For Gitcoin Grants Round Five, we ran a CLR matching experiment that raised an additional $26,740. In this post, we explain how and announce our plans for Round Six.
Gitcoin Grants: Matching your donations to public goods
It’s safe to say that Gitcoin CLR Rounds are becoming a significant source of funding for public goods in the Ethereum ecosystem.
Since January 2019, Gitcoin Grants has raised an incredible amount of $1.8m for (mostly Ethereum-focused) public goods. The growth in community participation has been more than amazing: What started off with 200 contributions and $38k raised in Round One, grew into 8000 contributions and $475k raised in Round Five.
It is truly incredible to see the impact quadratic funding and a community working together can have. Even so, most projects on Gitcoin Grants are still being underpaid. The pool of funds Gitcoin Grants has available to match donations is relatively small: No matter how funds are allocated, there’s only a limited amount of money available to match donations. For example, last round, the matching pool was $250k.
“While it has a relatively low amount of funding at present, and so inevitably underfunds almost everything it touches, we hope that over time we’ll continue to see larger sources of funding for the matching pools appear. With larger amounts of funding, Gitcoin Grants could serve as a more significant funding stream.” - Vitalik Buterin (Source)
So: Gitcoin Grants is establishing itself as an efficient way for the Ethereum community to raise funds for the public goods it cares about.
But: In order to maximize the potential of Gitcoin Grants, we’ll need to figure out how to grow the matching pool. How do we go about that?
Several potential sources of funding have already been put forward, among which MEV auctions and transaction fees of various DApps. A discussion of these mechanisms does not fit into the scope of this article, but we encourage readers to take a look and consider all possibilities. We’re also looking forward to seeing more experiments related to public goods funding.
For Gitcoin Grants Round Five, we ran our own quadratic funding experiment to showcase how Panvala can help raise more money for Ethereum public goods.
The idea behind it was simple: Double matching.
Yes, that’s right. Gitcoin matched all donations, and Panvala provided a second, extra match for all donations made in PAN tokens.
The result? 268 donations and an extra $26,740 raised for Ethereum public goods.
How? And where did those matching funds come from? Let us show you!
Panvala: How we subsidize public goods
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. 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.
For example, in the quarter that ended on January 31, Panvala matched donations from our sponsors at 11.2x. For each token that came into the token supply as a donation, 11.2 PAN went out as grants to fund Ethereum public goods.
How Panvala amplifies your Gitcoin Grants contributions
Because PAN tokens are released quarterly, the Panvala community decides on grant allocation quarterly as well. Last quarter, we decided to use 1.5m PAN (worth about $20k) of our new token supply to serve as a matching pool for Gitcoin Grants Round Five.
For every donation made to a Gitcoin Grant in PAN, both Gitcoin and Panvala matched it. At the conclusion of the grants round, the 1.5m PAN matching pool was distributed using the same CLR formula that Gitcoin uses.
The great thing about that? The top projects got $1k - $5k more in funding because some of their donations were made in PAN instead of in DAI!
What we’re planning for Gitcoin Grants Round Six
For the previous Gitcoin Grants Round, we ran a matching pool of 1.5m PAN. For Round Six, there will still be 1.5m PAN available for matching.
However, instead of PAN donations to every project being matched, only PAN donations to projects chosen by token holders will be matched.
We’ve made that decision to ensure PAN token holders have a larger influence over which donations will be matched. Since they’re the people who are diluted to make Panvala’s matching possible, it’s only fair that PAN holders get to decide where those matching funds are allocated. At the same time, this offers an extra incentive for people to hold PAN tokens. The more tokens are being held, the larger the multiplier and the larger our funding stream.
When Gitcoin Grants Round Six kicks off, we’ll post a document with an overview of all projects that are eligible for Double Matching on our Twitter. Make sure to follow us there to stay up to date with everything related to our Double Matching Experiment!
We’re excited to see which projects will receive double matching in Gitcoin Grants Round Six!