Gitcoin Passport to make fundraising and governance fairer – Blockworks | Region & Cash

  • Most DAOs today use a one-token, one-vote model
  • Decentralized identification has wide-ranging use cases from DeFi to NFTs to the future of work

A new tool from Gitcoin, an organization dedicated to raising funds for public goods, aims to help organizations raise money and make more democratic decisions.

Groups like Rabbithole and POAP are potential beneficiaries, but so are large DAOs.

If you think of a DAO (decentralized autonomous organization) as a collective decision-making exercise—allowing a large number of individual stakeholders to align their interests through voting—one problem stands out: most DAO governance systems use a token Voting model where each token represents one vote.

But according to Kevin Owocki, the founder of Gitcoin, “one token one vote systems are inherently plutocratic” rather than democratic.

The big owners, whales, and venture capital firms can—and often do—dominate the rest of the community.

A natural alternative – each person counts a vote – is notoriously difficult to enforce in an environment where interest groups are typically pseudonymous and globally distributed – in other words, most DAOs. This is where Gitcoin Passport comes in. It’s the first phase of a quarterly rollout of what Owocki calls Gitcoin Grants 2.0.

Gitcoin pioneered the use of a new invention in fundraising known as square funding. In addition to square voting, the concept was introduced in 2015 by researchers at the Institute for Advanced Study, a research arm of Princeton University.

Quadratic funding allows a pool of matching funds to be automatically channeled through the collective voting preferences of a large number of small contributors.

“That’s powerful because it marginalizes power — you fund what the everyday democratic people in the ecosystem want to fund,” Owocki told Blockworks.

Suppose two projects are vying for donations with a corresponding pool of $1,000, one raising $50 from one person while the other raising $10 from five people. Both raised the same amount of money, but the one with five times the number of backers gets five times the matching pool funds on top ($833.33 vs. $166.66).

Gitcoin has applied this fundraising model to its own quarterly grant rounds — now 14, distributing millions of dollars from thousands of donors.

But to be effective, the project must ensure that large contributions from a single person or organization cannot be broken down into many smaller parts, giving the false impression of widespread support. Preventing the system from being exploited in this way is known as Sybil resistance.

Passport will help Gitcoin keep its grants fair, but DAOs can also use it to improve governance.

“The Sybil Resistance is one of the most important things in taking us from a voice with a mark to a voice with a human,” Owocki said.

“A DAO would immediately be more democratic if it had a square vote instead of a one-to-one token vote. Here I am interested in the development of DAOs.”

Gitcoin isn’t the only project trying to solve decentralized identification (DID), but it does have an edge on the so-called “cold start” problem, Owocki said.

“What everyone else lacks is usage.” Today, there are few dApps using DID, so few users care about an effective DID system, and decentralized apps have no incentive to prioritize it.

This issue isn’t unique to DID, Disco co-founder Jonathan Howle told Blockworks via email.

“No merchant accepts crypto, so nobody wants crypto, etc. Regardless, the first step in this process is to develop the tools needed for acceptance,” Howle said.

But the long-term potential is there, he said.

“Decentralized ID has the ability to unlock coordination and close the trust gaps that currently exist in Web3: under-collateralised lending in DeFi, verifiable authorship and [intellectual property] Rights management in NFTs and the future of resumes, transcripts, applications, peer references” or what he calls “the future of work” will all benefit.

“Nobody really knows what could be driving mass adoption, but I think there’s a good chance it could be,” Howle said.

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  • Macauley Peterson

    Macauley was an editor and content creator in the professional chess world for 14 years before joining Blockworks. At Bucerius Law School (Master in Law and Business, 2020) he did research on stablecoins, decentralized finance and central bank digital currencies. He also has an MA in Film Studies; His film credits include associate producing the 2016 Netflix documentary Magnus, about world chess champion Magnus Carlsen. It is based in Germany. Contact Macauley by email at [email protected] or on Twitter @yeluacaM

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