Macauley Peterson

<div id="highlights-block_62e2aeb8ac4e2" class="highlights">
 <ul>
 <li>Most DAOs today use a one-token-one-vote model</li>
 <li>Decentralized identification has wide-ranging use-cases from DeFi to NFTs and the future of work</li>
 </ul>
 
</div>



A new tool from Gitcoin, an organization dedicated to raising money for public goods, aims to help other organizations raise money and make decisions more democratically. 



Groups such as <a href="https://rabbithole.gg/" target="_blank" rel="noreferrer noopener">Rabbithole</a> and <a href="https://poap.xyz/" target="_blank" rel="noreferrer noopener">POAP</a> are potential beneficiaries, but also large DAOs.



If you think of a DAO (decentralized autonomous organization) as an exercise in collective decision-making — enabling large numbers of individual stakeholders to align their interests through voting — one problem stands out: Most DAO governance systems use a token-voting model, where each token represents a vote.



But according to Kevin Owocki, founder of Gitcoin, “one-token-one-vote systems are inherently more plutocratic” than democratic.



The major holders, whales and venture capitalist firms can — and often do — dominate the rest of the community.&nbsp;



A natural alternative — for each person to count for one vote — is notoriously hard to pull off in an environment where stakeholders are typically pseudonymous and globally distributed — in other words, most DAOs. That’s where Gitcoin Passport comes in. It’s the first phase of a multi-quarter rollout of what Owocki calls Gitcoin Grants 2.0.



Gitcoin pioneered the use of a recent invention in the fundraising space known as quadratic funding. Alongside quadratic voting, the concept <a href="https://glenweyl.com/tag/quadratic-voting-funding/" target="_blank" rel="noreferrer noopener">was introduced</a> by researchers at the Institute for Advanced Study, a research arm of Princeton University, in 2015.



Quadratic funding allows a pool of matching funds to be automatically directed by the collective voting preferences of a large number of small contributors.



<blockquote class="wp-block-quote">“That’s powerful because it pushes power to the edges — you’re funding what the everyday democratic people in the ecosystem want to fund,” Owocki told Blockworks.</blockquote>



<a href="https://wtfisqf.com/?grant=10,10,10,10,10&amp;grant=50&amp;match=1000" target="_blank" rel="noreferrer noopener">For instance</a>, say two projects are vying for donations with a matching pool of $1,000, one of which raises $50 from one person, while the other raises $10 from five folks. Both raised the same amount of money, but the one with five times the number of supporters will receive five times the matching pool’s funds on top ($833.33 versus $166.66).



Gitcoin has applied this fundraising model to its own quarterly grant rounds — now numbering 14 and distributing millions of dollars from thousands of donors.



But to be effective, the project must ensure that large contributions from a single person or entity can’t be split up into many smaller chunks, giving the false impression of widespread support. Preventing the system from being gamed in this way is known as <a href="https://en.wikipedia.org/wiki/Sybil_attack" target="_blank" rel="noreferrer noopener">Sybil resistance</a>.



Passport will help Gitcoin keep its grants flowing fairly, but DAOs can also use it to improve governance.



“Sybil resistance is one of the key things to take us from one-token-one-vote to one-human-one-vote,” Owocki said.



<blockquote class="wp-block-quote">“A DAO would instantly be more democratic if it had quadratic voting instead of one-to-one token voting. That’s where I’m interested in seeing DAOs evolve.”</blockquote>



Gitcoin isn&#8217;t the only project trying to solve decentralized identification (DID), but it does have a leg-up on the so-called “cold start” problem, Owocki said.



“What everyone else is missing is usage.” Today there are few if any dApps using DID, thus few users care about having an effective DID system, and decentralized apps have no incentive to prioritize it.



This problem is not unique to DID, Jonathan Howle, co-founder of <a href="https://www.disco.xyz/" target="_blank" rel="noreferrer noopener">Disco</a>, told Blockworks via email.&nbsp;



“No merchants accept crypto, so nobody wants crypto, etc. The first step in the process, regardless, is to build the tools necessary for adoption to occur,” Howle said.



But the long-term potential is there, he said.



“Decentralized ID has the ability to unlock coordination and bridge the trust gaps that exist right now in Web3: Undercollateralized loans in DeFi, verifiable authorship and [intellectual property] rights management in NFTs, and the future of resumes, transcripts, job applications, peer references,” or what he terms “the future of work,” all stand to benefit.&nbsp;



“Nobody really knows what could drive mass adoption but I think there is a good chance it could be that,” Howle said.



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<hr class="wp-block-separator">

Gitcoin Passport To Make Fundraising, Governance More Fair

Casey Wagner

<div id="highlights-block_615daa6f78d68" class="highlights">
 <ul>
 <li>With the help of a DeFi Education Fund grant, candidates’ stance on crypto will be publically available </li>
 <li>Donors will be able to direct funds toward any candidate or lawmaker, but the goal is to support DeFi allies</li>
 </ul>
 
</div>



This digital assets-focused political action committee (PAC) is helping blockchain enthusiasts put their money where their mouth is, and influence Washington politics with their dollars.  



<a href="https://www.hodlpac.org/" target="_blank" rel="noreferrer noopener">HODLpac</a> founder Tyler Whirty, who previously served as a staffer at DC-based libertarian think tank Cato Institute, is working on an application that would operate similarly to a decentralized autonomous organization (DAO). PAC rules and regulations make complete decentralization difficult, but there will be an emphasis on group decision-making. 



“The idea is that it would be a DAO, to the extent that it’s able to be,” said Whirty. “We have to maintain a traditional bank account, so it’s a bit centralized, but we&#8217;re definitely going to be a community-governed PAC.”&nbsp;



In 2020, the PAC operated on a token-based system. Users who donated or subscribed to the newsletter were granted tokens that could be used to vote on where the money went through a voting application.&nbsp;



“It worked well, to an extent, it proved what a community-governed PAC could be, but it was kind of before DAO tooling is where it is now.”



The tokens ran on Rinkeby (an Ethereum <a href="https://ethereum.org/en/developers/docs/networks/" target="_blank" rel="noreferrer noopener">testnet</a>), Whirty said, to avoid gas fees. It was a good opportunity to test different concepts, he explained. The PAC ended up donating a total of $7,500 to ten candidates in 2020. 



“Not anywhere near the $85 million that finance, as an industry, has donated,” Whirty said. “But, it&#8217;s a good dry run, and we got all the compliance stuff in place, so it was definitely not a lost cause.”&nbsp;



Things are expected to work differently in 2022. The team plans to build the “Gitcoin of political giving,” Whirty said, referring to the open-source platform for funding projects on Ethereum.



Individuals will be able to use HODLpac’s donation app, which has not yet launched, to give to any candidate that they want. As with the first iteration, the PAC quill use quadratic funding, Whirty said. “I think there are some benefits to that,” he said. “One being that smaller dollar donors will have their donations matched and amplified.”&nbsp;



Under quadratic funding, projects will be prioritized based on the number of donors, not just the size of donations because donations are matched by a shared pool — so the total amount given to a candidate is the square root of each contribution to it, summed and then squared. The strategy encourages donations of any size and is designed to ensure democratic allocation of funds.&nbsp;



“So people will be able to use the quadratic funding application and give to the candidates they want. They can also obviously give to the PAC itself — to the matching pool,” Whirty said. Both activities earn governance tokens.&nbsp;



<h3 class="wp-block-heading">Governing the influence of government in Washington</h3>



Governance token holders will be given some sort of power, although the details are not yet worked out, Whirty said. 



App users and donors will be able to direct funds toward any candidate or lawmaker, but the idea behind the PAC is certainly blockchain-focused.&nbsp;



“The idea is that everyone will be able to donate to anybody, but obviously, we want to support strategic people and that&#8217;s where the challenge of decentralized governance comes in,” Whirty said.&nbsp;&nbsp;



To help combat this issue, Whirty said, the app will display something called a HODL Score, which will serve as a measurement for evaluating a candidate’s stance on blockchain-related policy.&nbsp;



<blockquote class="wp-block-quote">“It&#8217;s this idea that we should have a tracker of where every legislator and candidate stands on crypto and everything that they&#8217;re doing,” he said. “Measuring and ranking is an interesting challenge.”</blockquote>



The HODL Score was something the team attempted to implement in 2020, but they did not have the funding to make it work, Whirty said. Now they do.&nbsp;



“We got a DeFi Education Fund grant to quantify these numbers,” he said. “It is a public resource to crypto overall but like it’s also essential to the functioning HODLpac, because we will be able to see how a candidate or congressman is when it comes to crypto-related issues.”&nbsp;



The DeFi Education Fund works to inform lawmakers and advocate for pro-DeFi policies. The HODL Score, Whirty said, will hopefully take into consideration all crypto-related statements and votes made by different candidates and lawmakers, including Tweets and public statements.&nbsp;



In the eyes of many crypto proponents, <a href="https://cms.blockworks.co/?s=regulation" target="_blank" rel="noreferrer noopener">regulation</a> is fundamentally at odds with the founding principles of cryptocurrencies, Whirty acknowledged. 



“That&#8217;s something I&#8217;ve thought about a lot and I think the tide is turning,” he said. “People are realizing that this is not an existential threat, the technology itself isn&#8217;t going to be destroyed, but life can be made a lot harder in crypto adoption, people are realizing that it&#8217;s time to engage.”