The benefits of clean air, public parks, and the open source software powering web3 are evident. Yet, despite their crucial roles, they all have one thing in common.
We all agree they’re useful, but no one feels directly responsible for their financial sustenance.
So, why do these public goods struggle to find sustainable funding? This challenge has existed for centuries, with the issue lying in their very nature; public goods are nonexcludable and nonrivalrous, meaning everyone can benefit without paying, creating the "free rider problem".
💡 Despite their undeniable benefits, public goods often fall victim to the tragedy of the commons, where individual reluctance to fund leads to collective underfunding.
Traditional funding methods such as government and philanthropy are often unreliable and insufficient. A nonprofit might secure funding one year to maintain a public space, only to lose it the next due to policy changes or government shifts. Philanthropic support also fluctuates with the economy and donors' finances. Adding to this, private investments often lack immediate economic incentives, making it hard to support projects with broad, long-term benefits.
Funding challenges not only impact existing public goods but also discourage the creation of new ones.
For instance, a community-governed digital library offering free access to educational resources and rare archives might struggle to take off. Such projects require significant time and commitment, but without financial incentives, contributors lose motivation, feeling their efforts are undervalued. And, as a result, important innovations may never see the light of day.
So, what’s the way out?
In recent years, Web3 has been a hub for experimentation in public goods funding, with decentralized technologies opening the door to innovative new funding mechanisms.
These mechanisms offer a new level of transparency, community engagement, and accessibility that traditional methods lack. Projects like Gitcoin, Giveth, Potluck, and Clr.Fund are leading the charge and proving that the funding of public goods can be a killer use case of Web3.
Among these innovators is Octant, a relatively new platform leveraging community-driven decision-making to ensure that funds are distributed effectively and fairly. This approach gives every community member a voice in directing resources, ensuring that funding is allocated to initiatives most aligned with public needs. The end result is a more balanced and inclusive funding process, that is less susceptible to the whims and biases of large institutional funders.
In this article, we explore Octant's origins, unique operational design, and the impact of its innovative approach to building community and funding public goods. This is part one of a two-part series, with the latter focusing on how you can get involved in Octant and have a say in the allocation of millions of dollars in public goods funding. Let’s dive in.
The Golem Foundation launched Octant in August 2023 to test new methods for funding public goods. Designed as a self-sustaining ecosystem, Octant enables decentralized projects to thrive through community-powered governance.
What the Golem Foundation specifically had in mind was an Experiment-as-a-Service model. This framework turns Octant into a testing ground for various governance models, funding mechanisms, and participation strategies.
By gathering and analyzing empirical data, Octant aims to identify scalable solutions that can be replicated across the entire Web3 ecosystem.
“Web3 is a vast and uncharted territory, providing fertile ground for experimentation, and we hope that Octant will help us navigate through it and lead us towards better governance. ” - Golem Foundation
Ultimately, applying the lessons learned, Octant’s mission is to become a self-sustaining global public goods funding (PGF) ecosystem that balances the common good and individual financial empowerment, two interests that have long been viewed as incompatible.
It works by allowing participants to earn ETH rewards by participating in “epoch” funding rounds and deciding how to allocate these rewards. By locking GLM tokens, users gain voting rights on fund distribution, ensuring a committed and engaged community.
🚀 Since its inception, Octant has distributed over $2 million to 53 projects across three epochs and one community round!
The Golem Foundation supports Octant with donations that come from its staking rewards of 100,000 ETH. This ensures a steady flow of resources and encourages continuous participation. Locking GLM tokens is required for participating, ensuring community commitment.
We'll dive deeper into how to acquire and lock GLM in our next article in this series.
Each epoch involves experiments proposed by Octant, which create real-life scenarios to generate useful insights. In essence, by participating in Octant by staking GLM, you are not only supporting important public goods, but are also contributing to experimentation that is helping guide the Web3 public goods funding ecosystem.
In addition to the foundation’s experiments, Octant invites other stakeholders to propose and execute governance experiments. This makes it a versatile platform for innovation, addressing current challenges in funding public goods and fostering a sustainable, community-driven support system.
The Golem Foundation supports Octant through its activities as a validator on the Ethereum network. After Ethereum transitioned from Proof-of-Work to Proof-of-Stake, the Foundation staked 100,000 ETH to help secure the network and participate in consensus. In return for this service, the Foundation receives a steady stream of rewards directly from the protocol.
Here’s how Octant operates:
Every 90 days (an epoch length), a portion of the staking rewards earned by the Golem Foundation is transferred to the Octant community. Community members then decide how to allocate these funds through individual actions and polls. They can choose to claim a portion of the rewards for themselves, donate them to public goods projects, or a bit of both, giving users the opportunity to participate in the allocation of resources while also making a financial return.
Participation in Octant is open to anyone holding GLM tokens. By locking at least 100 GLM in the Octant contract, users qualify for rewards and gain voting rights on fund distribution.
This process ensures that participants are actively involved in decision-making, reinforcing Octant’s community-driven approach to funding public goods. Currently, there is over 150M GLM staked, at a value of roughly $50M USD. While this is certainly impressive, it represents only about 15% of the total GLM circulating supply, leaving room for plenty of growth for the Octant ecosystem.
At the start of each epoch, the Octant community selects eligible public goods projects for funding. Detailed information on eligibility and project submission can be found in the Propose a Project section, but eligible projects must, in essence, align with the ethos of Web3, including open-source, transparency, freedom and privacy, and decentralization. This selection process sets the stage for the funding activities that follow.
After the selection phase, there is a two-week allocation window during which community members can take the following actions:
Each epoch's structure ensures that funds are allocated effectively and in a manner that reflects the community’s preferences.
In fact, community members play a crucial role in these funding rounds, and active engagement is encouraged through various channels, including the Octant Governance Forum, where members can discuss proposals and governance ideas, and their Discord server. This ensures that Octant is truly “building in public” and living up to the values of transparency and decentralization.
Octant has significantly impacted the Web3 ecosystem by funding a wide array of public goods projects. It has supported initiatives aimed at enhancing privacy, open-source development, decentralized governance, and financial inclusion.
Projects funded by Octant include Protocol Guild, Gitcoin, Kernel, rotki, The Tor Project, Giveth, Drips, Glo Dollar, Bright ID, and Open Source Observer, among many others. This diverse portfolio highlights Octant's broad impact and attracts a varied community of supporters.
During Epoch 3, from January - April 2024, Octant’s funding achieved:
For Epoch 4, Octant has something new in store: the implementation of Quadratic Funding, a matching funds mechanism designed to enhance the fairness and impact of donation allocations. This approach prioritizes projects with broad community support over those that simply receive the most funding, ensuring that the distribution of funds reflects genuine interest and engagement.
Quadratic Funding boosts donations through Octant’s Matched Rewards. The formula takes into account both the number of unique contributors and the total amount donated, giving more weight to projects with widespread backing.
This way, even grassroots initiatives can gain the support they need to thrive.
In traditional 1:1 matching funds methods, high net worth donors can have an outsized impact on where matching funds are distributed, as they are able to put forward more capital and, thus, unlock more matching funds. Quadratic Funding, on the other hand, ensures that everyone, no matter their net worth, can have a fair say in how matching funds are allocated.
A critical component of this shift included the use of the Human Passport (prev. Gitcoin Passport). The Human Passport is a tool that helps ensure fairness in the Quadratic Funding process by protecting against “Sybils”, who are fake users (or programmed bots) that amplify support for specific projects with the goal of receiving more matching funds. Holders can increase their score by adding “stamps” to their passports to validate their identity and online reputation.The Octant community is evaluating the best sybil method moving forward, and there are active discussions on their governance forum about the best path forward.
As Octant navigates the rapidly evolving Web3 landscape, its innovative approach not only ensures sustainable and equitable resource distribution but also tests key Web3 funding methods in real-time.
By using community-driven decision-making and experimental funding models, Octant brings people together to work openly and transparently. With over $2 million deployed across diverse projects, Octant shows promise not only within Web3 but also as a potential model for global philanthropy.
With only 15% of GLM currently staked through Octant, there's plenty of room for growth. As Octant continues to evolve, including the introduction of Quadratic Funding in Epoch 4, now is an exciting time to join the community and support public goods in Web3. More participation means more funding for projects that benefit everyone.
We hope this article has inspired you to join one of the most exciting experiments in Web3. Stay tuned for the next article, where we'll guide you through acquiring and staking GLM, so you can be part of this innovative public goods funding initiative!
Support thoughtful, independent crypto journalism and help us continue highlighting blockchain’s potential for social and environmental impact.
cryptoaltruists.eth
