🆁🅴🅲🅴🅸🆅🅴 🆂🅴🅽🆂🅴 🅼🅴🅳🅸🅰 The Hands-Down Best Bants About Fostering Developer Communities in Web3: GRANT PROGRAMS 🔥🧨🔥 — Issue #15

Key Points:

This article will discuss the benefits and drawbacks of grant programs, examples of well run grant programs, as well as key considerations and thought exercises for establishing a successful one if you are a new protocol.

Protocol teams have spent time, money, and effort in recent years attracting developers to build on top of their networks.

The reason for this is simple: great developers are required for protocols to succeed.

The value of a blockchain protocol’s network grows as a result of developer and user activity, allowing the protocol to evolve further. Protocol teams rely on their community to develop verticals (DeFi, Gaming, NFTs), tools, and cross-chain infrastructure. Given the importance of developer activity, the following are some of the most common engagement strategies used by blockchain teams:

Grants 💰 — Programs that provide non-dilutive capital to teams that are developing on top of or for a specific protocol.

Ecosystem funds💰 are managed funds that invest dilutive capital in order to grow a specific ecosystem or protocol.

Hackathons👨🏿‍💻 — Blockchain protocol-hosted events in which developers gather for a short period of time to build new decentralized applications on top of the protocol in exchange for cash prizes and other benefits.

Protocols employ any or all of these strategies, with the goal of reaching project developers at various stages of “idea readiness.”

Benefits of Grant Programs🍱

Designed for public goods: Ecosystem grants do not include equity stakes in any of the funded initiatives. No-strings funding enables the creation of public goods (e.g., infrastructure, open-source tooling) and initiatives that benefit the ecosystem but are not motivated by profit or investment return.

Versatile and adaptable: Grant programs have the flexibility to define desired grant projects or leave the criteria open-ended — they can fund anything from small value-add activities to large-scale projects, allowing for the nimble and targeted deployment of resources that benefit the protocol.

Increased user adoption: A blockchain network with a broader range of better and more useful applications, tools, and infrastructure eventually attracts more user adoption, which drives protocol growth.

For Developers: Developers who receive grants from top protocols gain a lot of value as a result of:

• Excellent APIs and tools that do not frequently fail.
• The ecosystem has excellent onboarding, education, and code examples.
• Access to fantastic events (such as hackathons) and a developer community within the ecosystem.
• The protocol’s success drives project exposure and awareness.

Grant programs’ disadvantages➖

Limited ability to fund large-scale efforts/mature projects : In contrast to funds where foundations may partner with external VCs to raise large amounts of capital for deployment within the ecosystem, grant programs are typically much smaller in size and optimized for public goods rather than mature protocols with a path to commercialization. Grants, on the other hand, can be an excellent bridge between project inception and venture funding for developer teams.

Grant program can be centralized and untransparent: In many cases, it is unclear how protocol teams decide which grant programs to fund, who to allocate funds to, and how to hold them accountable. While grant programs are excellent for incentivizing targeted development, a lack of transparency may raise concerns about the ecosystem team’s inherent biases or prejudices. Many of these concerns, however, can be addressed through carefully designed grant programs such as LEGO, Lidos’ grant program in which the DAO can elect nominees to participate in the grant funding process.

Examples of crypto grant programs🎥🎥👇🏿

⭕LEGO:

Lido is a liquid staking protocol with the LEGO (Lido Ecosystem Grants Organization) grant program that rewards community members who contribute to the improvement of the Lido protocol and the staking ecosystem it supports — with verticals ranging from validation tech to DeFi integrations and more.

Size: As of July 26, 2022, the maximum quarterly budget is 240k LDO, which is approximately $300k USD.

Structure: LEGO is made up of a council of six founding core members who make large funding decisions, as well as a number of DAO-nominated members who can award smaller grants based on community interests. Grants are classified based on their size and required effort, which determine the extent to which the broader organization is involved.

Benefits: DAO-nominated members allow for (albeit limited) community representation in program funding efforts; defined funding verticals provide a loose scope for potential initiatives.

⭕GITCOIN:

Gitcoin is a crowdfunding platform where developers can be compensated for their work on open-source software. The DAO governs Gitcoin Grants, which allows individuals to secure funding for public goods projects (e.g., open source software, journalism, public health, environmentalism).

Size: To date, Gitcoin has funded $43.98 million in public goods through 2818 grants (not including tips, ads, and bounties), with individual crowdfunding aided by additional donations from philanthropists (see below for details on quadratic funding).

Structure: As a crowdfunding platform where anyone can submit proposals/bounties, Gitcoin provides limited structure to the grant and decision-making body. Interestingly, Gitcoin makes use of a mechanism known as quadratic funding, which allocates additional funding to projects based on their impact and number of contributors.

Individual donations to open source projects will be matched by additional philanthropic funding to increase the impact of each project’s votes (e.g., a project that gets 100 individual donations would be matched with a higher amount than one with 10 donations, regardless of individual donation amount).

Benefits: Possibly the most decentralized grant program, Gitcoin uses quadratic funding to ensure adequate prioritization of projects of widespread interest.

⭕ECOSYSTEM SUPPORT PROGRAM OF THE ETHERUM FOUNDATION :

The Ethereum Foundation’s Ecosystem Support Program is a non-profit organization that funds and supports open source projects with a focus on universal tools, infrastructure, and research for Ethereum developers. In addition to funding, the ESP offers non-financial assistance in the form of office hours (e.g., feedback/guidance, networking).

Size: The ESP allocated $26.9 million USD to 136 projects in 2021. Grants range from $250 to over $200,000.

Structure: All decisions are made internally, and the ESP structure is a mystery. Targeted grant rounds cover topics or areas of particular interest to the ESP.

Benefits: While the ESP’s decision-making process is opaque, the ESP provides more than financial support by providing feedback and networking opportunities to the Ethereum development community.

What to think about when putting together a great program.👇🏿👇🏿

• Optimize your program structure to meet the needs of your foundation: Some protocols may require focused assistance on a limited number of initiatives, whereas more established protocols may prefer a more open-ended platform to crowdsource a broader range of development. Optimize your grant program for the protocol’s needs and life stage.
• Provide recipients with more than just financial assistance: By providing office hours, in-person events, and networking opportunities, protocols can capture value that extends beyond the scope of grant proposals. These value-added activities contribute to the development of a vibrant, collaborative developer community, which is essential for the growth of decentralized protocols.
• Be as open as possible: The decentralized nature of blockchain networks should be reflected in grant programs. As the protocol evolves, ensuring transparency throughout the process and providing opportunities for community input can empower developers by alleviating concerns about bias and ambiguity in decision-making.

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Fin 🔚