How Crypto Grant Foundations Work: Expert Insights
Applying for research and development grants may seem not an easy process, especially in such a young and controversial industry as blockchain and cryptocurrency assets, where projects often face a skeptical treatment.
Tech companies behind well-known blockchain protocols—like Algorand, Ethereum, Polkadot, and Cosmos, among others—are constantly advancing their developments not only by means of their staff teams but also with the assistance of the community. There is also a slew of government-backed foundations interested in sponsoring blockchain projects, including the European Commission and UNICEF.
Some of the leading tech firms established dedicated foundations to foster innovation by offering various funding programs to startups or developer teams that have the potential to benefit ecosystem development or improvement.
Forklog.media reached out to some of the leading cryptocurrency and blockchain-focused grants foundations, asking them to provide insight into grants issuing and decision-making processes, as well as requested comments from grantees, who successfully went through the entire process—from the first application to delivering the final product.
What Are Grants Usually Focused On?
Generally, grant programs support research, application development, tools, infrastructure, and security, and also offer support for educational projects, as well as conducting local events, training, meetings, and hackathons.
For example, the Web3 Foundation grants program funds software development and research in and around the field of decentralized software protocols, and Gitcoin Grants targets main two categories, which are technology and community, with projects focused on security, privacy, ETH 2.0, and others.
According to Billy Rennenkamp, grants manager at Interchain Berlin that backs projects like Cosmos Network and Tendermint:
“We have a repository of ‘Request for Proposals.’ In general, though we look to support projects which build common components that can be used across the ecosystem, as well as work that broadens the scope of the ‘Internet of Blockchains’—work like bridges to Ethereum and Bitcoin as well as Inter-Blockchain Communication implementations for networks like Polkadot and ETH 2.0.”
Regardless of foundations’ fields of interest, the number of developer teams has been increasing massively, which apparently strengthens the competition in the market.
Community and Foundation Grants and Quadratic Funding
“The process of submitting applications and receiving a grant is simple if you are confident with what you are doing and understand what the issuing organization needs. You should also be ready that the grant amount your team received could hardly be enough for covering all related expenses during the development phase,” Vasiliy Shapovalov, CTO at p2p.org that won a development grant from Interchain Berlin, told forklog.media.
The blockchain and crypto space can offer two major types of grants—community and foundation grants. Community grants are negotiated and issued by the community, most often by a token holders voting, while foundation grants are issued by a fund created to manage raised investments and the corresponding share of tokens.
Often, they coexist within the same network. For example, Cosmos offers community grants and has two affiliated organizations—Interchain Berlin and Informal Systems—that accept applications for grants.
“They have different decision-making processes. Community grants are more open, public and usually focused on the token valuation increasing while working with a fund is more like the traditional process of state and commercial grant programs, and more related to the mission of the fund and the project roadmap,” Shapovalov said.
Speaking about how Gitcoin operates, Scott Moore, the organization’s technical growth lead, explained:
“Gitcoin Grants isn’t run like a traditional grants program. Instead, it uses quadratic funding to give individual, smaller donors more say in where funds from a larger matching pool will go. In particular, Gitcoin Grants uses an ideal called ‘capital-constrained liberal radicalism’ first formalized by Glen Weyl with help from co-authors Vitalik Buterin and Zoe Hitzig in this paper. Although we’ve iterated on the formula, the base formula takes the ‘square of the sum of the square roots of contributions’ to a given to a project over a defined period of time and matches that amount within the constraints of the matching pool.
“The beauty of this approach is that although the dollar values are the same for both projects, we can see that project two gets a much larger share of the matching pool because more people have taken the time to vote with their dollars and support it. In our view, quadratic funding democratizes the grants process and gives the entire Ethereum community a say in what kinds of projects are valuable to them,” Moore added.
As for the Web3 Foundation, it currently offers two types of grants, wherein one is fully transparent on Github and disbursed in cryptocurrencies and the other is partly private and for larger grants.
How Long Is the Grant Application Review Process?
Each grant application undergoes a thorough examination in order to be considered for funding. Applicants are advised to take an effort to provide the relevant foundation with a well-prepared application, which clearly describes what benefits the project can potentially bring to the ecosystem, how it will be maintained, what expenses it will require, and what deliveries can be checked upon the project completing.
The duration of the grant application review varies greatly. Thus, the Web3 Foundation is capable of making decisions on the Open Grants program immediately, each Gitcoin grant round lasts two weeks, while the Algorand Foundation reviews applications up to eight weeks in most cases. Interchain Berlin uses a quarterly system, so it spends up to three months to make the final determination.
“When working with foundations, the grant issuance process is rather slow, it even can take several months. Community grants are usually issued faster. The funding process also takes time, so it’s important to have some reserves as it’s not right to consider grants salary,” said Shapovalov and further added: “If you receive payment in project tokens, especially if the project is not yet traded on exchanges, pay attention to the peg. Often, the project’s price does not correspond to that on an exchange or OTC.”
Those projects who get positive feedback from the evaluation panel usually complete a due diligence procedure before final decisions.
General information on grant foundations’ operations
What Help, Apart From Financial Support, Can Grantees Expect From Foundations?
Normally, grant issuing organizations provide developer teams with additional assistance and guidance, as well as technical support and audit. The Gitcoin team even helps grantees market their projects to the extent it can.
Rennenkamp explained that Interchain Berlin uses a system that attaches a “Grant Entity” to each grant, which subsequently conducts a cadence of check-ins and milestone evaluations. This enables grantees to receive early user feedback. The foundation also publishes blog posts about the work and promotes projects via social channels.
“It’s important for the funding program to dovetail into the developer relations program to make sure the ecosystem is aware of the work getting done and knows how to access it,” he said.
David Hawig, grants manager at the Web3 Foundation, told Forklog.media:
“We offer everyone, not only grant teams, who are interested in our technology various tutorials and the possibility to ask questions directly in the chat channels on riot. In these channels are also our core developers and researchers, etc., so that you usually get your questions answered there. If not grants, the team can always reach out to us and ask for specific support. Apart from this, when we evaluate the deliveries by the grants teams, we generally try also to provide valuable feedback and not just testing according to the contract.”
Foundations tend to provide informational support to project teams during the development phase as they apparently pursue faster adoption and improvement of their relevant ecosystems, as well as strengthening and expanding communities.
Room for Improvement
Although organizations are constantly improving internal processes in a bid to ease the issuance of grants and the work of grantees, some unresolved issues still raise concerns among industry stakeholders.
What is most lacking, said Shapovalov, is “a formalized process for a preliminary discussion of applications. Usually, we have 3 to 5 interrelated ideas for grants, but writing an application for each of them is difficult, it’s an extensive work. Therefore, it would be great if foundations proposed a convenient way to negotiate non-formalized ideas. Yes, we can do this at this point, but it’s not an official process and we need to look for an approach to each fund or community separately.”
Shapovalov and his team worked on a complicated and lengthy project, wherein they adapted Tendermint and cosmos-SDK to add a BLS-based random beacon. It took a long time for the developers to discuss the project, however, they hardly communicated during the actual work process.
“Upon the project delivery, we were asked to make several minor changes and make more tests, which we managed to complete in about a week,” he shared.
Vladimir Zarechnev, founder of Baking Bad—a startup that received a grant from the Tezos Foundation—said that, prior to applying for the grant, it would be useful to know grant amount limits and time limits for the project completion. Zarechnev noted that it is best to break projects down into iterations.
He also noted that some teams were concerned about how to report the performed work and spendings as, at the time, there were no unified forms of reporting.
Words of Wisdom From Grant Issuing Organizations
Forklog.media asked some foundations what advice they can give to those seeking to receive a research or development grant, and here is what they said.
David Hawig, grants manager at the Web3 Foundations noted:
“They generally should work on ideas and projects that are interesting for themselves and potentially help them to create a long-term business model. Apart from key infrastructure pieces, we want to support projects that are maintained and help the whole ecosystem in the long run. So, projects should focus too much on what might be interesting for us or what might the grants program support, etc., but rather come up with their own ideas and convince us to fund these.”
Scott Moore, technical growth lead at Gitcoin said:
“The application process is completely open and permissionless, so we encourage anyone who has a great idea that they believe could improve the Ethereum ecosystem to apply.”
Stephen Duignan, head of marketing at the Algorand Foundation noted:
“Submit an ambitious plan for something that you are passionate about, and that will make a big difference to the Algorand ecosystem and to society at large.”
Billy Rennekamp, grants manager of the Interchain Berlin said:
“Get involved with the community on discord, read up on the ecosystem and the various pieces and projects, and find out what topic you’re most excited about working on. There are tons of interesting problems that need solving, I’d suggest digging in and seeing what prior work exists and what it is that still needs to be done that you’re well-positioned to tackle!”
What developer teams seem to have consensus on, is that they should have passion for what they do. Even if a foundation declined your application, it will likely provide you with thorough feedback and, what is most important, allow you to reapply for a grant in the future.
Written by Ana Alexandre
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