Buidler DAO: A New Paradigm of Web3 Financing from Grants Protocol
In the future, the Grants Protocol may become an LP platform for VC or Venture DAO.Author: Buidler DAO
Guests for this Space:
Bob | GitcoinDAO Steward Twitter: @bobjiang123
Yihan | GR15 Graeter China Round Rep Twitter: @0xYihan
Maxlion | Planet Daily Journalist Analyst Twitter: @zhunianpan On October 7, Gitcoin officially tweeted that it will launch a new product, Grants Protocol. We are very honored to invite three guests to discuss this new product, its impact on industry financing, and to look forward to the development of the financing market in Web3. TL; DR ◾ The biggest improvement of Grants Protocol is: from Centralized to Decentralized, supporting modularity, and Permissionless
◾ The modular functionality of Grants Protocol allows projects to customize their financing needs
◾ Grants Protocol can lower the financing threshold and improve fund efficiency
◾ The launch of Grants Protocol also comes with potential risks that may negatively impact the entire ecosystem
Grants Protocol Product Introduction @Bob: The Gitcoin that everyone currently knows and uses is a Grants platform built in 2019. Due to the limitations at that time, whether from a technical architecture or process perspective, it is a relatively centralized platform. We call it C Grants, which stands for Centralized Grants. At the beginning of this year, Gitcoin DAO proposed the Grants 2.0 plan, dividing the C Grants platform into three layers, with Grants Protocol at the bottom, followed by Program, and the top layer called Service.
The Service layer provides Grant Round services for the community, while the Program layer includes existing Gitcoin Rounds.
Grants Protocol is a protocol that can provide Grant services for any Public Goods, Open Source, community, or cross-grant combinations. Additionally, the platform currently only supports secondary matching, with Funding controlled by QF, and in the future, other matching can be provided in a modular way within the protocol. Therefore, the biggest changes in Grants Protocol or Grants 2.0 are:
The evolution from Centralized to Decentralized;
Support for modularity;
Permissionless, anyone can fork and organize their own Grant Round according to their needs without going through Gitcoin's review.
Currently, some features have been launched, such as the Passport launched in GR14. Additionally, the Round Manager module has entered the internal testing phase.
Impact of New Financing Forms on the Industry @Yihan: I want to share some of my previous experiences as a Round Manager for Graeter Channel, which were not very user-friendly. For example, reviewing projects was done on Google Sheets, making it easy to overlook or accidentally delete entries. In the operation of GR15, many steps and processes are still very centralized and rely on trust in offline manual operations. I believe the biggest change of Grants Protocol is automation and decentralization, which should bring optimization to the user experience.
Another important point is the improvements Gitcoin has made in its witch defense mechanism. Because Gitcoin's secondary donation mechanism allocates more funding based on the number of donors, it is susceptible to witch attacks. For example, project parties can promise airdrops to solicit votes, use fake accounts to inflate votes, or negotiate mutual voting with other project parties.
Subsequently, Gitcoin will provide tools to each Round to address witch defense issues. One of the tools is the Passport mentioned earlier by Bob, which is a certification identity similar to SBT, proving your behavior on Gitcoin. By assessing whether an account's behavior is trustworthy, it can determine whether to mark it as a witch attack account.
Returning to this issue, I believe Grants Protocol is an extension of Gitcoin, rather than an expansion of traditional VC structures, so it may not have a significant impact on traditional VC or Venture DAO models, but it may be worth exploring in terms of funding allocation direction within the community projects.
For example, a voting mechanism could be used to decide which projects within the community can receive funding support, how much they can receive, breaking the centralized investment decision-making model currently adopted by most communities.
@Maxlion: From the development trend of Ethereum L2, I believe that the Grants Protocol launched by Gitcoin will help the development of the L2 ecosystem. It can solve some issues of fragmented financing and help project parties achieve customized and aggregated financing needs. In the first half of next year, there will be a wave of collective listings of L2s, and at that time, each L2 ecosystem will help finance projects within its ecosystem, requiring such an infrastructure—a platform based on financing with a series of community ecosystem derivative functions.
From the perspective beyond the Ethereum ecosystem, if Gitcoin creates a set of open-source, modular infrastructure, it could potentially unify the financing infrastructure of the entire blockchain to some extent, connecting multi-chain funding pools and providing more convenience for developers and project parties, thereby improving financing efficiency.
Impact of the New Protocol on Various Participants @Bob: For Donors/Contributors, the user experience will not change much.
For Grantees, they can apply to join more rounds, and the review will be conducted by the Round Manager without needing Gitcoin's approval.
For Matching Partners, they no longer have to go through a lot of manual, trust-dependent steps like filling out forms and Gitcoin Team reviews; they can create their own ecosystem rounds, even on the Gitcoin Grants platform. Round Managers can utilize the modular features of Grants Protocol to customize their own protocols.
Gitcoin will gather more developers.
@Yihan: Grants Protocol can have some imaginative explorations in community applications. Gitcoin's consistent philosophy is to align projects with the community. Each GR Round is a community, providing an opportunity for projects to connect with their users and ecosystem partners.
Grants Protocol allows projects to be more flexible in standing with a richer community according to their specific needs. Project parties can also add some gating to prevent witch attacks, such as only allowing voting from core community members or implementing their own donation logic.
Grants Protocol can play a role in aggregating collective wisdom. In the Web2 era, most good investments were made by particularly outstanding elite investors making investment decisions. In the Web3 era, we can explore collective wisdom—how to enable everyone to honestly report their thoughts, how to aggregate everyone's judgments and ideas into an investment decision, and finally how to allocate funds.
On the other hand, there may be some potential risks. If centralized reviews are removed, there could be fake projects or platforms that disappear after raising funds, negatively impacting the entire ecosystem.
Moreover, Gitcoin has strict regulations that project parties cannot offer any benefits to donors, including token airdrops, NFT airdrops, etc. However, the various ecosystems created based on Grants Protocol may not be as strict in management, leading to situations where individuals vote for short-term returns, resulting in ineffective fund allocation.
@Maxlion: For developers, users, project parties, and communities, Grants Protocol can lower the financing threshold. It also allows public investors to more flatly access project parties, enabling project parties to express their financing needs more freely and improve fund efficiency. Its popularization as an infrastructure can not only help projects secure funding but also incubate more startups.
How to View the Future Development of the Financing Market in Web3 @Bob: Many investment DAOs have already begun to emerge, and in the future, individual investors will be able to participate in Web3 financing more conveniently and easily.
@Yihan: In addition to the evolution from elite individual decision-making to collective decision-making mentioned earlier, another point is the difference between return-based and non-return-based financing models and their underlying motivations. In traditional VC, investors aim for returns and profits; whereas in Gitcoin, donors may simply believe the project is good, beneficial to the ecosystem, or has positive externalities. Due to the difference in motivations, the original secondary distribution model is not suitable for VCs. If Grants Protocol is opened to some Venture DAOs, allowing them to develop algorithm modules that better suit investment motivations, it will have a certain impact on VCs.
@Maxlion: Boldly imagining, in the future, Grants Protocol may become an LP platform for VCs or Venture DAOs.
Article: @Buidler DAO
Design: @Rui
Typesetting: @Herson
