Introducing Growdrop: Funding the revolution of blockchain ecosystem with DeFi
Over the past decade, crowdfunding has been in the spotlight as a new alternative financial tool. The scope of crowdfunding is expanding day by day, from small events and performances to the production of cutting-edge products, and even funding large construction and urban planning projects. In particular, rewarded crowdfunding enabled the creation of a variety of creative products and services that had been difficult to raise funds through existing financial sectors, and blockchain industry projects also gained rich liquidity through crowdfunding through ICOs and IEOs. As the size and scope of the funding grows, the need for successful fundraising has also increased the need to compensate principals for quality products.
In the crowdfunding industry, investors are excited about the project to invest in and support the project, but most of the projects that did not meet the expectations and malicious behavior. Past Pennsylvania studies have found that 75% of Kickstarter projects fail to deliver products on schedule or fail.
If you think of the blockchain fundraising model, of course you will come up with ICO. The big advantage of ICO is its fast cash flow. In the midst of the ICO’s bull market, if anyone wrote a white paper, it would be possible to fund investors, and the investor would become a community where only profitists remained for the price, not supporting the project in the Pump & Dump community. Currently, blockchain financing is not a structure in which everyone can invest equally. Funds that buy tokens for ICO projects had a fast EXIT on the exchange through SAFT, which can be bought cheaper than individual investors before the ICO. As a result, private investors are forced to lose money. In addition, the bubble of the ICO gave a negative view to those who do not know the blockchain, and those who are tired of the market will gradually leave the blockchain ecosystem.
In the past, the Internet industry made data cheaper and more useful at the Application Layer, and this innovation provided a rich and easy world for humans. But these data were exploited at no cost. The blockchain Application Layer has provided the Internet with scarcity and requires a price to exploit it. Blockchain will form a value layer, a new layer that can transmit value that was not available on the Internet.
The value we talked about comes not just from the value of cryptocurrency, but from the birth of Bitcoin and Ethereum as a support of many communities. The value of the community provides a way to fork in the evolution of blockchain or to go forward through governance proposals. This process forms the core of the blockchain, the consensus value, which enables the sustainable development of protocols in accordance with reasonable governance rules for many people in the community. At some point, consensus value made a way to raise the value of instant community participants (speculators) through the funding method of ICO and IEO. This speculative bubble is extinguished for a moment.
Enthusiastic supporters gave a lot of feedback through BIP and EIP to form the initial consensus value, while the speculative bubble is blowing and the supporters of the blockchain project are concentrated only on pump and dump. This means that the blockchain protocol stays thin before fat, and even the application layer (EX: Dapp) will not inherit its stability and decentralized value. That’s why Bitcoin, whose consensus value is fat, is not the first cryptocurrency in history, but the most successful case. The mechanism designed by Satoshi Nakamoto allows the Bitcoin community to achieve effective self-organization and governance, which motivates community members to continue to benefit from mutual benefits.
Open source community funding
The biggest damage to the current ecosystem is open source projects. Open source projects rely on the Consensus Value formed by the community. However, growth is also slowed because Consensus Value, which general speculators are interested in, is Pump & Dump and the project values are not the same.
Currently, in the case of fat Ethereum, compared to other blockchain protocols, there are about 20 to 30 true contributors to development. There are many factors to this problem, but the open source community lacks the motivation to maintain the ecosystem voluntarily. Therefore, various methods of financing are proposed to protect investors and supporters in the current industry.
From the DAICO proposed by Ethereum founder Vitalik Buterin, there are Inflation Funding, Gitcoin, SEICO, Ensured ICO. Equivalent token distribution methods include Lock Drop, Livepeer, WorkLock. Here’s how the open source community can finance through traditional fundraising.
Donation :
The project connects donation link to homepage and user donates by clicking link.
Advantages
- fees and trust costs without having to rely on a third platform.
- Less work to be funded for the project
Disadvantages.
- Large funding is not possible because there is no dedicated funding channel.
- To make a substantial donation, you have to pay a fee in payments such as PayPal and Strip.
- Donations can only be made by legitimate charities (the 501 © (3) non-profit license in the United States is required) in order to exempt the individual/corporate who made the donation. For example, large non-profit organizations such as Software Freedom Conservancy and NumFOCUS are easy to manage, but very difficult to manage personal and international donations.
- Who manages donations in the project or how the distribution of funds is opaque.
Bounty Hunting:
A model that rewards developers for solving the project problems by distributing bounty to the community.
Advantages
- It can motivate the open source community to do better content or development.
- Compensation based on your work.
- Bound hunting is appropriate for verifying the stability of the model.
Disadvantages
- Project is too distributed or adversely affected by low quality PR.
- Work completion result may be inconsistent
- Generally, the bounce hunting model is not large in value.
- It is difficult to provide sustainable revenue to developers.
Typical cases
- Gitcoin
- GitHub Bug Bounty Program
- Google Patch Rewards
Crowdfunding (one-time):
Reward crowds and donated crowd models are supported by individual or business sponsors on the platform to bring ideas to different industries.
Advantages
- Individuals can participate through legitimate crowdfunding platforms such as Kickstarter and indiegogo.
- Firms can manage funds through legitimate platforms.
- Marketing effectiveness is good for platforms with many users.
Disadvantages
- In the corporate position, a lot of activities such as marketing and PR should be done.
- Fee and refund policies differ for each platform.
- Users can lose money depending on platform reliability.
Typical cases
- Monero Forum Funding System
Crowdfunding (sustainability):
Long-term crowdfunding provides donors with monthly financial reports and reports that are openly updated by the open source community indefinitely, and individual/business patrons contribute to the project based on trust value.
Advantages
- Legal support can be provided through representative platforms such as Parteon, Salt, Libraryera , and OpenCollective.
- An open source community/project is a suitable model, mainly for unprofitable and public benefit.
Disadvantages
- Ongoing crowdfunding is very difficult, usually depending on the brand or reputation previously formed.
Typical cases
- Babel
- Ruby Together
- Evan You + Vue.js Patreon
However, this traditional financing method is unfortunately not realized in blockchain open source projects. The funding model must meet at least three conditions in order to enable sustainable development of the software community, and to continue to contribute to open source protocols for full-time developers/contributors, taking into account the major requirements of developers/contributors.
- Possibility of funding success
- Consistent with the values of the developer/contributor
- Work period and speed of developer/contributor must be met
Taken together, open source project financing and token sales mitigate some of investor protection, but there are still many problems.
- Still Centralized (Third Platform) Trust Issues.
- Donations and crowdfunding are not efficient.
- Activities such as consulting and marketing have hampered the developer contributor’s project work time and current VCs do not meet the developer/contributor’s value proposition.
- In the blockchain open source protocol, patents, copyrights, copyright protection, and paid licenses do not fit with the philosophy of open source.
The problem is that the negative view of the ICO is already stuck in many people after the current market bubble is out. As a result, good open-source protocols have not been able to realize their long-term motivation for funding and realize their vision. Already, the blockchain industry, such as The Tragedy of the Commons, can be homework that can never be solved without a clear standard of investor protection.
The Blockchain Fundrasing we need should be Decentralized, Asset liquidity and Riskless
Growdrop: Token Fundraising Model
What we think so far is that the cost of trust in financing is very high. It’s expensive, so you pay a lot of money to maintain all sorts of unnecessary surveillance systems. Growdrop is a crowdfunding solution that minimizes the trust costs of existing third parties, deposits investment funds into DeFi Lending Protocol’s liquidity pool, contributing interest to open source projects and ensuring investor principal.
Given that Growdrop allows third parties to securely operate smart contracts, Growdrop can invest in projects, greatly reduce the risk of supporters’ seed investments, and projects will slowly build communities to help promote public relations and technology development. Here, in the early Ethereum community, it is very similar to the nature of DAICO, and projects can start as a community and receive seed investment and promotion effects.
- Users
Users can secure principals and invest in projects through the interest generated in the Lending Protocol without having to rely on third parties
- Open source Project
Seed money procurement and user Inflows for open source projects, and if the initial token economy is poor, Growdrop provides the use of tokens through the Uniswap model.
- DeFi Protocol
Currently, the DeFi protocol is important for liquidity pools of assets. Growdrop provides DeFi lack of liquidity pool to help keep things running smoothly.
Example: Mike, Ryan, and Bob can stake a crypto asset on a token project to offer interest and receive tokens in return. The token project sets a token amount of 100,000 tokens and one month of funding period when Growdrop distributes smart contracts. Mike sends 300,000 DAI, Ryan sends 500,000 DAI, Bob sends 200,000 DAI to the Growdrop pool, and assumes that the Lending Protocol’s annual interest rate is 12% at that time. After one month of funding period, the accumulated interest is sent to the token project and tokens are paid to the supporter according to interest rate.
Uniswap and Kyberswap
If the initial token project is not listed or there is no use, the token from Growdrop can be added to uniswap to set the listing and price. You can create exchange contract and add liquidity pool for a certain amount of tokens and interest. Here’s how to provide Growdrop.
1. The Growdrop Distributor sets a certain amount of tokens and interest rate for the uniswap.
2. At the end of the Growdrop funding period, swap the interest calculated by interest rate to ETH by uniswap exchange contract.At the end of the Growdrop funding period, swap the interest token calculated by interest rate to ETH by kyberswap.
3. List the swapped ETH and tokens to uniswap.
Growdrop: Donation Model
Donation has so far been donated through third parties. Donation is done with good intentions but can be used in a malicious way. It is also difficult to ensure that the funding is funded properly, unless the financial situation of each foundation is transparent.
Growdrop supports not only token distribution but also Donation. The Donation model is similar to the token distribution model, where supporters secure tokens in Growdrop so that the interest generated there is raised to the donated foundation. Supporters will receive ERC-721-based donate certificates and principals. This will help to realize a donating model that minimizes risk through principal guarantees.
The Donation certificate can also be used in game items, media, meetups, and conferences. Supporter’s Donation certificate is transferable and its use is unlimited depending on the project. In the traditional Donation model, users lose their principals, which leads to reliability issues for each foundation.
This can change the stagnant support culture through the support of Growdrop. The merit of principal guarantees allows anyone to feel free to supporter, and through decentralized Donation, the financial inclusion of the real world can be expanded.
Growdrop help money lego (Fat protocol)
The blockchain project has yet to have a successful business model and is faced with even more funding difficulties for an open source community. Projects like Ethereum 2.0 now require the power of the open source community to develop and maintain protocols. Open source can not only open code but also build trust and open collaboration of blockchain. Blockchain protocols that are not open source will not be able to build trust and the road ahead will be blocked, and it is hard to imagine that blockchain protocols are not open source. So the value created by the open source community is the only key to creating the fat Protocol of the blockchain.
Examples include the ERC-1789 inflation funding proposal, Gitcoin, and MolochDAO, which contribute open source projects/communities to the sustainable development of the Ethereum ecosystem. The key elements of ecosystem financing are a) sustainability b) community consensus c) transparency and d) value parity. Growdrop is an interest fundraising protocol that minimizes trust costs. Like the aforementioned model, Growdrop community members contributed to various open source projects/communities through the interest generated, suggesting that the blockchain protocol will provide a long term sustainable direction.
Conclusion
Since DeFi market is still a new market, there are risks that can cause side effects from interest volatility, and it is still active only in the Ethereum ecosystem. Of course, the interest rate of the project may be very small, but through Growdrop, open source projects can get seed funding and form a community culture with supporters who are naturally valued rather than very expensive financing such as ICO and IEO. Growdrop is a new funding model. This makes Growdrop a new option for contributing to open source projects and breaking the vicious circle of financing.
About Growdrop
- Twitter: https://twitter.com/Grow_drop
- Telegram: https://t.me/Growdrop
- Discord:https://discord.gg/zWd38ay
- DeFi Korea: https://t.me/DeFiKorea
- Website: http://growdrop.io/(Beta)
- Blog:https://medium.com/growfi
