GTC Value Accrual Intro

🤖 DAO Governance and Vision
1

Hello from FireEyes :fire:_​:fire:

Fire Eyes has been observing governance and token discussions across different projects, and we see an opportunity to help create value in the Gitcoin ecosystem.

A few developments that have happened in the last couple weeks:

  1. Uniswap Fee Switch For Protocol Governors
    • Uniswap fee switch discussion is currently ongoing. Gitcoin being able to move in a similar direction would be valid and beneficial.
  2. Gitcoin Whitepaper Launch
    • This announcement and launch has shown the direction forward for Gitcoin as a growth driver for Ethereum ecosystem.
  3. Gitcoin Grants Stack / Allo Adoption Increasing
    • Gitcoin has continued seeing higher adoption from many different projects across the ecosystem.

In the wake of these recent developments, we think the time is right to start thinking about GTC sustainability for Gitcoin - building more clear value accrual and sustainability to GTC.

We’ll focus on what we believe to be the three most impactful ways GTC can accrue value:

  1. Allo Fee Switch
  2. Passport Staking
  3. GTC Venture Fund

In this post, we will dive into the merits of each; hopefully beginning to drive discussion and eventually consensus about which should be pursued by the DAO.

1 - Allo Fee Switch & Staking

Allo protocol in its current version has had $60m in volume. One very easy and clear change we could make is to introduce a fee switch to Allo protocol, allowing Gitcoin to take a percentage of that volume into its treasury.

Uniswaps recent discussion on the activation of their fee switch provides some guidance about how this could happen, and the benefits of doing so.

Although Gitcoin is a different protocol to uniswap, the foundation of these decisions should be same. Protocols cannot sustain being public goods indefinitely and leaning into value accrual as a protocol is important. There are however reasonable discussion points that this type of fee switch could damage Gitcoins public goods reputation, here’s how we feel that we can mitigate this:

  1. Start with making the checkout process have an optional donation/fee to Gitcoin DAO.
  2. Only enact the fee switch on the official Gitcoin frontend, and let others deploy their own frontends without fee switches.
  3. Provide ways to route around the fee switch through holding / staking GTC?

Allo has established itself as a credible tool for capital allocation, projects with large sums of capital have two incentives to use Allo with a fee switch.

  1. It has pre-existing infrastructure which is easy to use, making the fee worthwhile.
  2. Using Allo (with a fee) also means that you also contributing to public goods inherently by contributing to the sustainability of public goods infrastructure.

2. Passport Staking

Gitcoin Passport has staked 1.5m of GTC so far (source). This is roughly 1.5% of the total supply staked within Passport within the first 18 months of launch during a bear market.

Sybil resistance has continued to be at the forefront of protocol and airdrop design, with projects like Worldcoin having significant valuations solving the same problem in a different way. Being able to capture some of this value for GTC via Passport presents like an achievable and impactful goal.

We encourage Gitcoin to continue to focus on identity staking and build more sybil resistance mechanisms into the Passport ecosystem, as well as more aggressively propagating passport throughout the Ethereum ecosystem.

Ensuring GTC is the primary mechanism for passport staking and security longterm is also a high priority for the protocol.

We see a possible next step of crafting a DAO wide strategy to further adoption of Gitcoin passport across the ecosystem.

3. GTC Venture Fund

Gitcoin has delivered $60m value to over 3700 different grants over the past 5 years, a key contributor to Ethereum’s growth and success.

These grant rounds have supported countless teams and projects from their earliest stages, with GTC being the key mechanism to enable this support through governance and infrastructure development.

Gitcoin has an extensive track record of projects funded: Uniswap, WalletConnect, Yearn Finance, etc. If Gitcoin and GTC could have been distributed even a small fraction of ownership from these protocols to reinvest Gitcoin’s future it would have been immensely valuable.

The main reason to create a “Gitcoin venture matching” fund is the dealflow that Gitcoin has access to, since many of these projects come to Gitcoin at inception it allows for the projects to be sufficiently supported, whilst allowing Gitcoin to share in their future upside.

In practice this is likely a GTC matching pool managed by a Hats structure where an elected ‘GTC venture committee’ distributes additional GTC incentives to projects that are willing to share future ownership / token allocation back to the GTC DAO.

Where a grants matching funds are doubled* (*open for discussion on this exact number) by the GTC venture committee in exchange for a future commitment of sharing any tokens, revenue or upside the project ends up accruing.

This effectively makes Gitcoin into an “Ethereum Emerging Market Fund” that has upside in each of the up & coming projects coming through the grants funnel.

The ask behind this would be community feedback on how to best structure a ‘GTC Venture Committee’, create a new treasury for the venture arm and possible deal term templates to create efficiency in this area. We do not want Gitcoin to focus too hard on capturing the most value out of seeding projects but rather have some exposure to be able to reinvest in public goods longterm.

Conclusion

As Gitcoin grows, there will be a handful of different directions through which GTC value could accrue. We welcome feedback from the Gitcoin community as to which directions we think could be most fruitful.

We think the first step should be setting up a GTC Venture Committee because this is the most time sensitive value add and potentially holds the largest upside for GitcoinDAO.

Allo and Passport are also high impact value adds, but would benefit from taking more time for the community to build out and iterate on the mechanisms and structure involved.

We at FireEyes deeply believe in Gitcoin’s mission of expanding Ethereum’s ecosystem in a virtuous way, but we also want to be sensitive towards the sustainability of GTC and Gitcoin itself.

Any and all feedback from the community would be very helpful, specifically on each of the three core proposals and how to best roll them out.

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Tysm for starting this convo here @James! It mirrors a lot of the conversations that have been seeded internally.

Re #1 we’re waiting for AlloV2 migration to be complete before a fee switch but I know that and other product-led financial considerations are being discussed between @meglister and @owocki.

  1. Start with making the checkout process have an optional donation/fee to Gitcoin DAO.

This seems fairly straightforward and easy to implement sooner rather than later as an interim step for consideration.

Re: #2 there is new ID Staking functionality that is going to launch very soon that will closely map to your thoughts. Really looking forward to the progress on this functionality on Passport.

I would love to discuss hwm further experiment with dogfooding Passport in gating experiments…even in light of it’s likely subtraction from the org.

Re: #3 Venture Fund

I really appreciate how you’ve outlined the thinking around this idea. It’s very interesting and compelling as a sustainability model. It has been thrown around internally but no official proposals have surfaced to vote on.

One thing that I’m mindful of is the tension between taking too much on and stretching our resources too thin across too many products and services. A lack of focus has something we’ve struggled with and very recently regained our footing around. I get the sense that there might be more appetite to explore this once we get over the improvement process for our tech stack (aiming for Q2 2024 afaik), but would love to hear from others who are stewarding product roadmaps.

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Hola,

That sounds good, but in my personal opinion, Gitcoin needs to consolidate its efforts by focusing more on building upon the foundation laid by its existing products.

In terms of the GTC Value Accrual Intro:

Pros:

  1. Revenue Generation: Introducing a fee switch could generate revenue for Gitcoin by capturing a percentage of transaction volume, potentially enhancing sustainability and funding for the platform.
  2. Value Accrual: By incentivizing capital allocation towards public goods through the fee switch, Gitcoin can strengthen its value proposition and contribute to the long-term sustainability of the ecosystem.
  3. Community Support: Implementing the fee switch as an optional donation/fee and restricting it to the official Gitcoin frontend can mitigate reputation risks and maintain community trust.
  4. Alignment with Industry Trends: Following Uniswap’s fee switch discussion, Gitcoin can align itself with industry trends and best practices, potentially enhancing its competitiveness and relevance.

Cons:

  1. Public Goods Perception: There is a risk that implementing a fee switch may damage Gitcoin’s reputation as a public goods platform, potentially leading to community backlash and loss of trust.
  2. Complexity and Implementation Challenges: Introducing and managing a fee switch involves technical complexities and operational challenges, requiring resources and expertise to ensure smooth execution.
  3. User Experience Impact: Adding a fee switch may impact user experience, potentially leading to reduced adoption or usage if not implemented thoughtfully and transparently.
  4. Regulatory Considerations: Depending on the jurisdiction and nature of the fee switch, regulatory compliance, and legal implications need to be carefully assessed to avoid any legal issues or complications.

Regarding the “Ethereum Foundation Fund”:

  1. I think that the best approach to this is making synergies with the Enterprise Ethereum Alliance initiative,

  2. or offering DVTs to trusted grantees for example to create an interconnected entity… in that way would be more genuinely implemented…

I would love to support the last idea, and I think that many grantees in low-mid-income countries too…
Rainbow staking + Rainbow paper = MORE GROWTH

@kyle, @owocki @Viriya it could work and gradually scale with certain experiments…

:ocean::coral::tropical_fish::sparkles:

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