Mar 27, 2019
The Future of Giving is Realigning Incentives
A Trade leaves things as they were, with no external Surplus. A Gift creates a Surplus as it spreads. ~ Seth Godin
Giveth is exploring new territories and expanding its horizons: we are embarking on an exciting mission to enrich the Giveth Donation Application by making the core part of it, the donations, more sustainable. From enabling Givers to donate to the causes they believe in and providing a layer of transparency and accountability through our DApp, we will now be tackling the sustainability of the donation process itself. We want to create continuous streams of funding through the creation of economies around causes, by building a system of token bonding curves feeding cause-focused DAOs (with a unique governance model) on top of the Giveth DApp, in a collaboration with BlockScience.
Edit May 2019: for more on the Commons Stack initiative, read this most recent update by Jeff Emmett, for a technical deepdive by Abbey Titcomb go here.
From centralized Donations to sustainable Collaborations
If you have been following Giveth closely, you will know by now that we are not your regular organization and are constantly changing our own collaboration models through many experiments, and that we are involved in many, many initiatives, seemingly not moving in just one specific direction, but actually, we are! We are a Decentralized Altruistic Community (DAC) focused on making the World a Better Place through the use of blockchain technology, and yes, this is a wide and ambitious mission. But we have a path we are on, well, actually we have several, and we are doing this on purpose, to make us more resilient, even antifragile. The Ethereum community and the blockchain space as a whole is in constant flux, so we are working on and supporting a wide array of different initiatives (we call it the Giveth Galaxy) that we believe are bringing lasting value to the wider community.
During this cryptowinter, we ourselves, as a non-profit blockchain-based entity, have been struggling quite a bit to keep financially afloat and have only been able to do this through a generous donation by an anonymous donor, but mostly through a constant stream of personal donations by our co-founder Griff Green, for which we are eternally grateful. This scarcity however got us to discuss our own sustainability quite a bit, and the importance of good, objective governance that will benefit our individual and collective interests, our ‘Commons’. Depending on pure goodwill, even if it happens in a transparent and accountable way, is not sustainable, not for us nor for any other altruistic community: it puts you in a scarcity mindset and is a heavy distraction from the cause(s) that unite you. This concern made us see more clearly than ever that we have to invest time in bringing Giving to the next level, and change the way humans collaborate.
1–2–3 — Infinity.
First things first, we are very happy and proud to say that our flagship project, the Giveth DApp, currently in beta, is now feature-complete, bringing us very close to what we could call ‘Giveth 1.0’. This of course does not mean that we will stop working on the DApp, on the contrary, much more is coming, such as deploying our DApp on the xDAI chain, introducing governance solutions through Aragon, a complete UX overhaul and so much more. This is all in the making but in order to continue with this, we are currently focusing very hard on the funding part of the puzzle. We want to help forward the ecosystem itself through an ambitious token-engineering experiment, in collaboration with BlockScience. The target of this experiment is to transform communities around altruistic causes into entire economies and to build this on top of the Giveth DApp. In the coming months, we will be working hard on this initiative that will bring us at some point to what we like to call ‘Giveth 2.0’.
Now that we have traceable donations working in the DApp, we can start to experiment with new models to support both the organization as well as the funding of communities. Your support stays very, very welcome (all tokens accepted 🙏) but in the long run, we want to incentivize you so that you are no longer just a Giver, but have a real stake in the success of the community you will be supporting: we want to align the very human behavior of profit-seeking with socially beneficial behavior: to us this is the real Future of Giving.
We built the foundational layer of our Giveth DApp on the Ethereum blockchain and not on a centralized server to bring true accountability and transparency to decentralized governance experiments: there is an immutable piece of evidence of what happened with your funds. The true magic however, that will allow us to create sustainable streams of funding, lies hidden within the existing dynamics of blockchain technology. Every blockchain network in existence has aligned incentives around supporting the network itself: every ‘actor’ in the system, when acting in their own best interest, actually benefits the system. Miners earn inflation for supporting the network, developers hold the token hoping their efforts will raise its value, and users buy the token creating demand and pay transaction fees: it is a very simple and well-balanced ecosystem: helping yourself, helps the system to thrive, and very often it doesn’t even matter whether that system is useful or not.
We are building the Future Of Giving and are fascinated by these mechanisms, we want to use these self-sustaining models for actual good. The ‘Commons’ can be defined as “[…] resources that groups of people (communities, user groups) manage for individual and collective benefit.” We, and many communities like ours, that are organized around social impact causes, are suffering from scarcity, because we think about the collective benefit and ignore the individual, who needs to survive as well; this is unsustainable. By default, people will actually do the opposite and take their individual interest over that of the common good, which is often called the tragedy of the commons. In both cases, there is a major incentive alignment issue: either the individual gains but the collective suffers or the other way around. Witnessing for a while now these emerging, more sustainable systems, we believe it is time for the next step. By modeling the success of existing blockchain ecosystems (through the implementation of new cryptoeconomic primitives) we want to create abundance to support the Commons, thinking about both the collective as well as the individual interests.
Now, our goal at Giveth is to use token engineering, more specifically, Curation Markets, to bring this from a purely digital realm, into the real world. We will build it on top of our Dapp, and build it in such a way that it supports projects that benefit our common interest, or in other words, that will enable us to sustainably crowdfund the Commons. The initial work was to enable transparent and accountable donations on the blockchain, the next step is to move away from ‘donating’ altogether and to create a sustainable system: gifted funds become backed by a token of value in a circular economy. As Abbey Titcomb says:
“We believe the answer to the underfunding of social goods and underserved community contribution is to reframe social goods as self-governing and continuously funded commons.”
Wait but How?
Through building the augmented bonding curve model created by BlockScience on top of our DApp we want to create continuously funded organizations. How does this work? We first learned about them through a post by Jeff Emmett, a Giveth collaborator, who explains the basic building blocks — a highly recommended read to learn more on how token bonding curves could enable a project to bootstrap funding and token value along with project success and popularity. You can find more references in Abbey Titcomb’s report on what we built at ETHDenver, and for all technical definitions and more theory, we refer you to Michael Zargham.
However, we would like to illustrate the theory now through a real life example of how this could work, imagining a future in which Giveth has already built this model into its DApp (also available in video format, narrated by Griff Green):
So imagine you live by the beach, and you have the habit of picking up trash regularly, but you see this is just not having the impact you desire: it doesn’t scale. For more impact you are also regularly donating to a nonprofit promising exactly this, large-scale impact but … all you see is a lot of marketing and a continuous request for more funds. This is all very frustrating.
At this point in time, you run into Jonathan, an activist who you often saw on the beach doing exactly what you do: cleaning up. He tells you about a new kid on the block: the ‘TrashHeroes’ and they are offering you something else. They invite you to not just give money but to actually help them steer the organization. In return for an amount you choose you will receive tokens, tokens that allow you to make decisions for the common good of the organization. On top of this, if you do a good job and the organization runs smoothly one day those tokens could be worth more than what you donated. This sounds too good to be true, but hey, you were donating funds anyways and with this one you get a say in the decisions!
So you give 10 xDAI (a representation of DAI token) and receive TrashHero Tokens, which you hear actually have value, in the real world. The value however, is not determined by an open market, but by a smart contract, which is actually the token bonding curve. So how does this work you ask? The price, the value of the TrashHero Token, is determined by the total supply of the token in general: if more people mint the token in return for xDAI, the price of the TrashHero Token goes up. If the supply goes down — when people burn their tokens and take money out of the contract the price of the token goes down. The big difference however with existing curve models, and which makes this one sustainable is two-fold. First, there is the curve itself which disincentivizes people who get in late to burn their tokens quickly, they need to keep these for a while if they want to make a profit. The second element is that people who get in early should be the people who are in it for the long haul, because they are the believers in the cause, they will most often be the experts. This is stimulated by preventing our pioneers from burning their tokens immediately: their tokens are locked until specific goals (which we call Milestones in our DApp) have been reached. In this way the collective interests you are fighting for are protected by default, the Commons needs those funds and outweigh your short-term self-interest, and you are incentivized to reach the set goals, the Milestones. This innovative system where everyone acts in their own self-interest, propels the Commons forward and pushes it to reach its set goals.
Back to our TrashHeroes that have invited you to be part of this initial group of experts who together have raised quite some xDAI to initialize the curve and the TrashHero Commons. One half, 50% of this xDAI, is locked in the smart contract, 50% of this xDAI is given to a DAO controlled by the TrashHero token holders to execute on their common interest, now baptized the TrashHero Commons. This Commons that supports the cause of cleaning up the beaches will now need to come up with good proposals to actually support this cause. As the Commons spends money, the tokens that were given to the group that initialized the curve will become unlocked periodically. This spending goes through Milestones you help create in the Giveth DApp: xDAI will be released once the initiative takers (the ‘Milestone Managers’) prove they have actually reached the goals they set that support the Commons’ cause (i.e. cleaning up beaches) — this is where the power of Giveth kicks in: you only get rewarded when you are being accountable.
The effective working of the TrashHero Commons is steered through a novel type of curation market governance system that allows you to use your TrashHero Tokens to signal priorities of tasks (Milestones) to be executed for the Commons to reach its goals. When a target that supports the goals of the Commons is proposed — for example, you get 15 friends together and make a Milestone for doing a side-by-side, step-by-step cleaning of 5 km of coast — and if it is supported by the TrashHero Token holders, it will receive funding from the Commons: xDAI will be sent to the Giveth Milestone. Then once the task has been completed, by documenting in pictures and videos the gathering of 3 tons of plastic and waste, the xDAI will be sent to the token bonding curve and you will be minted TrashHero Tokens, which you can then decide to burn immediately (without a need to speculate if you don’t want to) to receive your xDAI. When you or anyone else decides to burn your tokens, there is a fee that goes back into the Commons, which is the lever that will support more social good. To us, this is the Future of Giving: your socially beneficial behavior creates a surplus!
Generosity generates Income
Doing good feels good, and we hope our alternative economic system will attract more people who want to do good by not just giving but by staying involved. Instead of just simply donating, they get the opportunity to participate in a circular economy that supports the underlying cause. As more people will be encouraged to join the Commons, it incentivizes the people who initialized the curve to do even better, as the initial token holder’s funds will only be unlocked as the community actually does good, and spends the money. By being generous and by participating in good governance they can generate an actual financial return, an income — they create abundance.
Next to this, speculators will get involved, because that is what happens with tokens, and actually, its great! Secondary markets and the trading volume will hopefully create an extra flow of funds that isn’t normally part of a charitable community. After the initialization of the curve, the new donations create tokens that have no locking period, and 100% of those funds go straight into the bonding curve. When later participants burn their tokens they however always pay a fee, and this fee goes back into the Commons, which further support its goals. Every participant — whether it is an initial crowdfunder, a regular Giver or a speculator — should and will act in their own self-interest, which is steering the Commons to become a success, with everyone’s incentives aligned.
One more important note: this is a giant experiment and it may not work. However because of the use of the Giveth DApp the projects that are looking to clean up beaches, help the homeless or do research to cure Alzheimer are insulated from the governance experiment’s failure. The benefit is that these initiatives will exist on our Giveth DApp, so there are multiple ways to fund them. If a token holder really wants a specific Giveth Milestone to be supported but the governance of the Commons breaks down for one reason or another, they can burn their token (again helping the economy through a small fee), receive xDAI, and send it directly to the specific Milestone on the DApp they wanted to support. The Commons is one actor in an open system. What we will have done is create an extra way to fund projects on our DApp and most probably generate quite some buzz around that specific economy, a buzz supported both by the community as well as by speculators. Whatever happens, more people will know that this cause needs to be supported.
We started Building this Future of Giving Yesterday
With every statement we make, new questions come up (for example this dialogue in our chat), and we do not have all the answers just yet. The models we use are however based on years of research by BlockScience, and are being refined and further documented by the team led by Michael Zargham with whom we are in a constant dialogue. To put this theory to the test, we wanted to build this yesterday, so that’s what we are doing. With the very limited funds we have available, we have decided to kickstart this project by addressing the wisdom and skills of the very core for whom we are building this: the Crowd, the Commons, You. We will build and hack this together with you, and we have already started doing this successfully. At ETHDenver we supported the Pactful Team, where we won the Impact Track by building a proof-of-concept user interface for our idea. We continued at EthParis and are now ramping up to build various components that will all tie into a working whole during Odyssey in the Netherlands, the biggest AI & Blockchain Hackathon in the world. We are the largest group participating and have been accepted with five teams, working on four of the hackathon’s tracks gathering a multi-talented team of 30+ people. We are uniting developers from many different projects in the Ethereum space to form a Commons and help us build this Future of Giving, together.
More is coming very soon but in the meantime you can catch up by watching Griff Green’s EthCC talk, read Abbey Titcomb’s ETHDenver update, scrutinize the models at BlockScience, and keep yourself up-to-date by following us on Twitter. Next to this we are actively looking for more developers to help us build at future hackathons (such as ETHCapeTown) and beyond, so please come join our community via the Social Coding chat and signal your interest.
We hope you will join us on an adventure that has already started and is expanding our Giveth Galaxy, and invite you to be an active participant in this primordial Ethereum and Giveth-powered Commons that is Building The Future Of Giving. Join us Today.
Warm regards,
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