From applications to protocols, how will Gitcoin's Grants Protocol change Web3 financing?

Original Title: "How Gitcoin's Grants Protocol Will Change On-Chain Financing and Donations"

Author: Maxlion, Odaily Planet Daily

On October 7, according to the official Twitter, Gitcoin will launch a new product, Grants Protocol, which is a financing infrastructure that allows any community to initiate its own grant programs with community decision-making. It is currently in a closed testing phase. The existing Gitcoin Grants will continue to operate as a public good for Web3. In the coming months, Gitcoin will initiate the first round of grants with its design partners.

What problems does this product solve? How will it upgrade Gitcoin's existing business? Odaily Planet Daily will analyze this in this article.

First, let's discuss some pain points that Gitcoin faces.

Funding Limitations

The current quadratic funding pool mainly comes from donations from leading Web3 projects.

In the 15th round of Gitcoin Grants, which started on September 7, a total of $4.4 million in grants was distributed, of which $830,000 came from community donations, with most donations coming from some leading organizations in Web3.

According to the chart below, we can see the specific information about the main donors in the 11th round of Gitcoin last year, most of whom are well-known projects on Ethereum.

However, if the funding sources could be expanded to other ecosystems and Web2, it would further enlarge the funding pool and enhance the funding capacity for projects.

Issuance Limitations

Currently, new projects participating in donation activities on Gitcoin face time-limited donations and review threshold issues.

Regarding time-limited donations, Gitcoin Grants donation activities have clear start and end times, usually held once a quarter. For projects, this means they can only receive donations from the Gitcoin Grants quadratic funding pool within the specified time. When the Gitcoin Grant Round ends, the donation channel on Gitcoin will close, which limits the financing opportunities for project parties.

As for the review threshold, every new project uploaded to Gitcoin needs to submit fixed information and wait for review. Each Gitcoin donation program has specific eligibility requirements. While this can filter out low-quality projects to ensure project quality, it also sets a certain threshold for new projects to participate in donations.

Platform Fragmentation

This is a common problem faced by most blockchain funding platforms.

Although Gitcoin is considered by many to be the "arsenal" of Ethereum and has indeed become an incubator for many Ethereum projects, it does not restrict projects from other ecosystems from participating in Gitcoin Grants. We can see that Algorand and Solana also conduct bounty tasks on Gitcoin.

However, there are still ecosystems outside of Ethereum, such as Cosmos, Avalanche, and Aptos, that have not participated in Grants or held hackathons on Gitcoin.

Setting aside ecological competition considerations, a lack of customization may be why they do not choose Gitcoin. Other alternative options like Dorahack, Credencys Solutions, E-Consulting, Archer, and Qiscus can also conduct ecosystem project funding, hackathons, and bounty tasks.

However, multiple funding platforms create a fragmentation between funds and developers. From a blockchain perspective, different ecosystems conducting financing on different platforms can reduce the efficiency of fund usage. For example, the quadratic funding pool on Ethereum often has surpluses, while the funding strength for some emerging small ecosystems may be insufficient, leading to a mismatch of funds.

From a developer's perspective, when they develop a multi-chain project like a cross-chain bridge, they often need to submit their project on two or more platforms to apply for funding, which can also burden developers.

Gitcoin's new product, Grants Protocol, may address the above pain points.

Grants Protocol Innovation

According to Gitcoin's introduction, Grants Protocol, as the next-generation open financing platform incubated by Gitcoin, can help individuals and organizations build their own grant programs. Unlike Gitcoin, Grants Protocol also supports crowdfunding (similar to JuiceBox) and community-led grant programs. For example, a DAO can publish its own project on Grants Protocol, and users and organizations outside the DAO can also fund that project.

Lower Threshold

Compared to Gitcoin, Grants Protocol has a lower financing threshold. Grants Protocol allows all communities and ecosystems to raise funds from everyone through Grants Protocol, significantly lowering the barrier to entry. It is foreseeable that some DAOs specifically aimed at social financing for reinvestment will emerge on Grants Protocol, which may become an LP platform for investment DAOs.

More Customization

Grants Protocol will provide modular, flexible open-source tools to help communities achieve more customized grant programs and different project-specific financing needs. For example, Grants Protocol can offer funding plans on a monthly, weekly, or even daily basis that Gitcoin Grants cannot provide.

Moreover, unlike the ecological round funding set by Gitcoin, Grants Protocol can offer more diverse funding plans to promote the development of products across various tracks.

In terms of bounties, Grants Protocol also supports various ecosystems and communities to publish more customized bounty tasks, which may, to some extent, replace task tools like DeWork, while also facilitating community task management.

More Unified

By providing customization, this may allow all ecosystems to gradually shift towards sharing the same financing platform, giving developers and projects more financing opportunities and improving fund efficiency, without having to wait for quadratic funding supply at specific times each quarter as in the past with Gitcoin Grants.

With the future launch of Grants Protocol, we can expect Grant Protocol itself to become a public good—an infrastructure for financing for all individuals, groups, communities, and ecosystems. More project parties can conduct financing at lower costs and more quickly, connecting with other resources to promote the development of the entire crypto community.