How Web3 Foundations Are Rethinking Grant-Making

A few days ago, Mashal Waqar, Eugene Leventhal, and a team of researchers published The State of Web3 Grants Report, a deep dive into 15 grant-making programs in the web3 and blockchain ecosystem. This report is one of the first attempts of the web3 community to offer a more transparent look into how web3 foundations award grants, measure impact, and support grantees in the broader community. In particular it does a great job at demystifying the process for grantees, unpacking the types of projects funded, and chronicling the evolution of these new entities.

In this blog post, I'll share some reflections I had while reading this report, and what other industries might take away from this model.

I've always been impressed by how web3 foundations offer a new approach to funding public goods. Rather than rely on external public or private entities to bootstrap innovation, many blockchain networks are built to either reserve or directly allocate a portion of their value or tokens to directly support and advance their own ecosystems.

What’s great about this concept is the acknowledgement that progress (but in particular, technological progress) includes a mix of both profitable ventures and crucial work that might not make as much money—like research, setting standards, or building key developer tools.

When I worked with the team at the Uniswap Foundation for the better part of a year, I learned first-hand how much potential exists to accelerate innovation in nascent networks and protocols, when you have direct access to a treasury. You can see the types of initiatives they have funded this year alone, and the impact it has on the ecosystem broadly, in the Uniswap Foundation 2024 Impact Report.

One of the things I've been curious about since I worked with the Uniswap Foundation to help update a new strategic framework for allocating $30M+ in grants is to learn more about how other web3 foundations are structured, funded, and sustained.

This report is a good start at getting some of those questions answered. But, at 180 pages, I didn't have time to read the entire thing line by line this morning. Instead, I uploaded this report into ChatGPT and asked the AI to extract some relevant details about things interesting to me the origin stories, founding years, and entity structures of the grant programs analyzed.

After going through a more painful round of fact-checking that I would have liked (the AI hallucinated quite a bit on me on these details), here's what I wound up with. (And if you see an error in here, fact check me on it please, and I'll correct.)

If you're new to web3 foundations overall, you'll notice a few things about the grant programs profiled:

• All of them are directly connected or linked to an underlying blockchain network (and in fact, an associated public goods foundation is now commonplace in nearly every crypto network)

• There's a mix of formal nonprofit entity structure (but few with U.S.-based entities) and more novel decentralized autonomous organization (DAO) structures

• This entire ecosystem and concept is still incredibly new, at only a decade old

• The majority of these grant programs today are funding developer tooling and research, with less focus on what one might consider broader public goods that engage with the public external to crypto networks

While there's clearly a lot to figure out, I love learning about new ways that nascent ecosystems are beginning to rethink funding models for development and innovation work, and I'd like to see more of these ideals carried outside of web3.

A couple of years ago, I read Mission Economy by economist Maria Mazzucato. In the book, she explores the hybrid funding models that fueled one of the greatest technological and cultural achievements of the modern era: The 1960s moonshot project to land a man on the moon.

Her main argument is that solving society’s biggest challenges—those that need collaboration, innovation, and multi-stakeholder involvement—requires supporting innovation through both public and private sectors. She highlights the many publicly funded initiatives that developed critical technologies for astronauts, which later led to private sector successes built on those innovations.

Mission Economy

Economics - Innovation - Inclusive Growth - Public Purpose | Mariana Mazzucato

https://marianamazzucato.com

I believe these principles could be applied to "thorny" and intricate problems across industries—blending public and private interests to create new funding models that push the boundaries of what’s possible.

While the State of Web3 Grants Report does an excellent job of diving into the grant-making process, a few areas are left unexplored. For example, I am curious to read a deeper analysis of how on-chain treasuries were established, the relative size of grant allocation compared to the total market cap of that treasury, how treasury funds are allocated, and how these foundations plan to achieve self-sustainability over time. Maybe that's a topic for next year...

If you’re interested in exploring more, check out the tweet thread announcing the State of Web3 Grants Report here:

mashal ✨✨

@arlery

SO. MAJOR Announcement.

We've just published our 2024 State of Web3 Grants Report. 180 pages of insights and research. 20 pages of takeaways. 13 programs. 5 grants tools.

Read the report here: bit.ly/Web3-Grants-Re…

Produced by: Grant Innovation Lab at…

413

12:45 PM • Sep 24, 2024