT I O N S T R AT E G Y E X C H A N G E 238

A Capital Allocation Strategy Exchange (CASE) is a place

where capital allocation strategies (CAS) are exchanged.
It has three primary personas it attracts with distinct jobs
to be done. I think that Gitcoin can add value to all three
of these personas by giving each of them what they want.

PERSONA HAS JOB TO BE DONE EXAMPLES

Mechanism Innovative Get distribution for Glen Weyl & Vitalik

Innovator Mechanism mechanism (QF)

Advance mechanism Glen Weyl + Vitalik

design (RetroPGF)

Tim Beiko & Trent Van

Epps (Protocol Guild)

Superfluid / Geoweb
(Streaming QF)

1Hive (Conviction
Voting)

Many more.

Program Manager $$$$, Community, Wants to fund what Any of Gitcoin’s

Roadmap matters in their current partners
community

Wants growth

Giveth
Mechanism Development
Developer Skills Wants to deploy
Endaoment
the coolest new
mechanisms in their
IDriss
Often an app of their community
own
Gitcoin Grants Stack
G I T C O I N : T H E C A P I TA L A L L O C AT I O N S T R AT E G Y E X C H A N G E 239

Gitcoin is an attractor through its

social layer, tech layer, and economic
layer.

NEW OPPORTUNITY

Social Layer

Value Prop: Be a part of the

movement. Bring these tools to
your DAO & help your DAO to
fund what matters.

Tech Layer

Value Prop: Leverage Well

Documented
+ Audited Strategies
+ Ecosystem of tools

Economic Layer

Value Prop: Token Swaps

+ Rev Share

THE ATTRACTOR OPERATES ON 3 LEVELS

G I T C O I N : T H E C A P I TA L A L L O C AT I O N S T R AT E G Y E X C H A N G E 240

The weight of Gitcoin’s intermingled social, technol-

ogy, and economic layer provide a schelling point
for Mechanism Innovators, Mechanism Devs, and
Program Managers to rally around.

Within the Capital Allocation Strat-

egy Exchange, each actor gets what
they want
Mechanism Innovators Program Managers

Get distribution of their mech- Get access to the latest

anisms, and data about how capital allocation mechanisms,
their mechanisms operate in education training programs,
the wild. If all goes well, maybe and pilot cohorts about how
even a rev share. they work.

Mechanism Devs

Get access to well document-

ed, audited contracts, that do
capital allocation well out of
the box.

To juice the wheels, Gitcoin could

provide value-add services, including:

Well-documented, consum- Marketing/distribution for new

able, audited contracts, inte- mechanisms
grated into Allo Protocol

Education and training pro- Pilot cohort operations

grams
G I T C O I N : T H E C A P I TA L A L L O C AT I O N S T R AT E G Y E X C H A N G E 241

Gitcoin Value NEW MECHANISMS

Add:

Program
1. Distribution
2. Education and Managers
training
programs
3. Pilot cohorts Mechanism
4. Well documented, Dev
consumable, audited Mechanism
contracts Innovators
5. Weaving

Social Layer

Be a part of the movement.

Bring these tools to your DAO
& help your DAO fund what
matters.

Tech Layer

Leverage Well Documented

+ Audited Strategies
+ Ecosystem of tools

Economic Layer

Token Swaps + Rev Share

G I T C O I N : T H E C A P I TA L A L L O C AT I O N S T R AT E G Y E X C H A N G E 242

An example of this in practice is

EasyRetroPGF. Here’s how
EasyRetroPGF went:

1. We identified a Mechanism 2. We forked their software

Innovator and began building and created a well-document-
a relationship with them ed, audited, tool for other
(Optimism) people to use.

3. We ran educational and 4. We get $$$millions in Allo

training programs and invited GMV
program managers.

4. Devs built on top of it.

Other examples of mechanisms being

built by 3rd parties in the ecosystem.

Other examples: Another example is End- Another example is Impact

aoment. They took our QF Stream. They took Allo off the
strategy off the shelf and built shelf and built it into their app
it into their app. and then ran a pilot.

Another example is GeoWeb/

Superfluid Streaming Quadrat-
ic Funding.

Examples in the works Another example is 1Hive/Con- Another example I’ve got com-
viction Voting (currently being ing up is REDACTED, which will
right now:
built on Allo). be announced soon.
G I T C O I N : T H E C A P I TA L A L L O C AT I O N S T R AT E G Y E X C H A N G E 243

Why do this? Relieve the burden of exploring Repent for the past loss of
the design space alone. Enable market share, and create a
our network of citizens to do it path to making up that ground.
with us.

Build (3,3)s with other Create exponential network

ecosystems. utility.

As more and more Documented and audited Social Momentum

strategies on the Allo
people build on Allo,
Awesome List.
more network value
accrues, in the
form of: Allo GMV

… which reflectively creates more demand for mech-

anisms.

The coolest thing about this strategy

is that it is reflective. Momentum be-
gets momentum - and Metcalfe’s Law
kicks in. Reflexive growth cycles like
this can create exponential growth in
network utility due to Metcalfe’s Law:

This essay originally ap- Mechanisms Devs Products

NETWORK UTILITY

based upon Solid with great

peared on the Gitcoin Gov
Game Theory UX
forum. It has been edited
and condensed. Read the Exchange
original @
Program
Innovators Managers

$$$ & Data

INTEGRATIONS
META 244

EXPLORING
THE DESIGN
SPACE

WITH PRACTICAL
PLURALISM
P R ACTI CA L P LU R A LI S M 245

AN ESSAY BY AURYN
MACMILLAN (CLRFUND)
& KEVIN OWOCKI (GITCOIN)

The Ethereum network is secured by block produc-

ers (currently miners, soon to be replaced by valida-
tors). They are the foundation of consensus in the
Ethereum network, upon which there are trillions of
dollars of assets and untold untapped potential for
human coordination.

Having well-designed, secure, and dependable block

producers to protect this value is a great strategy to
defend the network.

One of the key strategies employed by the Ethere-

um community to ensure secure and reliable block
production is client diversity. This means, more than
one implementation of the specification — they can
be differentiated by language, architecture, features
or which part of the network they specialize in. If a
single client were used by 2/3rds (66%) of valida-
tors and it experienced a serious bug, there’s a very
real risk this could lead to chain instability for users
and monetary loss for node operators. By treating
client diversity as a public good and fostering an
environment where many independent client teams
are incentivized to implement the Ethereum protocol
in disparate code bases, the Ethereum community
bakes in a measure of anti-fragility and resilience
against bugs in any one implementation.
P R ACTI CA L P LU R A LI S M 246

Client Diversity is pluralism in prac-

tice (x axis — time, y axis — resource
availability)

2
4

1. ANTIFRAGILE 2. RESILIENT 3. ROBUST 4. FRAGILE

Pluralism — the understanding that diversity of

people, beliefs, opinions, mechanisms, approaches,
implementations, etc., within a given context gener-
ally results in better outcomes than in the absence
of such diversity. Nowhere is this more evident than
in ecosystems with rich biodiversity; ecosystems
where radically different flora and fauna work in a
harmoniously competitive act of mutual regulation
and perpetuation. This can be seen in how the
success of one species feeds and is kept in check by
the success of another species, and so on.

Pluralism itself is a primitive for antifragile, resilient,

and regenerative systems. As an ecosystem, Ethere-
um has done a great job fostering diversity in its min-
ing and validating clients. Similarly, we should insist
on pluralism across the full stack of web3 technolo-
gies and culture. This includes discrete products like
wallets, RPC nodes, DAO tooling, public goods fund-
ing mechanisms, AMMs, stablecoins, and developer
tooling, as well as the intangibles influences like the
people, groups, communities, and opinions which
participate in and hold sway over our ecosystem.
P R ACTI CA L P LU R A LI S M 247
P R ACTI CA L P LU R A LI S M 248

We are writing this essay because we believe in

client diversity. We believe in pluralism as a primitive.
And we want you to join us in extending the ethos
of client diversity and pluralism to other layers of the
stack. By having pluralism as a core value of each
vertical, we make it more likely the space tends to-
wards capture-resistance — not fragility. Participants
should be able to choose to use or not use any one
of a number of options for any given need.

By having pluralism at the heart of each niche, we

ensure the space is antifragile. If there is a major bug
discovered in one system, the resulting cascading
harm can only go so far because there will always be
another dApp ready to pick up the slack. For web3
to truly express itself, diversity and pluralism must be
core values.

To all those who would seek to build, enshrine, and

defend moats in our shared virtual machine, to build
systems incapable of composition, incapable of com-
ponentization, incapable of being permissionlessly
replaced by some alternative:

We say this is a pattern of the past, an antipattern in

web3. It’s a pattern enabled by permissioned access
to, and control of, data.

This pattern will be made redundant in our version of

the internet, made redundant by our shared virtual
machine.

The future will be dominated by much more emer-

gent systems; organic compositions of many
discrete and interchangeable components, built by
disparate people, in combinations never dreamt of by
their creators.
P R ACTI CA L P LU R A LI S M 249

The future will be dominated by much more emer-

gent systems; organic compositions of many
discrete and interchangeable components, built by
disparate people, in combinations never dreamt of by
their creators.

It is through this diversity that we build anti-fragility,

and a resilience to capture, censorship, and stagna-
tion.

We challenge the protocols at the center of the NFT,

DeFi, DAO Tooling ecosystems to adopt practical
pluralism as part of their design philosophy & broad-
er Ethos.

Special thanks to TJ Rush,

Trent Van Epps, and members of
GitcoinDAO, for reviewing drafts of
this essay.

This essay was originally

published in 2022. It has been
edited and condensed. Read
the original @
META 250

PARTING
THOUGHTS
PA R T I N G T H O U G H T S 251

IT’S ALL
COORDINATION
The Prisoner’s Dilemma is a classic problem in game
theory, illustrating why two rational individuals might
not coordinate, even if it seems to be in their best
interest. In the scenario, two prisoners are accused
of a crime and must decide independently whether
to confess or remain silent. If both remain silent, they
receive light sentences. If one confesses while the
other remains silent, the confessor gets a lenient
sentence while the silent one gets a harsh sentence.
If both confess, they receive moderate sentences.
The dilemma highlights how individual incentives
can lead to a worse collective outcome.

A/B B STAYS SILENT B BETRAYS

A stays silent -1 -1 -3 0

A betrays 0 -3 -2 -2

If we could solve the Prisoner’s Dilemma by ensuring

cooperation over self-interest, it could profound-
ly impact society by fostering greater trust and
collaboration. This would lead to more efficient and
mutually beneficial outcomes in various fields such
as economics, politics, and social interactions. En-
hanced cooperation could reduce conflicts, increase
collective problem-solving, and create more equita-
ble and sustainable systems, ultimately improving
overall societal welfare and stability.
PA R T I N G T H O U G H T S 252

I think that each of the onchain coordination mech-

anisms in this book create new ways of solving the
Prisoners Dilemna. Used together, they could provide
overwhelming momentum for coordination and col-
lective action (but without sacrificing sovereignty).

The capital allocation strategies de-

noted in this book are all working in
the tradeoff space of:

Principal vs agent
(as in principal agent
problem)
Individualism vs
collectivism

Mutualism vs
Centralization vs
elitism
decentralization

Commons vs
Coordination vs defection private
(as in Prisoner’s Dilemma)
PA R T I N G T H O U G H T S 253

This tradeoff space is active at many

levels of the universe at different
scales (cells, organs, organisms, fami-
lies, organizations, companies, etc.),
and in some spots it veers into coor-
dination failure.

Strings

Quarks & Gluons

Hadrons & Electrons

Atom
Molecule
Organelle
Cell Cancer
Tissue

Organ Organ system

Person Family
City, town, village

Local community Crime

State or province
Country Corruption
Continent

Galaxy cluster Planet Climate change

Star System
Galaxy

Galactic supercluster

Supercluster complex
Universe
Multiverse
PA R T I N G T H O U G H T S 254

Let’s reason about these varying

levels of scale. But first, some vocab-
ulary:

A holon is a system or entity that is both a whole

in itself and a part of a larger system. Each of the
capital allocation strategies that we’ve discussed in
these pages are a way of ordering the relationship
between holons - up and down the holarchy. A hol-
archy is a hierarchical structure where each level is
composed of holons that are both whole entities and
parts of a larger system.

Now that we’ve got blockchains - a better substrate

for human coordination - will we be able to create
better systems for human coordination? Can we
solve coordination failures in human families, com-
munities, cities, states, countries, or globally?

This is my theory of change: blockchains offer an

unprecedently effective medium for navigating
coordination failures and experimenting in new ways
to harmonize the individual within their collective
and vice versa, between individual humans (and their
bots), all of humanity, and every level of the stack
between them.

What if we could offer better ways of coordinating

groups, whilst still respecting the sovereignty of
the individual? What if we could solve for these
tradeoffs in one part of the stack and easily pro-
liferate that to other parts of the stack? If we can’t
solve it, we could at least make forward progress to
align incentives, rights, and privileges in new, more
elegant ways.
PA R T I N G T H O U G H T S 255

If you consider all of the different holons you are a

part of, you may notice how much of your relations
between other humans are mediated by ineffective
coordination.

INTERSECTIONAL
IDENTITY
Ethereum ecosystem

You
GitcoinDAO
Your DAO

Readers of this book

Owocki

IN CLOSING
The greatest pleasure of writing this book was to
showcase all of the powerful ways we are provoking
a new social contract between the individual and the
collective. Each of the onchain coordination net-
works in this book are embodiments of this potential.

At the same time as we recognize this tradeoff

space and work to solve for it, we must realize also
individualism vs collectivism are a false dualism.
You are both an individual human and a collective
(of cells). When you realize that cancer and climate
change are driven by the same phenomena—coordi-
nation failures (Moloch)—just at different parts of the
stack, you will see this false dualism at work.
PA R T I N G T H O U G H T S 256

Our task is to integrate globally shared knowledge

(like the mechanisms we invent in the Ethereum
space) with localized trust networks (like our com-
munities) to create sustainable and resilient commu-
nities. This is the vision of Cosmolocalism - a new
movement that recognizes where globalization has
failed and aims to combine the best parts of the
global with the local.

What if we could cross-pollinate world-class cap-

ital allocation strategies (globalism) with the deep
legitimacy, high lindy, and rich relationality of local
communities (localism)?

GEOGRAPHIC COMMUNITIES
DIGITAL COMMUNITIES

Culture Learnings

Mechanisms

Digital BioRegion- Localized Digital

al Governance Communities

We are only in the beginning of the pre-transition era

to a more coordinated world. This is our moment to
accelerate the transition to a world that has solved
coordination failures at scale.

PRE-TRANSACTION MID-TRANSACTION END-STATE

Current 2025 - 2035 2040+?
PA R T I N G T H O U G H T S 257

STAY BASED,
STAY GREENPILLED.
OWOCKI
 258

Wait it’s
 259

Always has been

all Coordination?
META 260

CALL
TO ACTION
CALL TO ACTI O N 261

USE THESE
MECHANISMS
Many of these mechanisms featured in this book
are either available to use via Gitcoin, available via
another organization, available via open source
software, or on a roadmap somewhere within the
Ethereum ecosystem.

WE’D LOVE TO HELP

YOU GET ONBOARDED

Mechanism designer? Developer?

Get distribution for your latest Fork the mechanism and ex-
mechanism via Gitcoin. tend it, or build it into your app.

Grants program
manager?

Use the latest and greatest

DM Owocki
coordination tech in your
ecosystem.

Join the telegram

group to git
involved.
CALL TO ACTI O N 262

FEEDBACK
WELCOME
Notice a typo?

Did I forget a mechanism?

Did I miss something?

Are you an individualist who thinks collectivism

is always bad?

Are you an collectivist who thinks individualism

is always bad?

Got an idea to accelerate the regen movement?

Did I do something differently than you would, and

did it ruin your whole day?

Let me know
DM Owocki

Join the telegram

group to git
involved.
CALL TO ACTI O N 263
META 264

SHILL ZONE

YOU ARE NOW ENTERING

A SHILL ZONE

SPONSORED BY
GITCOIN 2.1
SHILL ZONE 265

SHOULDA,
COULDA,
WOULDA...

NOW YOU CAN

easyretropgf.xyz
UNLOCK THE POWER
OF RETROACTIVE
FUNDING
SHILL ZONE 266

GITCOIN IS A
STRANGE LOOP

Build Gitcoin Build on

Ethereum

GTC TREASURY

Use Ethereum to Use Gitcoin

Build Ethereum to Build Gitcoin
SHILL ZONE 267

It’s so over

DON’T GIVE UP

We are so back soon

This BOOK is your invitation to build

this vision & help shape/accelerate
Gitcoin 2.1
 268
by

NICE PLAN,
NOW WHAT?
 269

A.
LET YOUR PLAN
GATHER DUST

A.
BUILD YOUR PROGRAM
WITH GITCOIN GRANTS
STACK

Book a demo
270