On July 3, the latest successful round of donation matching on Gitcoin Grants came to a close. This sixth round of donation matching brought in $226,000 in individual donations, which was matched by a $175,000 matching pool using quadratic funding. Quadratic funding democratizes donation matching by allowing small donations from many people to be matched just as much as larger donations from a few wealthy people, and Gitcoin Grants has been the best place to see this new mechanism in action. On average, donations were matched at 1.77x: for every dollar donated by individuals, grantees received $1.77.
Panvala’s token holders decided to continue matching donations made in PAN on Gitcoin Grants as well, just like we did last quarter. 75% of the quarter’s total budget was set aside for this purpose, giving us 1.42M PAN to work with. The $226,000 total of individual donations included 362,777 PAN, which is worth about $13,680 as of July 3. Comparing the donated PAN tokens to the matching budget we set aside gives us a matching multiplier of 4x: for every PAN donated by individuals, grantees will receive about 4 PAN. In total, Panvala was able to provide about $55,550 to grantees, up 65% from the $33,450 they received from Panvala last quarter.
Stake PAN for Your Community
This quarter, we introduced a staking program that allows token holders to stake PAN for their community to earn donation matching capacity. That means that Panvala’s full donation matching power was directed towards grants that were chosen by Panvala’s communities, while other grants that received PAN donations were matched at a lower rate of 1.46x. Our five communities are Commons Stack, DAppNode, MetaCartel, DXdao, and Hashing it Out.
|Hashing it Out||636,169.29||14,889.70||40.36%||0.00%||4.64x|
The Commons Stack community brought in the most donations to the projects they support with 187,652 PAN of donations. All of the communities staked tokens to earn donation matching capacity, but how does the quantity of staked tokens affect the matching? We calculate the utilization for each community’s cluster based on the ratio of donated tokens to staked tokens. Communities with an average utilization or below are within their capacity: staking more tokens won’t earn them much more matching, so they can focus on bringing in more donations. Communities whose utilization is much greater than average have exceeded their capacity, and could stake more tokens to earn more matching. Notice that Commons Stack and MetaCartel had some overflow: their donations exceeded the capacity of their staking clusters, so they didn’t get the highest multiplier of 4.64x: they got 4.62x, and 4.41x, respectively. It’s always great for any community to bring in more donations, but communities that have exceeded their capacity can also stake more tokens to earn more matching.
How Panvala Works
To understand how Panvala subsidizes public goods, it’s useful to take a look at Bitcoin.
How does Bitcoin subsidize its security? By creating new Bitcoins.
In Q4 of 2019, Bitcoin users spent 2500 BTC on transaction fees. BTC hodlers diluted their holdings to fund 150,000 BTC of block reward subsidies. In other words: They’re matching contributions to Bitcoin’s security at 60x.
It’s exactly that model which Panvala uses to subsidize public goods.
Panvala tokens are released every quarter, at a decaying rate over time - just like Bitcoin’s block reward. But unlike Bitcoin, we shouldn’t expect the supply of PAN to follow a predictable schedule. Tokens aren’t just released from Panvala — donors contribute tokens back to the supply. That’s because every quarter, Panvala’s new token supply is granted to teams working on public goods in the Ethereum ecosystem.
The supply schedule gives us a curve for the maximum possible circulating supply, but the actual circulating supply will fluctuate based on economic conditions and the flow of donations. As the circulating supply gets closer to 100 million, the grant budgets shrink until they approach the flow of incoming donations. Panvala isn’t a perpetual motion machine: eventually it will reach a point where dollars in equal dollars out.
Before we reach equilibrium, however, Panvala’s initial token supply acts as a matching multiplier for donations. The more PAN tokens are held, the bigger the multiplier is.
Why would anyone hold PAN tokens? To influence Panvala’s grant allocation by voting on our quarterly decisions, and by staking PAN to earn more donation matching capacity for their communities. You can read more about that here.
Imagine that no one believed that voting power in Panvala was useful, so everyone sold their tokens as soon as they received them. Panvala would issue tokens as grants, but they would all be sold to the only buyers left: donors. The multiplier would be 1x: the flow of donated tokens in equals the flow of granted tokens out.
However, since Panvala’s mainnet launch in August 2019, most grant recipients have held on to their PAN tokens in order to have a say in Panvala’s grant allocation.
Because some people are holding on to tokens, Panvala has more rewards to distribute than just the donations.
Panvala and EIP 1559
Since donated tokens in Panvala are removed from the circulating supply, it’s useful to compare our results with Ethereum’s EIP 1559, a proposal to remove transaction fees from the circulating supply on an ongoing basis. Over the last 90 days, the supply of ETH has been inflated by 1.1%, issuing $26 million worth of ETH to subsidize the network’s miners. Over the same period, $3.89 million was spent on Ethereum transaction fees at a market cap of $23.5 billion, so with EIP 1559 in place, the current supply of ETH would be 600 times the transaction fees removed from circulation.
In comparison, Panvala’s circulating supply was inflated by 4% this quarter, with 1,899,401 PAN released from the token supply. Since 362,777 PAN were donated of the current supply of 47 million PAN, the current supply of PAN was 130 times the donated tokens removed from circulation. That means that Panvala’s donors are currently removing much more PAN from circulation than EIP 1559 will do for Ethereum.
Next Quarter’s Donation Matching
We’ve now matched donations made with PAN on Gitcoin Grants for two quarters, and we’re going to keep it going! If you want to influence which projects can earn the most matching from Panvala, get involved in one of our five current communities: Commons Stack, DAppNode, MetaCartel, DXdao, and Hashing it Out. If you’re part of a different community that wants to earn donation matching from Panvala, we’d love to get you involved!
With Panvala, we aim to grow a league of communities that compete to bring in the most donations, but all benefit when any community succeeds because they’re all sharing the PAN token system together. We’ve started with Ethereum-focused communities, but Panvala is for everyone. We’re looking forward to getting more and more communities on board. To get started, email the Panvala Caucus at email@example.com.