When an individual or team come(s) up with an innovative idea, often the first source of funding they turn to is in the form of a grant. Grants in the blockchain ecosystem are usually milestone-driven and issued by either foundations or patron organisations. Recently though, there has been a new approach to promote ecosystem development. Free TON, a blockchain with roots stemming from the Telegram Open Network community and a live instantiation of the Telegram Open Network protocol, has focused on endorsing ‘permissionless innovation’ within its ecosystem. Free TON has been using decentralised contests as opposed to issuing grants to reward those that are making contributions to its network. Whilst it is still early days, this innovative rewarding mechanism used by Free TON could be a secret ingredient that other blockchains could adopt, to assist them to foster faster innovation and community growth within their own ecosystem.
When it comes to fundraising, grants are often a good place to start. Grants are distributed to individuals or teams with no expectation of return from grantors (e.g. there is no surrendering of equity or requirement to pay back the principle and/or interest in the future). There is usually immense competition to receive grant money as there are limited amounts of funds available to be distributed by grantors and receiving funds without needing to make a return on the original investment is a highly lucrative prospect for grantees.
In blockchain, grants are generally issued on a milestone basis to ensure the grantor’s funds are being used appropriately. If an individual or team shares the same vision as a foundation or patron organisation, they can request funds from them to bootstrap their project. Once both grantor and grantee are aligned, a grant ensues and the grantee begins work on reaching deliverables specified in their grant application.
There are two typical types of grants a team can apply for in the cryptocurrency ecosystem: foundation grants and ecosystem grants.
Foundation grants in the blockchain industry are given by non-profit organisations dedicated to supporting growth within their own ecosystem. A longstanding foundation is the Ethereum Foundation, an organisation committed to fostering Ethereum’s research, development and community. In February, the Ethereum Foundation announced an allocation of more than $1M across 25 grants to make the Ethereum staking experience easier, safer, and more secure.
Ecosystem grants are grants from patron organisations , meant for supporting blockchain development. Ecosystem grants come from organisations that have an interest in developing an ecosystem for the benefit of their organisation, rather than the benefit of the blockchain itself. For example, Huobi is a patron organisation that has recently announced a $10m fund for Polkadot ecosystem grants. Patron organisations are prepared to disperse grants to ecosystems (such as Polkadot in this example) because the development of the ecosystem brings their organisation more business.
Non-repayable funds have traditionally been dispersed by foundations and patron organisations in the form of grants to encourage development of software that helps grow an ecosystem, often specifically focused on applications and tools that might be hard to monetise in a different way.
Grants Pros & Cons
Recently an argument has been made by Lane Rettig on grants:
Grants do not make the most of one of blockchain’s core properties, permissionless innovation as grants are given first to people we already know and trust, then to people who are like us.
In turn, this leads to conflicts of interest from grantors and there is a lack of transparency over how biases affect decision processes to issue grants. For this reason, Free TON has introduced a novel way to disperse non-repayable funds in order to develop their blockchain in a more decentralised manner, using contests to reward contributions rather than grants.
Free TON Protocol
Free TON is a blockchain derived from the original Telegram Open Network protocol. Telegram Open Network itself was halted by the SEC for being considered a security in 2020. However, the underlying code of TON was already open-sourced and therefore some individuals in the TON community that were excited about the original TON project, decided to use and continue developing the code from TON repositories to deploy the blockchain in a completely decentralised manner, without any corporate entity backing it. In fact, just 5 days prior to Telegram officially announcing that it was completely removing itself from any association with the blockchain it had created on May 12 2020, a collective banded together to announce they would continue advancing the technology that had been created by developers working on TON, completely separate to Telegram under a new name, Free TON. Free TON has unique features, such as the “self-healing” vertical blockchain mechanism and Instant Hypercube Routing, which enable it to be fast, reliable, scalable and self-consistent at the same time. What separates Free TON from other projects re-using Telegram Open Network’s code is the large community they have managed to build around the project. To date, there have been 3,000 entities join contests to earn TON Crystals (the token for Free TON blockchain) and there are 10,000 members in the Free TON community globally.
Free TON Contests
As it stands, Free TON contests are the only way to receive TON Crystals, meaning TON is only distributed amongst those who have contributed to the network. There are 5 billion Free TON Crystals; 85% of these will be distributed to those who contribute to the project (partners and users), 10% will be distributed to developers and 5% will be distributed to validators. To date, there has been 528,444,782 Ton Crystals distributed to 115,874 unique addresses out of a total supply of 5,022,346,449 TON Crystals (i.e. 10.5% of tokens have been distributed to contributors so far). Founders of Free TON wanted to distribute TON Crystals in a meritocratic way by rewarding users with TON Crystals who are actively involved in developing the project. Currently, it is very difficult to obtain TON Crystals on secondary markets. Meaning for now, the main utility of TON Crystals is to use them in governance processes (e.g. voting on contests). Free TON is committed to empowering their community to engage, contribute and make decisions via decentralised governance.
To spur innovation within Free TON blockchain, contests are created with rewards of TON Crystals for winners. Anyone in the Free TON community can propose/vote on contests, vote on solutions to contests and propose/vote on jurors to judge the solutions to contests. Contests are wide-ranging in Free TON and there are 19 different Free TON sub-governance groups, all hosting their own contests. Contests are not just for developers in Free TON, it is also possible for those with non-technical backgrounds to participate.
Using an example, Free TON has a DeFi sub-governance group. The first proposal was to select a jury, which would judge future submissions to Free TON DeFi contests. There were 7 Free TON Sub-Governance DeFi members initially in charge of selecting additional members for the jury. Any Free TON community member could apply to be a Free TON DeFi Juror by submitting a CV (if it had adequate DeFi experience, they would be selected). All selected DeFi Jurors receive rewards as incentive to monitor and vote on DeFi contest submissions. Once a DeFi Jury was established, it was possible to propose Free TON DeFi contests in the sub-governance group. In order for a Free TON DeFi contest to be initiated, it must first be discussed in the DeFi sub-governance forum and before it is officially proposed as a contest. Once it is proposed as a contest, it must receive over 50% of votes in favour from Free TON community members to initiate the contest. Once a Free TON DeFi contest has reached quorum at over 50% and been initiated, anyone with a Free TON address is then able to submit responses to the contest. Descriptions of contests are clear and include: description, motivation, requirements, terms, criteria, artefacts, rewards and voting process for each one. The most recent Free TON DeFi contest was a Stablecoin Architecture and Design contest with 137,000 TON Crystals available as a reward for submissions reaching the Top 10. The contest had 13 submissions and 12 jurors voting on each submission. Votes (and comments) from jurors on submissions are transparent and publicly available to see.
Contests Pros & Cons
Free TON has introduced a novel way to engage community members in the longevity of the project. Contests are a fast and accessible way for participants to contribute to a blockchain. Free TON has decentralised all aspects of their contests, meaning rewards are going to those who truly deserve them. Contests remove the conflict of interest that sometimes arise from foundations or patron organisations giving grants to projects they might have a previous relationship with. Contests that are decentralised are in line with the ethos of blockchain and decentralisation. Traditionally, grants have been issued by centralised foundations or patron organisations. A centralised entity fostering development of a blockchain might not achieve the same efficiency and innovation as what Free TON can achieve with their decentralised contests. Free TON are already improving their contest process and are now discussing BFT governance as the new Free TON governance system for contests. Innovative governance and accessible contests without reward distribution bias is Free TON’s competitive advantage over other blockchains. Building an active, decentralised community around a blockchain is perhaps one of the most critical facets to get right to ensure longevity of a blockchain. Using contests to reward individuals or teams working on development of a blockchain has rarely been seen prior to Free TON. We find innovative governance that uses contests to promote innovation within a blockchain might be a trend that other blockchains could use to foster their own ecosystem development in the future. For now, Free TON’s community continues to grow, albeit slightly in the shadows, as there has been little speculation on the token due to the fact it is not widely available on secondary markets. When the token is eventually widely able to be traded on secondary markets, those that have participated in contests to contribute to developing the blockchain might be handsomely rewarded by the time the rest of the ecosystem discovers the blockchain’s capabilities and community.