Novel Situation #1 - Project should not have a token or raised VC funding

[David_Dyor]

@kyle

I am not sure I follow the logic on the proposal if governance tokens are tradable and have a market value.

My logic is based on the original reason a project creates a token. If it appears the token was created for governance purposes, not revenue-generation, then imo it should be eligible.

We should not penalize a project for what the free market chooses to do with a public token. Alcohol and Gun manufacturers aren’t penalized when their creations get abused.

My logic has the obvious problem of projects fraudulently labelling their token as ‘governance’ when it was designed to create profit. I agree this will be a continuing problem however the steps I describe will empower Gitcoin reviewers and approvers to make the final call, based on judgement and experience. Now they don’t get the chance and great projects like Giveth and BrightID are getting denied. Feels wrong to me as I can’t think of more suitable projects for Gitcoin funding.

[David_Dyor]

@DisruptionJoe

The current appeal process was written by me when we were in stage 1 above! I had no clue how cumbersome the idea of having stewards vote on every appeal could be, or the damage it could do to a grant by making it ineligible while we formed our processes to execute said vote.

I now believe it is the best way forward for the dao, though cumbersome (temporarily). It would be difficult to evaluate fringe cases as just one of many dao-workstreams when the precedent set could have major future ripples. I agree with Joe that a full Steward Vote is suitable. We can probably shave a day or two off by improving the workflow needed to obtain the full steward signal.

[David_Dyor]

I will post a properly formatted proposal into the forum soon for vote on the appeal. Thanks for your feedback!

[annika]

Catching up here and first off, thanks @David_Dyor for flagging this.

Our “should not have a token” is a nebulous policy - and, for what it’s worth, is actually nowhere explicitly within the application flow - and I appreciate the opportunity for us to get more explicit and offer clearer guidelines to the community.

My initial reaction to the situation is that we will have to set objective guidance, and I don’t think some of the current proposed solutions lend themselves to that.

For example:

@David_Dyor

My logic is based on the original reason a project creates a token. If it appears the token was created for governance purposes, not revenue-generation, then imo it should be eligible.

Everything in Web3 moves extremely quickly, and what was originally conceived as a governance token can very quickly turn into an extremely valuable tradable asset. As a result, I disagree with intent at token creation being the right yes/no barometer. And, even if it were, assessment of the team’s intent at time of token creation is highly subjective and extremely difficult to discern.

@David_Dyor

“Grant Applicants should not have a token other than governance tokens.”

This suggestion is clearer and more explicit, but IMO, this is still far too inclusive. There are projects with governance tokens that have billions in market cap and certainly do not meet the ethos of Gitcoin grants, based on their stage. I do not think governance tokens as an arbitrary cutoff makes sense for that reason.

I don’t think the existence of a token alone should preclude a project from being part of Gitcoin Grants; as you suggest, @David_Dyor, the landscape has evolved and many, many early-stage projects that I believe the community would deem eligible for grants do have small token experiments. That said, we have to draw the line somewhere.

A couple suggestions, perhaps, to get the ball rolling:

• What if we allowed governance tokens that have not yet crossed a certain market cap? E.g., market cap has never been above $20M

• I also still believe that VC funding is a material, measurable event that often greatly shifts a project’s priorities. I am in favour of keeping something like the $500K VC funding threshold (I would perhaps up that amount, but would love to hear what the community thinks).

TLDR: I’d propose we work towards some combination of objective metrics like the above two. These will, inevitably, be somewhat arbitrary - and we’ll likely need to experiment and adjust - but in order to scale this program and our approval process, we need to get explicit and start somewhere.

[DisruptionJoe]

@annika

Everything in Web3 moves extremely quickly, and what was originally conceived as a governance token can very quickly turn into an extremely valuable tradable asset. As a result, I disagree with intent at token creation being the right yes/no barometer. And, even if it were, assessment of the team’s intent at time of token creation is highly subjective and extremely difficult to discern.

Absolutely agree here. I believe David’s intention was to offer a conversation starter. The subjectivity of these parameters is why we need to solidify our appeal process so we have a consistent method for changing the policy in a fast paced environment. We will be posting on that tomorrow.

@annika

I also still believe that VC funding is a material, measurable event that often greatly shifts a project’s priorities. I am in favour of keeping something like the $500K VC funding threshold (I would perhaps up that amount, but would love to hear what the community thinks).

I very much agree here. One problem is that the token issue is wrapped up with this as though it were one issue. By separating them, our fidelity will improve.

[connor]

Copying some of my general comments on the topic from Discord - (not necessarily in response to BrightID or any other grantee):

For ecosystem rounds, it’s ultimately up to the round partner to decide. Hence why we really need to decouple side rounds (cause or eco) from the main pool in the future - ideally before gr14.

But I think there are plenty of reasonable cases where a project has a token but didn’t do a large fundraise (or a fundraise of any kind). Also “token” is getting vaguer all the time. NFTs are tokens. Voting/governance tokens, non-transferable tokens - just having a token doesn’t always imply a large treasury to fund a project.

So I think it’s really a case-by-case situation. A fundraise or liquidity event should def be a pivotal moment, but even so, I think a project that raises a $200k seed round or something could arguably still qualify. There are projects that may have gotten large grants from other programs, non-profits that are funded via donations, maybe a project won a big hackathon prize, the line is blurry. If I had to draw a line, I’d say raising > $500k should def disqualify you.

[kyle]

I want to make sure we aren’t talking past each other here, @DisruptionJoe - Grants that have tokens, or even VC funding, I feel should still be “active” and “visible” on the platform. Users should have the option to fund them (ideally the Grant owner is clear about this fact though), and if there are clear disqualifying criteria they should be marked inactive/no longer visible.

In this case, I feel BrightID should be active on the platform, but “is CLR eligible” should be disabled. These are options in the admin so folks see that we have multiple options:

I do agree with @annika that setting thresholds and clarifying this would be wonderful. I appreciate that the BrightID Grant is a strong impetus for us to do this. When we launched GTC, the goal was to have PGF define these criteria and then have FDD help confirm compliance.

Thanks for the discussion thus far, I love that this is pushing us to be better.

[ZER8]

Agree. We don’t want to have ‘double standard’ cases popping up…

[ZER8]

As a Grant Approver I’m very happy that this convo is taking place. This has been a turmoil for us…
We basically reviewed grants on a case by case basis due to the novel situations that appear in web 3 and because if the dynamic environment. Everything is evolving very fast!

@annika’s comment is a good start towards a more clear grant approval process.

@annika

A couple suggestions, perhaps, to get the ball rolling:

• What if we allowed governance tokens that have not yet crossed a certain market cap? E.g., market cap has never been above $20M
• I also still believe that VC funding is a material, measurable event that often greatly shifts a project’s priorities. I am in favour of keeping something like the $500K VC funding threshold (I would perhaps up that amount, but would love to hear what the community thinks).

[ZER8]

@connor

So I think it’s really a case-by-case situation.

That’s actually how we reviewed and approved grants until now.
@DisruptionJoe illuminated us on that and also gave the FDD a lot of training materials to understand why “case by case” is the only solution atm.

@David_Dyor

My logic is based on the original reason a project creates a token. If it appears the token was created for governance purposes, not revenue-generation, then imo it should be eligible.

We should not penalize a project for what the free market chooses to do with a public token. Alcohol and Gun manufacturers aren’t penalized when their creations get abused.

My logic has the obvious problem of projects fraudulently labelling their token as ‘governance’ when it was designed to create profit. I agree this will be a continuing problem however the steps I describe will empower Gitcoin reviewers and approvers to make the final call, based on judgement and experience. Now they don’t get the chance and great projects like Giveth and BrightID are getting denied. Feels wrong to me as I can’t think of more suitable projects for Gitcoin funding.

It would be awesome if we could separate those, but seeing how the space moves, in some cases this could prove impossible… Everybody is launching a “governance” token

So atm I kinda agree with @DisruptionJoe’s comment, this is GOLD and really captures the essence of this whole discussion all from a more “practical” and bottom/up perspective:

@DisruptionJoe

Working on the frontier of web 3 is exciting, but sometimes it means we are making this up as we go. Our legitimacy at this point isn’t from following the letter of the law, but from having a clear purpose, communicating our decisions in the post round governance briefs, and getting better round over round.

I see no reason why a rule that I wrote about a year ago which has seen uses thus far can’t be mended to provide the proper intention of our policy.

As we have matured, we have realized the need for a system based in English common law which can remove bias and provides a pathway for updating our precedent. Once this system is fully in place, then we can be 100% letter of the law, but we are still building that system now.

This community (ethereum/gitcoin) went through the DAO hard fork and realized that code isn’t law. In this case, the law isn’t law yet because it isn’t built on a solid substrate that is resilient to outside pressures.

That’s actually the way we handled all the situations thus far, but I agree that we should have a more “clear” policy or GE criteria in the near future.
Personally as a former “grant reviewer” I know from my experience that there are a LOT of cases that could be labeled as a “double standard”.

@connor’s vision could be a solution, namely separating the main and cause/ecosystem’s rounds eligibility criteria and processing, but won’t that just expand the “double standard” scenario to the ecosystem/cause rounds?
Like, selling a novel use case NFT would be ok in the climate round, but the same thing would be forbidden in the main round if they use the funds made after selling the NFT to build houses or smth like that(which doesn’t have it’s own round yet). Maybe I’m taking this to far

Thanks for starting this hard conversation @David_Dyor ! This has been an area of great uncertainty and it still is…

[DisruptionJoe]

@kyle

want to make sure we aren’t talking past each other here, @DisruptionJoe - Grants that have tokens, or even VC funding, I feel should still be “active” and “visible” on the platform. Users should have the option to fund them (ideally the Grant owner is clear about this fact though), and if there are clear disqualifying criteria they should be marked inactive/no longer visible.

Yes. This is my understanding as well.

@kyle

In this case, I feel BrightID should be active on the platform, but “is CLR eligible” should be disabled. These are options in the admin so folks see that we have multiple options:

For reasons outlined above, I’ve set them to “active” AND “clr Eligible” for now with the potential outcomes listed above based on us executing the full appeal.

This isn’t a call of if they should or shouldn’t be eligibile. It is only a call to allow them the same opportunity to earn for their grant they would normally considering the evidence and effort combined with the overwhelming desire of the community in our research.

It doesn’t mean that the appeal will be upheld or that they will be “clr eligible” at the end of the round.

@kyle

I do agree with @annika that setting thresholds and clarifying this would be wonderful. I appreciate that the BrightID Grant is a strong impetus for us to do this. When we launched GTC, the goal was to have PGF define these criteria and then have FDD help confirm compliance.

Setting the thresholds in an arbitrary and lightly defined way is already happening. The complexities of the side rounds needing to be included in the main ethereum round is what is causing many of the gray area policy issues. There are also a few where I or Kevin made a decision in the past that ended up as a soft precedent, but isn’t written or defined.

The policy squad is looking to complete the audit and rewrite the full policy this season. From there it can be updated via the appeals system rather than arbitrary judgement calls from our or PGF team. Are we both on the same page that an appeals system to update precedent using the english common law model is a path we should continue on?

Lastly, I agree with you that PGF should own the policy in the future, specifically grants operations. Let’s talk more about this in CSDO.

[DisruptionJoe]

I’d like to add here that I am making a small decision in a domain where I have had the responsibility to make the decisions for the last 5 rounds. With FDD, we have been creating more transparency and community participation, but when a grants policy or sybil defense decision needs to be made it has fallen mostly on me.

Now that we are communicating in this transparent forum, I am worried people will see me making a decision and claim “that isn’t decentralized!”

I don’t want anyone to get the impression that I feel I have the authority and am abusing it. The number of decisions that were required in the past 5 rounds was enormous. Most of the time, I would seek input from the team where my concerns were heard, but no one was interested in participating in making these decisions. Issues which are causing problems now like the attachment of the main round and ethereum round are issues I have been calling out since GR8.

Even during GR11 the PGF group wasn’t running the grants ops yet. Not to complain at all. I just want the public forum readers to know I’m not a benevolent dictator. I’m more the benevolent guy who happened to be in the role of responsibility to make sure shit didn’t hit the fan!

[David_Dyor]

@annika

What if we allowed governance tokens that have not yet crossed a certain market cap? E.g., market cap has never been above $20M

Excellent idea I totally agree. This can be another variable that ecosystems can use to shape their rounds.

@ZER8

won’t that just expand the “double standard” scenario to the ecosystem/cause rounds?

While it expands the double standard out to the ecosystems it also pushes some reviewing responsibility to the ecosystem (depending on curation model). So reviewers will be able to lean on the ecosystem reps for fringe case help.

@DisruptionJoe

I don’t want anyone to get the impression that I feel I have the authority and am abusing it. The number of decisions that were required in the past 5 rounds was enormous.

I don’t feel that way at all. You did an incredible job building out the dao. I kinda wish you had gone even farther down the Centralization path during the last 6 months. Because herding cats isn’t easy. We were trying to do very serious consequential work and yet in the early days tbh there were a lot of clueless folks trying to figure out how to be a dao, myself included. I think if you had been more bossy we might have skipped a couple challenges…at great cost ofc.

I feel the same about the GPG. I trust them and I want their explicit guidance to build this thing right. I suppose imo the ends justify the means. We can always improve our decentralization but if we don’t succeed operationally our decentralization debt is meaningless. I am aware that some people feel differently, feel that maximum decentralization is needed.

[tjayrush]

I just read through this whole discussion. I can say this, “Wow.” Everyone’s point is well articulated, kind, fair, multi-faceted, etc.

I, for one, now have enough information to make an informed decision, so I look forward to a vote being put up.

If the above discussion is any indication of the appeal process, I think it basically worked. Although, I think we can all admit that this level of discussion cannot happen very often. My preference would be to see this type of decision pushed off onto the community. Maybe some way to say to the donors, “This grant has been flagged as XYZ. Do you wish to help us decide?” Or, “Do you think this grant should be eligible for matching…” (Just thinking out loud.)

Also, I don’t feel any time pressure to get this done. As Joe points out this can be completed before the end of the round and, if I understand, no action means they get the match. This goes along with Ostrom’s principle of “punish infractions lightly at first and then ramp up…” I like that.

[David_Dyor]

I think I even detected an additional reason for BrightID to be permitted. Adam explained the organization that created and manages the grant is called BrightID Main LLC yet the org that manages the token is Bright Dao, a 1hive Gardens Dao. Although both share the word bright in the name they appear to be legally separate entities. If this is true, then the grant applicant behind grant 191 actually does not have a token.

Adam can you confirm if these entities are legally separate?

[castall]

Yes, they are legally separate. Sorry for the late reply, and thanks for all your help David.

[David_Dyor]

Wow that sure is an unexpected twist. I think we will stay the course but this is a great fact to keep in the back pocket. Thanks for confirming.

[krrisis]

@kyle

@krrisis

Are we actually also denying projects like Giveth?

Yes, we are (I believe).

–
I hate to be the stick in the mud, but I feel like BrightID was rightfully denied matching funds as their project has launched a governance token, which at launch arguably acted more like a liquidity token by offering several yield farming mechanics as well

So, haven’t read all the comments yet, but if this is the case, we’re being inconsistent here.

Giveth is up & running and receiving matching. And they have an entire tokenomics system set up (giveconomy)

BanklessDAO the exact same thing, they have 11 related grants up if I see it correctly, most important one being Bankless Academy I think.

All are receiving matching funds.

(pretty sure there are many more, these are just the ones that popped up)

Edit: Reading up, definitely like Annika’s proposal here & hope this can indeed be owned by the grants team. Great to see this discussion.

@annika

TLDR: I’d propose we work towards some combination of objective metrics like the above two. These will, inevitably, be somewhat arbitrary - and we’ll likely need to experiment and adjust - but in order to scale this program and our approval process, we need to get explicit and start somewhere

[David_Dyor]

The Gov post for approving the eligibility criteria revisions is now live here.

Let democracy run its course and go vote your preference! Poll will stay up till March 23.

btw, Approving this minor revision will still permit us to pursue the alternatives mentioned above. But with a safety net incase these alternatives don’t materialize.

[lefterisjp]

I commented on the other post about this issue and will keep my comments there to not split the conversation.