A month after Russian troops invaded Ukraine, an organization called Gitcoin raised over $800,000 for initiatives to support Ukraine with protective equipment, food and relief supplies. This is one of many causes Gitcoin and other so-called impact DAOs are funding through blockchain technology.
Impact Decentralized Autonomous Organizations or Impact DAOs use crypto tools as a source for the common good and as an alternative way to support social causes. Think of it as the blockchain version of a non-profit organization.
Aid to Ukraine, the fight for reproductive rights and efforts to reverse the effects of climate change are all supported by Impact DAOs to support the rally.
These organizations aim to correct what they see as institutional underfunding of public initiatives and causes. A DAO (pronounced “dow”) is a fancy way of saying that it’s a self-governing body that makes decisions based on community votes, not executive decisions. Anyone who buys tokens for a specific DAO can vote on what decisions the organization makes, e.g. B. For which social cause funds should be donated.
Crypto enthusiasts have created DAOs for everything from building high-level friend groups to buying the Constitution. With Impact DAOs, however, the mission is more philanthropic — and ambitious.
In theory, Impact DAOs and similar cryptocurrency projects seek to correct the mistakes of traditional institutions by funding public goods that are under-supported in society. They were created to support everything from reproductive rights organizations in Texas to helping with climate change. Impact DAOs contradict the notion that everything cryptocurrency is about making a quick buck.
In practice, it’s a bit muddy. Impact DAOs and blockchain projects focused on aid represent a novel way to disrupt the longstanding acceptance of how philanthropy and work give. They are still in their infancy, facing barriers to accessibility and general public distrust due to the volatile crypto market. This is just one of many ways the crypto world intends to overhaul the status quo.
A new philanthropic model
DAOs have been around since 2016, but there was a shift in 2021, as cryptocurrencies like bitcoin and ether surpassed new all-time valuation highs. More Web3 and cryptocurrency enthusiasts began to envision how virtual technologies could have a more tangible, positive impact on society, explained Gitcoin’s Scott Moore.
Moore and co-founder Kevin Owocki founded Gitcoin in 2017 to fund software developers laying the foundation for Web3, which blockchain advocates are calling the next generation of the internet. The nebulous idea broadly relates to a decentralized internet deeply integrated with crypto and NFTs.
Although Gitcoin started out as an Impact DAO to fund software, in the years since it has funded causes related to climate change, helping people in Ukraine, and arts and culture.
“We want to ensure that Web3 public goods are more than just infrastructure,” Moore said. “They are things like the climate we live in, our health and well-being, and the diversity of our community. We cannot exist only in this metaverse. We must actually make a difference in this world as well.”
Because a community of members decides what issues an Impact DAO funds, Moore says it’s more egalitarian than an individual coming in with a donation or new technology for an underserved community and directing how resources are used or spent.
Because these donations happen on the blockchain, another benefit of the Impact DAO model is increased transparency and community oversight, said Robbie Heeger, president and CEO of Endaoment, a crypto donation platform. The blockchain is a public ledger, meaning anyone can see who donated how much and who voted for what.
Significant amounts of money have been raised by Impact DAOs and traditional nonprofits on Endaoment, with approximately $3 million donated to Ukraine’s humanitarian aid, approximately $2 million to physics-related research and experiments, and approximately $500,000 to reproductive rights .
“There’s this notion that all of these things are out there and are going to happen in the future. I really feel, from our vantage point, that Impact DAOs are not only a real thing now and raising significant amounts of money, but they are also overtaking traditional philanthropic systems,” Heeger said.
20 more steps
But building relationships with trusted local organizations that don’t take advantage of disenfranchised communities is an important part of philanthropy work to build and something DAOs need to work on.
So says Devin Mathias, who, as senior director of development for the Center for Disaster Philanthropy, has spent his entire career in the nonprofit world advising or working with philanthropic groups.
“I feel like part of what the general crypto world and environment wants at its core is to disrupt,” Mathias said. “There are times that can be great and effective. There are times when it just creates more problems and makes things more difficult.”
Mathias is open to new ways to simplify philanthropy. But the charity process takes time and effort to weed out organizations that cannot be trusted and to build relationships with those that can be trusted. He worries that DAOs might move too clumsily for the charity process.
Mathias noted that while on paper it might be attractive to donors that these DAOs provide communities with potential answers to these infrastructure problems, it might also further complicate existing problems.
“You just created 20 steps for [the community] from receiving a gift to actually helping,” said Mathias. “There’s a lot of power in giving money to the right people so they can go from zero to impact quickly.”
Beyond the DAO
There are a few other issues with funding public goods through Impact DAOs that need to be worked through before they find widespread acceptance. People can generally understand the big picture, but sharing the details of the technology is trickier, said Darrell Jones III of Web3 infrastructure development organization city3.
Jones is attempting to build a thriving hyperlocal community in Oakland, California by developing Web3 tools such as a local cryptocurrency called Oak. city3 is not a DAO, but Jones has partnered with Impact DAO Gitcoin to create a community funding process as a form of governance to determine which local nonprofits the community would like to fund. The project is still in development, but city3 has worked with Oakland residents to participate.
The language and digital tools surrounding cryptocurrency and Web3 are particularly inaccessible to people outside of the ecosystem, Jones said. Another hurdle the crypto community has to overcome is earning the trust of the communities it wants to serve, not to mention the fact that most people don’t have crypto wallets to store digital coins.
“The details are harder for people to understand. And then it’s even harder to use the technology as it is today,” Jones said. Jones emphasized that these topics are being worked on and that city3 is still in an early stage of development.
Endaoment’s Chief Operating Officer, Zach Bronstein, also noted that it’s not just about getting these new ideas into people’s heads; It’s also about changing the narrative around crypto itself, from a get-rich-quick scam to an effective way to fund causes and communities.
“The more there are things in cryptocurrency that feel childish or fraudulent, the less likely it becomes that people will be willing to participate in this space,” Bronstein said. “As this area matures… the easier it will be for us to build tools that benefit nonprofits in real, tangible ways.”
the real world
Some of the skepticism about this new technology is justified. With multiple cryptocurrencies falling in value and a new, exclusionary technology being touted as a salve for real-world problems, it’s reasonable that many are taking a critical look at DAOs.
Even if it serves its purpose of raising funds for various causes, the results may raise some eyebrows.
When Gitcoin initiated rounds to raise money for Ukraine, there was a difference in the number of contributions for donations that could help Ukrainians immediately versus causes that excite crypto donors. For example, in Gitcoin’s 13th round of funding, there were opportunities to fund aid in Ukraine, climate and Ethereum infrastructure. An accounting tool that protects privacy received the vast majority of contributions, while only a fraction was used for more practical needs like protective equipment. The funding came just a month after the conflict.
“There has been too little research and interest in helping people who may be skeptical about Web3,” said Gary Sheng, co-founder of Dream DAO.
Sheng, a former Google software engineer, co-founded Dream DAO with a vision of empowering young people from around the world to use Web3 forever, but now he’s “shipping responsibilities” after he Dream DAO led for the first six months. Sheng said he wants to better understand how impactful DAOs can be for people outside of the Web3 world, where “normal people are and where our grannies are.”
“Unless Web3 significantly improves the lives of many people who might really dislike Web3,” Sheng said, “it’s not realizing its full potential.”