An Introduction to Gitcoin Grants and Quadratic Funding

Philanthropy
Written By Drew Simon

If you’re active in the Web3 space, you’ve probably seen a lot of buzz lately around Gitcoin Grants. The Gitcoin Grants program is a community-driven fundraising protocol, delivered quarterly, that “empowers everyday believers to drive funding toward what they believe matters, with the impact of individual donations being magnified by the use of the Quadratic Funding (QF) distribution mechanism.”

Wow, sounds incredible, and a little bit confusing, right? Don’t worry, we’ll break down and demystify each of these elements in this article so you have a basic understanding of the mechanics behind Gitcoin Grants, and are confident making your first donation to a Gitcoin grantee.

Funding what matters

Gitcoin’s overarching goal is to “Fund and Build What Matters.” The primary way that they accomplish this is through their Gitcoin Grants protocol, which provides support to public goods projects building in Web3. To date, they have had an incredible impact on the Web3 ecosystem, supporting many pioneering Web3 projects at the ground level, including Optimism, Coin Center, 1inch, Toucan Protocol, and many more.

Gitcoin recently release their first Impact Report, demonstrating the sheer scale of their impact, which includes:

  • Contributing $50M in funds to public goods projects

  • Facilitating 3.8M unique donations from 270K unique supporters

  • Funding 3,715 projects

The next round of the Gitcoin Grants program, the Beta Round, officially launched on April 25, 2023, and includes hundreds of incredible Web3 Public Goods projects looking for support. The Beta Round includes five core rounds, which were selected by the Gitcoin community, and a number of featured rounds, which are supported by partners of Gitcoin. The core rounds include:

Individuals wishing to donate to a project through Gitcoin Grants have the opportunity to receiving matching funds through a unique Web3 innovation called Quadratic Funding, which helps amplify the impact of their individual donation.

What the heck is Quadratic Funding?

According to Gitcoin, Quadratic Funding is “the mathematically optimal way to fund public goods in a democratic community”. For a 60 second introduction to quadratic funding, we recommend checking out this video from the Gitcoin team.

In a nutshell, there are three parties in a Quadratic Funding campaign: the everyday citizen, the matching donor, and the grantee, which is an individual or cause soliciting funding for their project. The grantee puts forward an idea for something they would like to receive funding for, let’s say, a new Web3 education project for underserved communities, and their project gets added into the appropriate grant round, which in the case of the Beta Round, would be the Web3 Community & Education round.

The everyday citizen can then view all the grant proposals and decide which ones they want to support by making a small contribution. The beauty is, that even the smallest of contributions, let’s say $1 in ETH or DAI, can have a massive impact, and this is where the matching donors come in to play.

The matching donors contribute funds to a matching pool which is fundraised by Gitcion before the granting period begins. This is used to provide matching funds to the contributions of individual donors, or the “crowd”. Quadratic Funding elevates the crowd’s favorite projects, by contributing more matching funds to the grants that receive the highest number of contributions, as opposed to the highest value of contributions.

For example, let’s say there are 10 donors who donate $1 each to project A, and 2 donors who donate $6 each to project B. Although project B received a higher value of contributions than project A, project B would receive more matching funding, as they were supported by 10 individuals, instead of 2. Quadratic Funding makes use of a special formula to determine exactly how funding is matched, ensuring total transparency and fairness in the process.

This amplifies the impact of smaller donors, making sure that they have a voice in how community funds are distributed, while ensuring the projects with the most widespread support get the funding they deserve. Check out our blog post on how Quadratic Funding will revolutionize crowdfunding for more information on the exciting potential of this innovation.

“Gitcoin grants quadratic funding is not just for funds allocation, it’s also a great signaling tool! For the last few rounds, going to https://gitcoin.co/grants/ (sort by top match) has led me to discover a lot of really cool Ethereum projects I previously did not know about.”
— Vitalik Buterin, Founder of Ethereum

I want to make a donation to a Gitcoin Grant, how do I get started?

There are two elements to donating to a Gitcoin Grant:

  1. Setting up a Gitcoin Passport

  2. Making the donation

A Gitcoin Passport is a digital identity that aims to prove that you are, well, a human, without the risks that come with storing all your personally identifiable information.

The Gitcoin Passports aims to prevent sybil attacks, “a type of attack on a computer network service in which an attacker subverts the service's reputation system by creating a large number of pseudonymous identities and uses them to gain a disproportionately large influence.” In the case of Gitcoin Grants, a sybil attack could involve setting up a bunch of wallets and making tons of small contributions to one grant, thus inflating the grants matching funds. The Gitcoin Passport does an excellent job of preventing this by making it difficult for bad actors to set up multiple accounts.

To help you get started, we’ve put together an introductory video on how to set up a Gitcoin Passport and donate to your first Gitcoin Grant.

If you don’t have a crypto wallet, don’t worry! We recommend you check out this helpful guide from Blu3 Global on how to get from fiat to making your first Gitcoin Grant donation.

Have any questions? We’re here to help! Don’t hesitate to DM us on Twitter, or email us at info@cryptoaltruism.org.

Crypto Altruism’s Gitcoin Beta Round Proposal

Crypto Altruism is honored to submit our first proposal to the Gitcoin Grants Program, focused on helping onboard the next generation of Changemakers and Nonprofits to Web3. Specifically, we aim to achieve the following key milestones:

  • Milestone # 1 – Web3 Changemaker Toolkit - Developing a Web3 Changemaker Toolkit that contains educational content, resources, and case studies for Nonprofits, grassroots organizations, and Changemakers who are interested in using Web3 to advance their cause. It will serve as a one-stop shop for Nonprofits and Changemakers looking to use Web3 tools to grow their movements.

  • Milestone # 2 – Re-design of Crypto Altruism Content Hub - Re-designing and re-launching the Crypto Altruism site to create a true hub for the exchange of ideas on Web3 social impact. The result will be a more accessible experience for those looking to learn about the social impact potential of Web3 while allowing for additional integrations including free online courses, sharable infographics, and a versatile database of Web3 social impact projects.

  • Milestone # 3 – Special podcast series focused on Nonprofits in Web3 - Funding the release of a special, 10-part Crypto Altruism Podcast series interviewing 10 pioneering Nonprofit leaders who have successfully used Web3 tools to advance their cause.

Interested in learning more? Make sure to check out our full proposal, Crypto Altruism – Accessible Web3 Education for Nonprofits and Changemakers.

Drew Simon
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