You may have heard through the grapevine that we recently partnered with Compound to revitalize their grant program. We worked very hard to propose our approach and take feedback from the community in their forum. You can read the proposal in its entirety at the link below:

https://www.comp.xyz/t/cgp-2-0-delegated-domain-allocation-by-questbook/3352/1

To say we're excited about this development is an understatement. This achievement results from many months of hard work and lessons learned from builders and our partnered grant programs. If that interests you, you can check out some of the lessons we learned from our early partnership with Polygon DAO.

Beginnings

So, where did all of this begin?

For starters, our approach with CGP 2.0 involves an interesting new approach to running community grant programs called Delegated Domain Allocators or DDA. DDA was first mentioned in this report by Ethereum Foundation as a means to make grant programs more decentralized. This involves identifying and empowering active community members with domain expertise to run their programs for that domain on behalf of the foundation.

DDA is an alternative to the more traditional committee-based grant programs. While these committee-based programs can be effective, they become more challenging, specifically for Protocol DAOs, due to the distributed nature of their work and the broad span of expertise that could be needed to cover all the facets of protocol or community development.

DDA is set up to empower individuals, teams, or groups within the community to make decisions with reasonable autonomy while ensuring that the community has visibility into the grant decisions made. The rationale is that it allows the DAOs to become more agile with their grant-making while maintaining a level of oversight and accountability to the broader community. With this autonomy also comes skin in the game, and this was very important for us in how we envisioned DDA being successfully implemented.

We knew that DDA would be a viable alternative, so we started to put the work into developing the approach with our platform. We began to look around the space, specifically at Protocol DAOs. We noticed that Compound had recently shut down its grant program, and we thought that might be an opportunity for us to engage and see if they would be interested in entertaining the DDA model.

Community Engagement

What did engagement with the community look like?

Well, it looked like our co-founder, Harsha, was reaching out to many different stakeholders and asking their thoughts and opinions on the previous model and what a new program might look like.

Harsha used the CGP 1.0 forum post as a guide for whom he should engage and organized more than a dozen meetings with these community stakeholders and Compound team members to understand their thoughts around CGP 1.0 and what desired traits of a new program might look like if CGP 2.0 emerged. Harsha also started attending the developer calls, taking the draft of what we were developing, and gaining consensus among the team members.

Along the way, we met Adam Bavosa, Compound's Community Manager. From the initial stages onward, Adam has been instrumental in helping to guide and provide advice on how best to work within the community. Given the decentralized nature of how Compound operates, it was beneficial to have his support as we worked within the context of their governance process to propose DDA.

A special thank you to all that participated in those early conversations. There was strong support around the idea of DDA, further strengthening our resolve to develop an initial proposal.

The Proposal

After hearing the feedback from multiple community members, we knew this was worth the time and effort to pursue.

We developed a comprehensive proposal outlining our approach to DDA and how it would be implemented for CGP 2.0. We crafted this by combining lessons from our early work with Polygon DAO and conversations with the Compound community.

The proposal outlined how DDA would work, how it would be governed, and what activities a successful program would take on. The proposal saw a lot of engagement from many different team members, and we made sure to be responsive to any questions and concerns as we honed our approach based on their valuable feedback.

As the proposal started to gain acceptance, it was apparent we needed to move to the next step of selecting who in the community would be filling the roles of Domain Allocators. Initially, we wanted to see Compound Labs serve some of those roles. Still, due to Compound's ethos of decentralization, they have strict rules in place that prevent members of that team from participating in the work of the Protocol DAO.

After some help from the Compound Team engaging the community, we were able to round out the list of Domain Allocators; you can find this information in the proposal mentioned earlier.

Now that we have the initial group of Domain Allocators in place and the proposal has seen good reception from the community, we are ready to engage the token holders. We identified token holders with 400K+ votes and started to engage and set up calls if they were open to meeting. These were some great conversations where we took the time to review the proposal and explain our approach. Many had questions about legal considerations (about the foundation and legal entity managing the grants). A special thank you to eaglelex (a friend we made through our work with Polygon DAO) for his assistance and guidance in helping to address these questions.

The last step in this journey before a formal post in Compound Governance was whitelisting. Whitelisting is a process that allows for someone to submit a proposal that doesn’t hold more than 1% of $COMP, as that is a requirement for Compound Governance. Again, we drew upon help from our old friend, Adam Balvosa, as Compound Labs can grant whitelisting through a process that seeks approval from signers on their multi-sig.

It was starting to feel like we were nearing the end. We prepared our proposal in markdown (a bit more challenging than anticipated) and posted it. Proposal #136 was now live and up for voting by the community.

As we saw the results roll in, we were floored by the support and felt justified in all of the work that had been applied up to this point to make this proposal a reality. We believe this is only the beginning, and we look forward to watching the DDA model impact the Compound Community and its grants program. We hope that our story inspires more people to come on board and join us as we explore the idea of DDA.

Closing

At Questbook, our mission is to make grants more accessible to builders of all kinds while allowing flexibility and choice to grant programs on how they can use our platform to meet their individual needs.

If you might be interested in applying for a grant from Compound, please join their Discord and send us a note in the #grants channel or watch the Compound Grants Twitter account for announcements.

If you are interested in looking at DDA for your community grants program or learning more about Questbook, we would love to hear from you. Connect with us on Twitter; DM's are open.

https://www.questbook.xyz/

In the bull market, we had yield farming; in the bear market, we now have grant farming.

Why are grants significant?

Grants and grants programs have always had a place in crypto (or Web3, if that’s what you like to call it).  Many of these programs and initiatives started focused on base layer network infrastructure, software development, and developer tooling.

Today, these programs have diversified into many focus areas, including content creation, curation, and community building. Over the past year, these programs have increased and gained significant popularity in the broader ecosystem. So let’s dive into why that is and the trajectory of these programs we see in the days ahead.

First, let’s start with some basics to ensure we’re all on the same page.  A grant is “a sum of money given by a government or other organization for a particular purpose.” This sounds like free money to many, but the key phrase in this definition is “for a particular purpose.”  Because we don’t have governments (yay!) doling out the vast majority of funding as we see with grants in the more traditional sense, we instead have interesting new kinds of organizational models that have evolved or developed to take on the role of grants management (among other things).

So, why do these different kinds of organizations dedicate many of their treasuries to giving away money to builders and projects?

To understand this better, there are two concepts we need to comprehend:

1. The Fat Protocol Thesis

2. The Grants Flywheel

Fat Protocol Thesis

A seminal piece in the catalog of crypto knowledge, Joel Monegro’s Fat Protocols thesis states that unlike the walled gardens of Web2 where most of the value accrual happened at the application layer (Ex. Google, Facebook, Amazon) over the protocol layer (Ex. HTTPS, SMTP) the value accrual in Web3 will happen at the protocol layer over the application layer.

This will happen primarily due to two significant factors:

1. Complete transparency of data

2. The presence of a token to access the protocol that can accrue in value

The defensibility of Web2 projects lies in the data they possess and the tech IP. In Web3, when both the data and the code are open to the public, the only defensibility comes from network effects and the costs of switching to another product.

Network effects directly function the number of valuable products built upon a protocol. These beneficial products must also have a strong community with strong network effects to decrease user switching costs.

Now that it is well understood that protocols need practical applications built on top of them, how can a protocol incentivize valuable projects to be built on top of it? How can a value flywheel be created for an incentive program?

Enter Grants.

The Grants Value Flywheel

When we look at grants, the organization disbursing the grant has the underlying belief that the grantee will build something that will augment its value. Joel John explained the grants flywheel the best in an infographic from his piece “Grants & Web3” (another must-read from the catalog of crypto knowledge).

While the image above is self-explanatory, it is clear that the primary goal of a grants program is to maximize the number of individuals and teams building value across the broader ecosystem and using that value to attract the most users. Additionally, the treasuries that support these programs are very limited in what they can do with their funds. Therefore, they must place their bets wisely regarding operational costs and grant distribution, especially in the depths of a bear market like we are currently experiencing.

Another interesting aspect of grants in Web3 is that these programs manage some portion of the treasuries for the respective protocol tokens. This means that the grant programs are tasked with spending money to increase the value of the remaining tokens; this is a never seen dynamic in web2. For example, imagine if Apple had incentivized early app developers with Apple Stocks. In this mental model, if Apple accrues value because of the apps, the developers have unbound upside too.

Now that we have shared with you a bit of our perspective on the way, let’s take a look at the how as we dive deeper into how these programs function today.

Component Parts

To understand how grant programs work, we must first understand the different moving parts. There are currently four pillars we will touch on in this piece to describe how these programs are structured today:

1. Organizational Structure

2. Capital

3. Participants

4. Workflows and Tooling

Organizational Structure

Sov recently wrote a piece titled Organizational Models, describing the different kinds of organizations common across Web3, specifically for grants programs.  These are:

1. Foundations

2. Ecosystem DAOs

3. Protocol DAOs

At a high level, you see a spectrum where on one end, you have more centralized entities (Foundations) that are, at times stepping stones to traditional VC funding, either through their Ecosystem Funds or VC Networks.  These organizations typically have strict regulatory requirements, like KYC/KYB, and oversight due to legal constraints of where they are headquartered and various other factors.

In the middle of this spectrum would sit Ecosystem DAOs.  These are organizations that were created to help bolster support for a specific community or purpose.  These organizations can be formed from a Foundation or Protocol DAO and exist in many respects to help the parent organization move closer to the middle in engaging with the community and broader ecosystem. For example, organizations like Aave Grants DAO were formed to manage and disburse grants. At the same time, others see grants as a primary function but also support other aspects of the community, like Polygon DAO.

On the far end of the spectrum, we have Protocol DAOs.  These organizations espouse the core ethos of decentralization and make every effort to drive engagement and governance from their communities.  Typically you see these organizations having prominent players that are active in governance functions. These stakeholders work to steer conversations and community sentiment towards goals and objectives that they feel would be best to help steward the sustainability and growth of the underlying organization. Prominent examples here would be MakerDAO and Compound.

Capital

Capital across the treasuries of organizations is managed in many different ways with varying levels of transparency in their flows and processes based on the type of organization they are.

On one end of the spectrum, you have more decentralized organizations like Protocol DAOs and some Ecosystem DAOs.  Most of these are all on-chain and can be seen at sites like openorgs.info at a very high level. Others have further taken this commitment to transparency by developing their sites that provide dashboard-like views of how the funds are being used (like Polkadot’s Dotreasury or NounsDAO’s Governance).

Capital for these more decentralized organizations is allocated through open governance processes managed in forums like Discourse or Commonwealth or by dedicated teams that oversee the grants process and are responsible for budgeting, etc.  Typically the entity would state core areas of focus based on the needs of the protocol or ecosystem, and it would be the responsibility of community teams to steward funds and resources for those goals.  One of our favorite Twitter followers is DAO Research Collective, and they recently went into great detail regarding this topic in their piece, Treasury Management, if you want to learn more.

Other organizations on the more centralized end of the spectrum are typically more opaque in their processes. For example, they may have funds distributed across many on-chain wallets or in traditional bank accounts.  Capital is sometimes allocated and managed by grants teams, but you would typically see Business Development or Foundation Leadership playing a heavy role in oversight.

Participants

Participants encompass both internal to the organization and that outside that participates across the grants lifecycle.

Internal participants include all the individuals and teams that work directly for the organization in some capacity.  These roles can be full-time, part-time, on a contract basis, or as an appointment by the community (this usually occurs in protocol DAOs).  Depending on the organization's size and level of focus, they may have dedicated grants teams, typically with roles like grants analysts, managers, and committees with specific focus areas.  Other parts that are sometimes responsible include business development, developer relations, leadership, and protocol development.  These teams may play supporting roles or, in the case of the organization not having a dedicated grants team, be directly responsible for managing the grants lifecycle.

These internal participants work on tasks across the grants lifecycle that include driving awareness review of applications, engaging with applicants, keeping current documentation, approving applications, and ensuring follow-up or follow-through once applications are accepted with things like funds disbursement, progress tracking, and ongoing support of projects and their stated goals and objectives.

External participants include those who have requested funding (applicants), those who have received funding (grantees) along with active community members (typically within the Protocol DAO structure that participates in some form of governance).

If we start by looking at both applicants and grantees, they typically fall into a few broad categories:

• Developers

• Marketers

• Researchers

• Curators

The lion’s share of programs today are looking for qualified developers to help build infrastructure, tooling, and interesting applications on top of their network.  Recently Alchemy released a report detailing Web3 Development that offers some interesting insights into the current state of development across the broader ecosystem, and it’s apparent that even though we currently sit in the depths of a bear market in terms of price action, the amount of development happening is scaling at an incredible rate.

One point to consider is that even though this report shows a fast accelerating growth trajectory, it doesn’t show the scarcity of competent developers, a problem that many different ecosystems and their programs are dealing with.

In addition to developers being the main focal point for many of these programs, we are starting to see them open up to alternative skillsets, including content creation like marketing materials (blogs, newsletters, and social media) along with research that helps with building greater awareness, diving into complex topics that need further review or explanation, and even expanding into new frontiers like Decentralized Science (DeSci) like we have seen recently with Polygon DAO or the Ethereum Foundation.  In addition to these types of content creation, we also see opportunities arise for curators that specialize in gathering and organizing information for wider consumption using tools like Notion or Obsidian.

One of the more significant challenges faced by many programs in the space today is finding qualified applicants that can fulfill the promise of building valuable projects that can help to grow the ecosystem. We joked a bit earlier in this piece about the phenomenon of “grant farming,” but its impacts can be seen in programs that are only disbursing to a tiny double-digit percentage (typically 10-15%) of the applications they receive. This low rate of application approval can be for various reasons, including the applicant’s lack of vision, doubts about its ability to execute, or the applicant doesn’t fit the areas of focus the program is looking at for growing its ecosystem.

Tooling and Workflows

Tooling and workflows refer to the process and supporting infrastructure these organizations use to grow and manage their grants program. While traditional non-profit organizations (what many people think of when they hear the word “grants”) often have a more established process for seeking and receiving funding along with a vast network of products and services, the Web3 space is just starting to develop mature tooling and workflows to address this emerging need.

Across Web3, there is a wide variation of tools and workflows that are being used today by teams, including traditional Web2-based tools like Google Sheets, Notion, Salesforce, and others with more and more Web3 native instruments, like Questbook, that are being developed specifically for the needs of these new kinds of organizations that crypto is enabling. The tooling type can be influenced by several factors, including the type of organization and its approach to building and managing its programs, the focus of its programs, the capabilities of its team, the complexity of its processes, and the specificity of its needs.

Many programs have a simple process for soliciting grant applications, especially for smaller grants (typically sub $30K).  Usually, the steps will include submitting the proposal details on a form, in Github, or directly in the community governance forum. For more extensive proposals, the process can be much more involved with detailed explanations, including a project plan that explains the milestones for the submission.

Once applications have been received, the review process starts for the grantor. Depending on the kind of organization, the review process can involve internal team members that sit on a grants team or committee, typically with Foundations or Ecosystem DAOs. An excellent example of this kind of structure exists with Aave Grants DAO and their Grants Committee. Sov wrote more about their program in his Aave Grants Retrospective. Aave Grants DAO has multiple part-time members involved in the review process, all known and respected community stakeholders.

In the case of Protocol DAOs, the review process typically involves community discussions through governance forums, with community members providing their thoughts and opinions on submissions and using mechanisms like Snapshot to vote on the proposals. The goal is to ensure that there is a proper process to ensure the review process is fair and transparent and that those involved in making the decisions are qualified to make those decisions. The challenge with this model is that it can be cumbersome, not a good fit for more minor proposals seeking grants, and can often preclude smaller grants.

After a grant has been reviewed and approved, the monitoring and evaluation of the project's progress start. The grantor may monitor for grants that involve multiple milestones to ensure the work is progressing and provide feedback or resources where needed or escalate issues depending on their process and bandwidth. For more direct grants that involve a few specific tasks or objectives, the grantor may elect to payout upon completion or half down when work commences and the rest of the payment when the grant has been completed.

One area that many programs researched struggle with is measuring impact. The challenge is that different programs consider different areas of impact, and the tools they use, including custom-built tools, often aren’t built to capture various factors. As a result, many organizations are trying to learn more about impact after the fact. The hope is that new tools can be built to help organizations evaluate and get actionable insights on the effects and usage patterns for projects, developers, and organizations.

Closing

If it’s not apparent already, we believe grant programs and innovative new approaches to funding great ideas will continue to play a significant role in the Web3 ecosystem.

If you are building a Web3 grant program and are interested in how Questbook could help, we would love to hear from you. DM’s are open.

Peace!

- Sid Rao & Sov

We were fortunate enough to have the opportunity to work with the Polygon DAO team on their initial launch, and we continue to work with them on an ongoing basis. Today, we’ll cover a bit of our shared history and how we have taken their feedback over time and improved our platform.

History

I wrote previously about some of Polygon’s History in my retrospective a few months back. In it, I described their origins from Matic and some of the different iterations they have seen over time with their grant programs, including the Matic Developer Support Program (launched in 2019) and #DefiForAll (established in 2021). At the height of the 2021 bull market, many ecosystem funds and grant programs were launched, like #DefiForAll.   Many of these ended up folding due to unrealistic expectations and oversized fund valuations that were not sustainable for the long term.   

Polygon knew that Polygon DAO and its grant program needed to be different. It had to be a sustainable program that could support projects over the long term by providing more than just funding but a holistic support framework.

Polygon approached this challenge by considering the best approach to structuring how it could onboard 1000+ new projects onto Polygon (a mission statement they continue to work towards even today). They realized that grants would be a critical part of this story but not the only answer. During these early stages, the vision for what was then known as the Polygon Ecosystem DAO started to take shape.  

One of Polygon’s first (and most important) initiatives was to delegate the flow of grants to the newly formed Polygon Ecosystem DAO (later, their name changed to just Polygon DAO). Early on, this was a key area of focus for the DAO Genesis Team in developing a more extensive governance model. The team realized they needed to build a platform that enabled and supported them. Thus, they launched the Polygon Village: A one-stop shop that could help guide builders in all the ways they can engage with and request support from Polygon and its vast ecosystem.

Today, Village is a robust and thriving community where builders can access not only grants but Jobs, Bounties, Welcome Vouchers, and Village Wonders (their accelerator program). In addition, Polygon Village has demonstrated the DAO Team’s thought leadership in going above and beyond a simple grants program to a comprehensive suite of support that can meet projects wherever they are in their journey.

Now that we have given you a bit of the background let’s dive into how we initially engaged with Polygon and how that partnership helped us to develop our Grants Management Platform.

Getting Started

Our team started to engage with Polygon in Q2 of 2021. At the time, Polygon was already one of the more active grant programs in the space, with Developer and Ecosystem Support Programs in full swing. They had a relatively high volume of grant applications. In addition, Polygon asked our team to help meet and interview different community members and grant applicants to garner feedback on their experience. Our goal in this was to see how Polygon could evolve its program to meet the needs of builders better.

We started the engagement by setting up many different individual Telegram groups to interview them and learn about the experiences, good and bad; they had in working with Polygon. We quickly discovered that feedback expectations were not always well aligned, confusing the process and causing misunderstanding of how grants were decided on and distributed. We also learned that, sometimes, just as important as the funding was the desire to work with Polygon to create greater brand awareness through their social media and ecosystem.

This feedback proved invaluable and helped us understand how we could better develop a workflow to optimize their current process and what steps we could take in developing Questbook’s Grant Management Platform better to meet the needs of grantor programs and applicants alike.

Workflow Assessment

In addition to engaging with applicants and community members directly, we looked at the workflows that supported the application process. For example, applicants needed to fill out a form, join the Polygon Discord, write a proposal in a dedicated channel, and wait for DAO Team members to provide feedback. In addition to the front end of the workflow with application intake and review, the team struggled with manual entry and tracking of applicant data which also proved challenging.

These processes took time and effort to manage as volumes increased, and things like success metrics or milestones were not well defined. Ultimately, this workflow didn’t meet their desired outcomes for improving SLAs and grantee satisfaction, and they were looking for options on how to improve but stay true to their goals and ethos.

We saw this as an opportunity to improve their experience by developing an optimized workflow and accompanying platform to support. This feedback helped us tremendously early on in developing our platform and tailoring it to the needs of grant programs across Web3.

Questbook Platform Launch

When Polygon DAO launched and added dedicated team members for managing the grants lifecycle, we went live with our grants management platform. The insights from working closely with Polygon DAO proved invaluable in building a platform that helped tie all parts of the grants management process into one seamlessly integrated tool.

*“Our product is all about making the process of Web3 Grants Management seamless. We tie together all the different parts of the grant lifecycle in one open-source platform.”

- Harsha, Co-Founder of Questbook*

With Questbook, the Polygon DAO team can now create, receive, review, track, and disburse grants all in one place. Without their insights and feedback, we would not have fully appreciated the importance of these kinds of problems and may not have correctly prioritized our time and resources. Instead, we thank them for their partnership in helping us to build a platform that delivers real value.

Some examples of this value are:

• Time spent reviewing and approving applications went from 2-3 months to now, on average, 15 days. Turnaround time is an excellent indicator because it relates to many aspects of the process flow (from intake to disbursement).

• A monthly application window where grants are submitted by the 10th of each month and targeted for disbursal in the last ten days of the month. This change allowed the Polygon DAO team to segment their budget and see what metrics, like applications received and total funds disbursed, would look like month over time.

• The ability to delegate review and approval of applications across different members. Our platform allows them to assign reviewers to proposals so the Grant Management team can monitor the review's progress through the grant lifecycle.

• Development of the evaluation rubric, a feature allowing programs to define custom criteria for evaluating proposals (helpful for grants teams with multiple members).

• A batch payment feature allows for grants to be allocated and disbursed efficiently across multiple applicants without heavy manual entry and one-by-one approval of funds sent to individual addresses.

"If not for Questbook, we would not have come up with this new structure. Community insight docs were the key to setting up the process.”

- Marco Grendel, Polygon DAO Lead

Closing

Thanks to the efficiencies gained from Questbook, Polygon has identified many innovative new projects they wouldn’t have caught otherwise. As a result, the grant process has become smoother and more decentralized for both the protocol and the applicants. However, we still see much potential with all the success we have seen. As Joel John mentions in Grants and Web3:

“The end state for ecosystem grants will be to tackle problems traditional financing cannot fix. These are usually public goods that require time and years of commitment.”

We couldn’t agree more, and that’s why we wake up every day excited to build. We talked to various programs and thought leaders across the Web3 space daily. We would welcome the opportunity to develop partnerships with others as we have with Polygon DAO.

Until next time,

- Sov

As I have researched various grants and incentives programs since late last year I have started to understand some of these models better and thought it would be interesting to dive in a bit to some of what I have learned as it applies to a few different kinds of organizational models.

As I started to brainstorm on writing this article I thought back to The Sovereign Individual.  I know the book is really overplayed, especially in our space, but bear with me here.  In Chapter 5: The Life and Wealth of the Nation State, the authors discuss the work of Frederic Lane who developed a mental model for understanding where the control of government lies.  Lane believed there were three basic alternatives in the control of government, each with different sets of incentives: proprietors, employees, and customers

1. Proprietors: run for the benefit of their masters.  The Sultan of Brunei is mentioned in the book.  I think a good example for our space would be some of the cults of personality we see in crypto or highly centralized NFT projects where one or two founders hold all decision making authority (and keys to the treasury.)

2. Employees:  USG is the example mentioned in the book, for our purposes I think the corollary would be project teams and holders of the native governance token (assuming they are actively participating in the functions of governance.)

3. Customers:  Merchant era Venice is used as an example in the book.  In our example this could be users of the protocol or project or a specific L1/L2 network or project that the DAO helps to support.  A bit more on this concept a little later.

Like many of the concepts in the book this model holds true today decades after it was authored.  As I review the different approaches to organizational models prevalent in our space today I find that all of the different examples I have come across fall into one of these three camps.  In this article I will review a few of the more prevalent models including Foundations, Ecosystem DAOs, and Protocol DAOs.

I’ll attempt to contrast each of these structures against the different examples from the Sovereign Individual mentioned above and look at how these organizations decide on their goals, solicit and review proposals, allocate funding and ultimately make decisions on who to fund and how they will measure success.

Let’s start with Foundations.

Foundations

One of the reasons I originally became interested in grants and incentives programs was my background as a board president for a regional food bank.  The food bank is a registered 501c3 non profit in the US and, since the beginning of the pandemic, we have seen critical funding come in through grants from both government (federal, state, and local) along with different foundations.

Many times these “traditional” foundations are created through an endowment or initial seed fund and they have specific goals and objectives defined for how their funds should be used.  These goals and objectives are usually defined by the creators of the foundation and stewarded over time by a board of directors or fund managers who have a fiduciary responsibility.

The makeup and structure of these organizations in crypto is not much different from traditional foundations with some key differences:

• Initial funding for their treasury usually comes from a native token creation event that underlies the network or protocol they steward and support.

• They are focused on the development and sustainability of their ecosystem versus a public good like feeding people or building roads (though, sometimes these things can intersect across the metaverse/meatspace)

In looking at what kind of organization these foundations would most closely resemble from my Sovereign Individual example I think it would probably be an organization that runs for the benefit of its employees (namely the largest token holders, of which the Foundation and their stakeholders are usually part of.)  These organizations typically decide on their goals in alignment with what they believe will bring the best ROI for the token holders and drive activity on their network or protocol, specifically incentivizing developers and builders to create systems and applications that will drive up overall network value (a la the Fat Protocol Thesis by Joel Monegro.)

In terms of how these foundations solicit proposals it can vary.  Many of them have opted to use various kinds of submission methods and management platforms including Notion, Google Suite, Salesforce or crypto native apps like Questbook (yay!).  Overall, there is a lack of standards in this realm today and that is why at Questbook we believe there is an opportunity to learn what is working and not for many of these groups and see how we can purposely build our product to better fit the needs of the wider Web3 Community.

Funding allocations can vary as well and, at Questbook, we have definitely seen a decline in allocated funding amounts since onset of the bear market.  On a very positive note we have also seen many of our partners step up due diligence in review and overall allocation of funds.  Due to the centralized nature of many foundations, it is a relatively small group of stakeholders within the Foundation that makes that decision and is ultimately responsible for the results.  This can make the job of allocations fairly easy in terms of making a decision but those that have to live with the decision after the fact can feel that weight over time if things don’t go the way they had hoped.

“Everyone has a plan until they get punched in the mouth”

– Mike Tyson

Another aspect to foundations and more centralized grants programs is sometimes they can be stepping stones to more traditional VC opportunities.  There are many foundations today that maintain strong relationships with a network of VC’s and use this network to help broker introductions to these VC’s in addition to their own ecosystem funds that back early stage projects.

At Questbook, we have seen success with teams that set funding goals month to month or quarterly and work to align those funding goals to specific outcomes where there is also buy-in from the wider community.  Even if the decision making process for foundations is centralized that doesn’t mean getting feedback and learning from your community through engagement in forums, social, or events is off limits, quite the contrary.

We have found that foundations may vary in their desired levels of transparency (especially if they are more of the stepping stones to traditional VC as mentioned before) and, because of this, we have implemented privacy controls into our platform that allow for grants and bounty programs to mask application data in a way that is encrypted where even our teams are unable to see applicant and disbursement data.

Now that we have taken a high level look at foundations let’s dive in a bit to a more varied type of organization: Ecosystem DAOs.

Ecosystem DAOs

Ecosystem DAOs are interesting organizations that have started to pop up more and more since the last bull market.  If you are wondering what exactly an Ecosystem DAO is, it is a DAO that was created to help bolster support for a specific community or purpose.  Some examples of Ecosystem DAOs today would be MetaCartel and MolochDAO for Ethereum, Polygon DAO for Polygon (a Questbook Partner) Aave Grants DAO (also a Questbook Partner) for Aave, Climate Collective (also a Questbook Partner) for Celo, or Uniswap Grants Program (UGP) for Uniswap.

Usually these organizations were founded (and initially funded) directly from a grant or initial disbursement from the organization or community they were intended to support and their purpose can vary from functions like specifically managing grants and bounties for the community (like with Aave Grants DAO) and other times grants and bounties might just be one of the functions they help to provide.

As I compare these organizations to my Sovereign Individual example I think these mostly align with an organization that is run for the benefit of their customers (ultimately the project/protocol and their wider community).  Because of this their ethos is very much community first and many of them start with heavy community discussions and involvement to form their goals and areas of focus as they form and start to build their structure.  You can see examples of this in the initial forum post defining Polygon DAO or in the initial forum post defining UGP.

Ecosystem DAOs are similar in many ways to foundations in how they solicit and review proposals in their use of tools like Notion, Google Suite, Airtable and Questbook (yay again!) but we have seen them be more innovative in how they build systems and workflows around these toolsets that support collaboration and community involvement when compared to other types of organizations.

Examples of this innovation I could point to would be how Polygon DAO created Polygon Village as a one stop shop where builders can come to engage the community and find all the ways that Polygon DAO can support them.  Climate Collective and Polygon DAO have also seen success in adopting our platform to improve management of their grants workflows while driving down SLA’s in terms of response, review and approvals of their grants.

For funding allocations usually these groups have set budgets for some period of time like with Aave Grants that is approved and allocated from Aave Treasury or Polygon DAO was formed with an initial amount of funding from the previous DefiForAll Fund.  It is ultimately up to the DAO Lead or Grants Manager (if the Ecosystem DAO is specifically for management of grants) to decide on budgets and work within those constraints across the budget term.

In terms of the decision making process these groups usually operate by having analysts and reviewers that are responsible for ensuring the applications coming in meet the qualifying criteria set forth by the DAO and may have a process of peer review for larger or more complex applications.  An aspect of our product we have built thanks to feedback from Ecosystem DAOs like Polygon is features like evaluation rubric (used to help define evaluation criteria) or customizable reporting dashboards that can help to show trending metrics like disbursements, application flow, submission queue and more.

We have found that most of the teams we would group as Ecosystem DAOs want to be transparent and open in their approvals process including exposing the names and approval status of their applicants.  Whether it be full transparency or some level of privacy as mentioned before with Foundations our platform can help to provide the level of transparency desired.

Now that we have reviewed Ecosystem DAOs let’s take a look at Protocol DAOs and compare them using some of the criteria we have applied for the previous two types of organizations.

Protocol DAOs

Protocol DAOs are a more classic representation of the original “DAO” model (minus the mega hack and rollback that brought us $ETC).  These organizations tout decentralization and make every effort to drive engagement and governance from their communities using mechanisms like forums for discussion (Commonwealth and Discourse being the most popular) and governance token voting (using tools like Snapshot).

While these DAOs look to fulfill crypto’s ultimate promise of decentralization and further our efforts in the battle against Moloch they are incredibly hard to govern at scale and face unique challenges with driving balanced community engagement and fair consensus across all holders of the native governance token.  Some of the more prominent examples of these kinds of organizations would be Compound, Balancer, and MakerDAO.

First, let’s compare one last time against my Sovereign Individual example.  For these organizations I think that they would fall most into the camp of an organization that operates for the benefit of its employees (i.e. the native token holders participating in governance). This can create challenges in balancing governance with the largest token holders teaming to ensure their interests are met while minority holders that may have less weighted equity per wallet address (but may outnumber in quantity) are at a disadvantage in being able to have their voices heard or interests recognized without the ability to coordinate.  I think because of this and a certain percentage of these minority token holders being pure speculators we don’t see a balanced form of governance across many of the Protocol DAOs that are operating today.

In looking at how these kinds of organizations define their goals it is usually started in much the same way Ecosystem DAOs approach, through forums.  With these protocol DAOs many times there are respected community stakeholders (usually founders and/or core developers) that start these conversations and ask for other respected members of the community to weigh in and share their thoughts and opinions.  These discussions can move to Discord and other collaboration tools until proposals are formed and eventually voted on using systems like Snapshot.

These proposals can range from things like changes to the protocol, funding decisions, human resource decisions and a variety of other topics.  Whereas Foundations and Ecosystem DAOs many times have a more centralized form of decision making (more akin to traditional organizations) Protocol DAOs look to drive these decisions all from the community and its stakeholders.

Sometimes these proposals are focused on development activities, marketing or other community objectives that bleed into grants and bounties and that’s where our platform can come into play.  At Questbook we have created integrations with both Discourse and Commonwealth that allow for on-chain updates to be pushed between platforms allowing for tighter integration between platforms that Protocol DAOs use for governance and grants managements.

A major innovation we have helped to build at Questbook is the concept of Delegated Domain Allocators (DDA).  We developed this governance model as we witnessed some of the challenges (and opportunities!) present in the Protocol DAO model. At a high level the DDA model allows the community to select a grants manager (this can be outsourced to Questbook or one of our partners) or can be done “in house”, that is the choice of the DAO.  The Grants Manager would be a highly visible community stakeholder that is responsible for oversight and management of the overall grants and bounties budget.  Under the Grants Manager we have Domain Allocators, these are other highly visible and respected community stakeholders that have a specific area of expertise (security, SDK, etc.)

Each of the domain allocators are given a specific budget that they have discretion to approve and disburse but all of their actions would be done in a way that is visible and open to feedback from the wider community.  We believe that this model cuts down on the amount of overhead and time wasted by the community delegating on items that could be quick approvals but still forces oversight and community awareness on the decisions being made by the domain allocators.

We recently started to work with Compound on CGP 2.0 on this approach and have received positive feedback and are in active conversations with many other protocol DAOs that are evaluating this model for their purposes.  While this model is not required for Protocol DAOs to use the Questbook platform we believe it offers a great option for those that are looking to either revamp their existing grants program or look at developing one anew if they have not yet created one formally as of yet.  We also believe that DDA could offer opportunities for Ecosystem DAOs and Foundations that are looking to launch parallel community funds to their more centralized grants programs as an option versus building a new structure from scratch and going through the pains of deciding on how to manage and steward them over time.

Closing

I hope you found this article informative.  We are still very early (yes, I said it ... we’re still early) in the development and growth of these organizational models and it’s an exciting time to be paying attention as things develop.  I have been told bear markets are for building and there is no better way to get exposure to building than working with these grants programs and seeing how they are contributing to the decentralized future that all of us know is possible.

Until next time, frens.

Sov

We created more than 100 tutorials for web2 engineers to learn web3 development. All free of cost and all of them all of them hosted on GitHub.

All the tutorials can be followed at https://learn.questbook.xyz

• All the content has been created by the community : https://github.com/questbook/webapp-content

• All the content is in the form of text based code alongs. This is the fastest way to learn programming, we’ve found after a lot of research.

• There is now a community of 20K developers who are learning web3 using these tutorials, and ever growing.

Present

As of March 15 2022, we’ve launched a grant tool : https://grants.questbook.app

The grants tool allows DAOs and Protocols to run their grants process in a completely decentralized way. Again, a tool that is completely open sourced and decentralized. Meaning, Questbook doesn’t own any data. All the data is either on-chain or on decentralized storage networks.

A grant manager is able to make the grant program transparent and streamlined instead of using dozens of tools like notion, airtable, google forms, telegram etc.

Using this tool grant programs are able to

• Payout grants as and when milestones are being hit, otherwise very hard to track

• Test multiple grant programs in parallel

• Approve, reject and request more information from applicants

Within 10 days of launch Polygon and Aave are already on board and almost half a million dollars in grants have been disbursed via the tool. Our waitlist has 20 top protocols waiting to start using the grants tool.

https://twitter.com/HarshaKaramchat/status/1507061637249138689

Mid term future

By Q2 2022, Questbook will onboard all the DAOs & Protocols to run their grant and bounty programs.

By end of Q2 2022, we’ll launch an opportunity wallet. This is the gateway for great developers, designers, community managers and marketers to earn in crypto.

By importing their web2 credentials to web3, the Opportunity wallet will surface the best opportunities for them to earn in crypto.

There are only 2 ways we’ll onboard the next 10M users into crypto - that’s going to be games or giving people an earning opportunity. Opportunity wallet focuses on the latter.

Instead of getting their first crypto by buying it off an exchange using an onramp, Opportunity wallet will enable users to earn their first crypto by contributing to projects - fixing a bug on github, writing a marketing twitter thread etc.

Long term future

In the long term, Questbook will become a DAO and launch a token.

This DAO and token’s sole purpose will be to attract more builders & contributors into web3 in a decentralized fashion.

More details coming soon :)

Know more at https://questbook.xyz