A new way to support community projects
Many community projects related to the Ethereum ecosystem have a donation address specified somewhere on their web site. For successful well-known projects, such as MyEtherWallet or Etherscan.io, the stream of donations may be significant, or at least enough to cover project’s expenses for hosting, domain delegation, etc. However, for a new project that is still under construction and doesn’t have large loyal user base yet, the donations stream could be negligible or even zero. Thus, donations are easy to attract when they are not needed anymore, as popular projects may earn money via AdWords or monetize their audiences in some other way, but donations are very hard or even impossible to attract at the early stages of development, when they are needed the most.
In this article we suggest a new and efficient way for community projects to attract support from those who believe in project success: Donation Token.
At the early stages of development, the project team deploys into Ethereum blockchain a special ERC-20 token smart contract. This smart contract has fixed total supply of, say, 1 million non-divisible tokens. It accepts ether transfers and distributes receveid ether proportionally among all token holders.
The team specifies the address of this smart contract as the donation address for the project. Thus, every token represents 0.0001% share in all future donations that will be made to the project.
At the initial stages the stream of donations could be negligible or even zero, however, the tokens will still have some value for those, who believe in the future project success. Thus, the team will have a valuable resource to spend right at the beginning of the project, when resources are needed the most.
Donation Tokens Usages
The team may use donation tokens in a variety of ways:
- to reward people for bug reports, translations, valuable pull requests, or any other contributions to the projects;
- to distribute some tokens among key contributors in order to encourage them;
- to donate some tokens to the developers of the frameworks, libraries, or tools, the project depends on.
Donation Token Value
At the early stages, people will probably treat donation tokens more like souvenirs that prove contributions made to the project. Some people may even want to collect donation tokens from many different projects as they collect stackoverflow badges or GitHub stars. Non-divisibility of donation tokens is important to make them scarce resource for collectors.
At the later stages, when the project gains attention and more people start believing in it, the second market for the tokens may emerge, thus the tokens may get some real market value. At this point the team may start selling donation tokens to cover expenses. Also, people may start buying tokens from second market and donate them back to the team, pushing donation token price up.
Finally, when the project matures and donation stream becomes significant, the team may start withdrawing dividends from unspent donation tokens and use the dividends to finance the development of the project.
In order to proof that the concept of donation tokens works, I’ve deployed a minimalistic version of donation token smart contract at address 0x8ecff3b6371474280abdc3523a5542090e6b2fad. I will user these tokens to reward people for finding mistakes in thsi article of in the donation token smart contract.