DAO Drops

Abstract

dOrg designed and developed DAO Drops (first round), a Retroactive Public Goods Funding (RPGF) mechanism that leveraged the wisdom of informed stakeholders to distribute $250,000 – coming from Ethereum Foundation — to a range of projects and individuals in the Ethereum ecosystem.

The responsibility of impact evaluation was assigned to thousands of pseudonymous addresses based on past on-chain activity. We used data on governance participation from Deep DAO, smart contract deployments from Galxe, and ecosystem event attendance from POAP to assign voting power to over 30,000 addresses.

Background

Ethereum Foundation awarded dOrg with a grant to design and build a mechanism that could reward projects and individuals contributing to the Ethereum ecosystem, collect the right information about them and finally distribute the funds. A goal was to more diversely distribute decision making and discovery across pockets of the ecosystem.

DAO Drops round one was a pilot project to explore the possibility of distributing decision-making power over the funds allocation based on past on-chain activity (dApp usage, development, event attendance) that give users influence over fund allocation decisions.

We completed the 1st round of DAO Drops during Q1 of 2023 distributing $250,000 DAI to eligible nominees.

Focus Areas

The DAO Drops roadmap had three phases in order to be executed. First phase was research, followed by the design and development phase of the project, including its launch and funds allocations and finally feedback gathering and planning next steps for future rounds.

Research is publicly available for anyone working on retroactive public goods funding innovations. We focused on making an accessible and fun game-like experience, drawing upon existing multi-stakeholder governance processes. We looked into and iterated mechanism designs that would identify and incentivize informed decision makers across diverse areas of the Ethereum ecosystem, to vote on how the funding pool was distributed. And lastly, how to mitigate 'popularity contest' dynamics.

Build: We developed a scoring script based on the on-chain activity datasets we pulled for the initial pilot round, so that allocators would have a reasonable amount of points and no addresses would have hugely disproportionate power. We built the frontend and database to hold the nominees and voting data, and leveraged dOrg's collective brainpower to test and discover any adjustments needed.

DAO Drops launched its own website and twitter. We initiated a comms campaign that included shared the steps for the 1st round:

• Nomination phase: Individuals submitted projects/individuals. Outreach for nominees included Meetup organizers in diverse geographic regions.
• Curation process: Duplicated and unrelated entries were removed, and an initial curation scoring implemented to reduce the list to 57 nominees.
• Allocation: Eligible addresses distributed voting points.
• Funds allocation: After voting closed, funds were distributed accordingly.

Overall, this program addresses the need to decentralize the funding of the larger Ethereum ecosystem, in order to intelligently allocate capital and resources for overlooked projects and individuals working to advance Ethereum ecosystem.

Team

DAO Drops team was formed by specialists in mechanism design, web3 software architecture, integrations, frontend and backend and ecosystem knowledge with a proven track record in the space. The project included research, brand and UX/UI design, plus strong comms & social media efforts to promote the project inside the ecosystem. At the same time, we assigned a dedicated Tech lead– ensure quality code, documentation, and testing– as well as a Project Manager to ensure smooth coordination, including scheduling, feedback, personnel assignment, and work reporting.

Business Objectives

Use individuals' past on-chain activity to participatory distribute Ethereum Foundation funds to projects and individuals contributing to the ecosystem, so that funds could reach overlooked projects in the space for retroactively reward. This approach aims to address the weaknesses of traditional prospective funding approaches which implicitly need to predict the future impact of what to fund.

Conclusion

Once nomination, curation and allocation phase ended up, $250,000 DAI were distributed between 57 nominees:

• 277 addresses voted, out of the +30.000 addresses with voting power.
• $3,056 was the median grant.
• $18,185 was the largest grant distributed Check out the key learnings and the next steps in the full project report.