The Grant Stack

A few days ago, I found myself reading a 600 page council meeting doc from my borough, Tower Hamlets’ democracy portal. Why? I wanted to understand how grant funding works: the entire lifecycle, from the decision-making, allocations, through to evaluations. While doing this, I wondered what the same process looked like in web3. Below are my landscape notes — starting with the funders, down to the mechanisms used to both distribute capital and evaluate outcomes.

Collective intelligence

What does impact look like?

Before a funding round can identify the most impactful projects, voters need to understand what impact looks like.

• AI-assisted synthesis to help voters navigate large project pools without losing the nuance of individual applications.
• Reputation-weighted evaluation to ensure that domain experts have proportional influence on funding decisions in their areas of expertise.
• Prediction markets to aggregate distributed knowledge about which projects are most likely to deliver impact. (still experimental)

The funders

Who has the capital?

• Self-taxing blockchains — Most funding comes from L1s and L2s (Ethereum, Stellar, Arbitrum, Celo, Optimism). They bake tax directly into their consensus economics, and direct surplus fees into a retroactive treasury or distribute via grants to fund their own dependencies. Everyone funds the part of the stack they rely on.
• Protocol + Ecosystem DAOs — DAOs managing treasuries built around a native token. Grant-giving here is small and intended projects are intended to grow the ecosystem.
• Public goods entities — Organisations with no protocol of their own, but exist to allocate philanthropic or ecosystem funds to public web3 infrastructure: Gitcoin, Optimism, Giveth, Octant [yield-based PGF], Deep Funding [revenue-based PGF], Localism Fund [off-chain capital].

The mechanisms

How is capital evaluated?

[ Automated infrastructure ] — Data layer

What was built?

• Indexers: Dune tracks raw events on chain / OSO Data Pipelines bundles those events with off-chain code inputs e.g. GitHub
• Trackers: Karma Milestone Attestations converts project text check-ins into structured data attributes

[ Applied mechanism ] — Math layer

How do we pay?

• Distribution: Quadratic Funding formula where unique community contribution outweighs dollar value, Retroactive funding capital after work is verified
• Flow: Milestone escrows locks capital in smart contracts, releasing % sequentially as milestone attestations go live

[ Selection primitive ] — Human layer

Who decides value?

• Judges: Badgeholder Expert Juries apply weighted preference curves to aggregate collective opinions
• Power: Reputation Weighted Voting

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Standout article: Collective Intelligence Protocols for Thinking Together — while most of the ecosystem focuses on more sophisticated mechanisms for distribution and evaluation, this article argues for better systems to ‘think together’.

Side note — Tools: companies building the technical rails: Karma (milestone tracking), DAOstar (open standards), Open Source Observer.

Follow up: how does this relate to civic grants?