The Utility of GTC

Hello,

I am working on doing an analysis of GitcoinDAO.

I have been poring over the governance forum + many other resources. I wanted to lay out what I understand how the DAO views the utility of GTC/Gitcoin DAO. I wrote this post to hone my own understanding, but also was hoping to solicit understanding by others in the DAO.

Utility

Today

As I understand it from this post, GTC was launched in May 2021 as a governance token for the Gitcoin network, which so far has funded $50 million of public goods and has about 300k users (are these users developers?).

As I understand it from this post, it has been used for

  1. Ratifying Grants Round Rules
  2. Ratifying Grants Round Results
  3. Funding DAO Workstreams
  4. Ratifying Partnerships with other DAOs
  5. Ratifying a path forward on the AKITA donation from Vitalik
  6. Governing the multisig, which presently has $15mm worth of tokens in it.

Tomorrow

As I understand it, the DAO is developing Grants 2.0 + a small handful of other protocols/products. The plan is to increase the governance scope to include these other products and portocols.

It seems like there are plans to do governance token swaps with other DAOs starting with DeveloperDAO. And there is a sense that GitcoinDAO will have access to some of the top DAOs given its brand halo and Gitcoin Grants.

Why would someone want GTC?

Philosophical Reasons

  1. Someone would want GTC because it creates the solarpunk future they want to live in.
  2. Someone would want GTC because they value stewardship of ETH public goods (and believe that GTC has an outsize impact on ETH public goods).
  3. Someone would want GTC because they value stewardship of ALL public goods (and believe that GTC may one day have an outsize impact on all public goods).

Emotional Reasons

  1. Someone would want GTC because they like Gitcoin’s name.
  2. Someone would want GTC because they like Gitcoin’s brand & legitimacy.
  3. Someone would want GTC because Vitalik likes Gitcoin.
  4. Someone would want GTC because they think Gitcoin Grants is competitive as an ecosystem building service in the DAO space.
  5. Someone would want GTC because they want to be known in Gitcoin’s social ecosystem.
  6. Someone would want GTC because they think blockchains will be used for social or public good one day.
  7. Someone would want GTC because their friends want it.

Rational Economic Reasons

  1. Someone would want GTC because they believe there is not a lot of GTC outstanding on the market.
  2. Someone would want GTC because they believe there is a lot of tokens in the GitcoinDAO treasuries.
  3. Someone would want GTC because they believe Gitcoin plans to build token sinks into its protocols.
  4. Someone would want GTC because they believe Gitcoin will generate token flow one day.
  5. Someone would want GTC because Gitcoin may start doing governance token swaps with other protocols (and that Gitcoin Grants discovers up & coming protocols before anyone else). The DeveloperDAO partnership is an early example of this.
  6. Someone would want GTC because they believe that over time, GTC represents the utility of many emerging projects

Did I get this right? How does the DAO think of it’s value proposition and utility? Which of these value propositions is the core one?
Many Thanks.

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How disappointing to see that no one responded to my post!! And now we’re in a place where the market has turned against GitcoinDAO. How will GitcoinDAO ever survive in market when it can’t even articulate it’s own utility?

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Does this DAO have any plans to articulate to the world what the token does (beyond compensating people working for the DAO)?

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From your post, I did see lots of conclusions and your summaries, but this is not a proposal, or a question. So I don’t know what to say about it.

If you would verify if all you get is right, one way is to join GitcoinDAO by https://gitcoindao.com/
The GTC utility, it is in experiment, some potential usages as I know. e.g https://voting.gitcoin.co/

Last, but not least, thank you for the research and summary.

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With the launch of the protocol approaching, are there any updates on the utility of GTC?

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@myceliumcoordinator have you checked out @DisruptionJoe’s relatively recent post here? He covers utility of the GTC token in the context of “The New Grants Protocol Flywheel”.

I’ve seen it.

But I find it very complicated and also very speculative. It sounds like TLDR the DAO is still experimenting with where GTC adds utility to the protocolDAO.

Can anyone explain in simple terms what the utility of GTC is? Or do you have an ETA on when a simple explanation will become clear? I think it is important.

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This is accurate. I would say that our plan for continuous R&D delivering utility to GTC is better than something like a “fee switch”.

Last season we ran our first identity staking experiments. Here is a deck with some of the results.

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I think about GTC in three ways - Voting rights, Protocol Utility, Regen Signaling. This is just my personal perspective from the vantage point I have… I would encourage others to fork this or to present their own thinking.
It’s worth noting, this is not investment advice and I do not believe folks should speculate on the token. If you need/want it because it has utility to you, it is available via lots of means (partnerships, open market, DAO contribution, hackathons/contests, grants, etc.)

Voting

We know that there is value in having a voice in how funding for public goods are allocated. GTC voting is how capital is allocated from the Grants Matching pool. this creates an incentive to have and hold GTC so that you can direct funds to the projects you care most about. There are parallels to how rewards from Maker and other protocols are used in bribes to garner votes, etc.

The Grants protocol will likely have a fee similar to the way the existing platform does (to fund public goods). those fees that accrue (what percent) and how to use those fees will also be up to GTC holders to decide.

Protocol/Token Utility

GTC is an integral part of a couple of experiments we have today. GTC Staking on Identity is an important part of Passport and will likely be important in helping determine a “price of forgery” (a new score we are evaluating to reduce sybil attacks).
We have mocked up other grant curation mechanisms that are based on GTC staking (as a signal of legitimacy for a grant - though not the only signal as we are also exploring impact certificates, etc.). We don’t have a lot of details to share on this yet, but we know that lots of folks have had problems finding the best grants to fund. incentivizing that curation is also on the roadmap.

Regen Signals

Holding GTC is a signal for support of public goods. Some of the “best” community members have and hold GTC, and as a result GTC gating exists on our swag store and also in a couple other places we are exploring. I see holding GTC as a signal to your dedication to funding and supporting public goods (same signals as when staking on identity or projects with GTC). We want to offer reasons to hold GTC as a regen signal, but we are early in our thinking here as well.

Each of these buckets offer reasons to have, hold and use GTC. This is how I think about the utility and uses, but I am just one opinion. Some of these uses are not yet built, but we want to experiment more in the near future (with the protocol launches).

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https://twitter.com/gitcoin/status/1305932004848889856

https://twitter.com/gitcoin/status/1369702138188881926

It seems like tweets like this are really effective for driving engagement and rewarding members of the funders league.

If you believe that one of the utilities of GTC is the regen virtue signal, perhaps it’d be worth recognizing GTC holders in much the same way. Nobody is going to check on chain who is a regen, but lots of people pay attention to twitter.

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How compelling do people find these value propositions? Has there been any studY of that?

It would be good to find one good meme for GTC value proposition. For example Bitcoin has “sound money”. ETH has “ultra sound money”. What is GTCs value proposition in 4 words or less?

Definitely agree on doing a better job of publicly celebrating those who are large GTC holders to build that culture. We are exploring how we might do that.

In a similar vein, some of us have discussed how might we reward good actors (those contributing to grants rounds, those running grants rounds) with more governance rights (GTC) as well.

The initial airdrop was focused on empowering those who helped build and make Gitcoin with governing rights (GTC). We have stopped doing this, and I think its important we continue to invite those who are values aligned to help us govern the protocol.

We are working on what that might look like and how to do it in a way that incentives the actions we want (altruistic participation) and discourages just farming for rewards.

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Happy to share ideas, figmas, contracts, etc from what Giveth will be launching in 8 days.

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That would be excellent Griff.

Like many, I’ve gone through the rabbit hole regarding tokenomics. tl;dr - I’m not sure many of the systems really reflect the values of Gitcoin; generally, they are complex, they can be gamed, and they are seemingly by design not transparent.

What if we did something dead simple such as the following:

  • in the immediate budget cycle we:
    • run a zero basis scenario - a particular approach to the downside scenario that many are discussing
    • each workstream & the overall DAO discusses a revenue plan to cover X% of spending
  • AND - we implement an extremely simple tokenomics model such as:
    • 10% of revenues are used to burn GTC
    • plus as a practice, we apply to grants in each grant protocol round possible to either fund us and/or to burn GTC

Something simple like that. Let’s assess the worst case (zero basis budgets), build plans to capture some value via revenues, and start to address GTC utility in part through burning GTC as we grow.

These are just outlines. Per our steward meeting today, our DaoOPS workstream is working through improved budgeting now. I look forward to seeing their proposal.

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Of all of the things you’ve done at giveth to make GIV valuable, what has been the most effective?

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As someone who is also researching GitcoinDAO and has a little distance I think I can do the “simple” answer you request:

(a) it confers governance rights or the ability to influence the direction of the DAO.
(b) it is used to fund the workstreams.

And all this is couched in a cultural commitment to public goods funding. Remember the DAO’s mission is to fund what cannot get funded elsewhere due to its non-monetizable nature. It is not a token in the same way UNI is (partially a proxy for Uniswap’s financial performance).

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Avoid this approach at all costs. Any revenues should go towards public goods, not engaging in ponzinomics. GTC can have value without these gimmicks.

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What you refer to as “ponzinomics” is simply whether the token is a security (under which dividends and buybacks are par for the course). Despite the significant amount of venture investment in GTC, I tend to agree that expectations of a risk-adjusted return should not be honored (it’s also illegal to issue unregistered securities).

This leaves two paths:

  1. People expect a return of 0% (not ~4% as is the prevailing risk-free rate) or even a negative return (cost of carry).
  2. We default on the token entirely. We focus on maximizing runway directly, in USD, and acknowledge that selling a token was, with the various expectations that people project onto it, not a sustainable way to fundraise. We claim no liability for any financial losses, since the token is not an investment (again, an investment token would be illegal).

Path 1. is a very important distinction. Without it, selling GTC does not improve our financial standing at all - every contributor payment, every treasury diversification, etc just digs us deeper into the liability hole. We do not engage in profit-seeking endeavors and cannot return the risk-adjusted equivalent of 4% on a growing market-cap (even if we could, creating that expectation would be illegal).

The question that remains is, if the token is expected to be a commodity/utility which is, on expectation, financially on par with cash or decaying cash, why even use a volatile instrument? Why not charge for all utility in dollars? Stake in dollars? Etc.

The obvious answer to the above is that we already passed the point of no return. We lack the reserves to peg $GTC to a fixed dollar price, or buy it out. We would have to pursue path 2. to stabilize the utility pricing.

The other point I want to bring up in this thread is the concept of equivalence in tax incidence. In short, taking a cut from matching sponsors is equivalent to taking a cut from participants. The value that Gitcoin provides is the same - it’s the process. Sponsors pay for the brand and legitimacy that Gitcoin adds to their grantmaking, which comes from the resources the DAO spends to ensure fair outcomes. Participants pay (but not really pay, since their donation still gets a net increase) for access to the matching funds. To understand that all of this is equivalent greatly simplifies the design space, as the variable of what people are paying for is fixed, it just a matter of how we roll out the payment. Every GTC utility proposal ultimately boils down to this. Why not then adopt the simplest and most direct payment methods? For example, any of the following:

  • 10% of the matching pool to Gitcoin DAO
  • or, participant’s share of the payment goes to Gitcoin DAO; only the matching funds go to the grantee. In this case, sponsors still appear to pay 0, and the typical participant contribution is still greatly amplified (a 99x amplification for example just becomes 98x). Yet we’d still make 7 figs in a round.
  • Merch (including NFTs) and contributor tiers are in USD directly
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Just a bump on this, @griff do you have any insight into what you’ve launched and what has been effective?

A little bit LO @Lunacat . My post starts by stating let’s not do something complex in tokenomics, let’s do something simple to convey utility whether burning tokens or generating revenues etc.

Your response is basically - the specific example I mentioned IS a “gimmick” and we can drive value some other way.

ok - great. Could you be specific? What other way? I promise not to immediately label it a ponzinomics gimmick. All ideas are welcome - it is the only way we are collectively going to figure this out in a credible way.

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