[Discussion and Feedback Request] Impact Market Workstream

[thedevanshmehta]

Hi all,

My first post here on Gitcoin, hope I’m doing this the right way!

I’ve been interested in the concept of impact markets for about 2 years & I’ve seen some discussion of it here at Gitcoin.

This post seeks feedback on formalising it as a public good funding mechanism held on a bi-yearly cadence. In this post I’ll go through the nitty grittys of what impact markets are, why Gitcoin should launch this & the go-to-market strategy. I’d appreciate any feedback, especially on the next steps!

1. What are Impact Markets

Impact markets create a VC ecosystem for funding social impact. Investors get impact shares (or rights to the hypercerts issued by a project) upon funding a team. If the project succeeds, grant funders buy out the shares at a premium. More details here

Impact Markets potentially allow investors to make money by funding soup kitchens

2. Why Gitcoin

a. The regular grants round is limited to reaching donors; impact markets would allow us to reach investors too, strengthening the degen to regen pipeline.

b. We can bolster our evaluation capability, as grant funders assess projects before buying out certificates.

c. Position ourselves at the forefront of the public goods meme by attacking the coordination problem from two fronts, QF grants rounds and impact markets, reducing any single point of failure

3. Go to Market

a. Run an impact market round every 6 months. In the first 2 weeks, projects seek funding from investors. Funded projects then deliver over the next 5 months. The final 2 weeks are kept for evaluation.

b. Limit the initial rounds to journalism and open source software, as the output from their projects is wholly online & can thus be evaluated by anyone without need for trust in the claims made by a project.

c. Keep a ratio of 1.5x investor money for 1x of grant money. If $1500 is invested in projects over the first 2 weeks, then only $1000 in grant money is made available for buying out hypercerts of successful projects in the final 2 weeks. Periodically revise this ratio based on feedback from investors & donors.

This will be appealing to grant funders as they only fund successful projects + they get a multiple on their funding (1.5x more of projects get funded if they give via our impact market than if they give it directly). Investors in good projects should be able to make 2-3x returns while bearing the risk of non purchase of the impact certs of dud projects.

I’m going to end this post with an image I’ve seen here. We have the grants protocol up and running to support ImpactDAOs attacking Moloch; the second pillar we need to create is Ether’s Phoenix , which this work stream hopes to do.

Additional Reading: manifund.org is running a pilot impact market with Scott Alexander buying $40k of impact certs in September 2023

[ccerv1]

Welcome Devansh! Thanks for posting.

I think there may be challenges creating a new workstream for this purpose at Gitcoin DAO, however, I could imagine a group of builders implementing an Impact Market on top of the new Allo Protocol and/or Grants Stacks.

Also check out this related discussion about an event / hackathon series that could seed such an Impact Market.

[thedevanshmehta]

Thanks for the feedback Carl! I do feel the matching fund pool at Gitcoin and Oracular Funds in an impact market overlap as they appeal to a similar donor base.

How would using Allo protocol or the Grants Stacks be different from the RetroPGF system at Optimism with pre-selected judges/badge holders evaluating each project? Impact markets need a restricted jury unlike the Gitcoin grant rounds, to prevent teams that have done less/no work from taking the lions share of oracular funds by simply getting their community to vote for them.

I’m applying for a visa to attend funding the commons, I hope the proposal is passed and impact markets becomes one of the projects we work on ! My project is in manifund’s impact market, so I’ll be able to share some good insights on how Scott Alexander approaches evaluation for distributing oracular funds.

[lucian]

Hey @thedevanshmehta! Love impact markets, I really think this is one of the next key areas to dive deep into with public goods. Creating a market around impact certs is going to change the world.

I think it would be super cool to build out an interface/protocol for facilitating impact markets. Allo protocol–the underlying open protocol for Grants Stack, which facilitates project data, on-chain payouts, etc.–could be an awesome underpinning for such an interface.

Perhaps this would be better suited as a Grant in an upcoming Grants Round? Often times developers might build out a POC as part of a hackathon and then create a grant to apply for funding to continue building out the project.

[thedevanshmehta]

Thanks, that’s really useful feedback to start this out as a project on Gitcoin’s grant registry rather than a separate workstream! I think the biggest challenge to sustaining impact markets is finding outcome funders, similar to how the biggest challenge for Gitcoin is ensuring there are always matching pool sponsors.

As the next Gitcoin grants round starts in July, we could take @ccerv1 feedback & seed this at the upcoming Funding the Commons/Eth CC Schelling point events before launching it as a project.