Evolving Nonprofits into Regen Economies
What if instead of relying on governments, we had organizations competing to provide the public goods and services that are most in demand? A world where labor, expertise and capital contributions to public goods are rewarded and the people who care have a voice in how this value is created? The world you are imagining is the world we are building towards at Giveth.
At Giveth our goal is to use web3 to build better systems for public goods creation where everyone who contributes is rewarded and empowered, ultimately transforming the way public goods are created and funded, by helping nonprofits evolve into Regen Economies.
This post is not about our goals for 2023. Our last post, 2023 Giveth Looking Forward, explains our path towards building the most epic web3 donation platform in the space. This post is about our long term vision for the platform and the impact that our success can have for the world.
Public vs Private Goods 🌈
There are four types of economic goods, but we often use the terms “private goods” and “public goods” as overarching terms:
- Private Goods (Excludable, gated goods) — the pay-to-play goods and services that are made profitable via scarcity and exclusion. This represents actual private goods & club goods in the picture above.
- Public Goods (Non-excludable, open goods) — the goods and services that anyone can have access to. This represents common pool resources and actual public goods in the picture above.
Public goods are free things we all benefit from such as nature reserves, free roads, infrastructure, public education, public safety, public health, open source code, ideas and knowledge. Public goods create abundance for society.
Private goods are effectively the opposite of public goods. They are scarce, and the providers restrict access. These are things such as theme parks, toll roads, apartments, cars, private healthcare, closed source code, patented ideas, private schools, and anything you can own or have to pay to experience.
We, at Giveth, talk about private goods and public goods as defined above in most of our communications when technically we should be probably be saying excludable and non-excludable goods… but that is a mouthful 😜. The main point is simple: public goods are great & we need more of them!
Despite the meme above, private goods, while not as great as public goods, are very much needed in our society. They are just over idealized due to how effectively we as a society coordinate around their production. With private goods, profit acts as a market feedback mechanism and Schelling point for coordination. People coordinate effectively without much communication to create scarce goods and services, innovating and competing as they go, because they’re all aligned on the goal of “profit”.
This effective coordination has led to incredible access to and distribution of scarce resources — as long as you can pay. We can travel around the world, we can profitably embark on massive projects like skyscrapers, and we can create complex consumer technology like cell phones and distribute them globally. The business models we have created for private goods have raised the standard of living for society, no doubt.
With public goods, however, the same business models don’t work because you can’t exclude anyone to create customers. Public goods create abundance for society that everyone can enjoy, but, because of their ineffective coordination mechanisms, public goods provision has been a struggle.
Governments are the main providers of public goods, and when they fail to meet the demands of society, people start nonprofits. Governments get their funding from taxes, and nonprofits get funding from donations — both rely on financial sacrifice.
Financial sacrifice comes at a cost that’s not just purely financial. Without profit as a Schelling point, market feedback in the public goods sector is sparse, and innovation is limited. There is little incentive for governments to innovate to satisfy the end users of public goods, especially when the only feedback mechanism for most democratic governments is a vote once every few years.
At Giveth, we plan to solve this problem by empowering nonprofits to become DAOs with regenerative funding mechanisms that create market feedback cycles so that they can innovative effectively in the public goods sector.
Our strategy is to build a simple, attractive journey towards giving power to the people on the ground, while giving everyone involved upside. Our approach is bottom up, giving stakeholders at all levels the opportunity to have input.
With regen economies, we can collectively design a financial model for public goods that doesn’t rely on sacrifice. Regen economies can create their own token, direct their own governance collectively, generate their own productive feedback loops and, most incredibly, create public goods that benefit everyone — a win-win model for creating abundance for society.
The Opportunity 🧑💼👩💼
In 2021, nonprofits received nearly $500 billion USD in donations in the US alone. That’s about half of the total crypto market cap, donated, in a year! Governments around the world make $500B look like a drop in a bucket.
It turns out I was being conservative in my previous talks, the largest 100 governments spent an estimated $35 TRILLION USD on public goods in 2020. This money was not invested; it was spent, used, burned. Imagine if even just 1% of that — $350 billion USD — was invested into regen economies solving the same problems in a free market, cost effective way that could respond efficiently to the demands of society!
So how do we evolve public goods from the current broken system into, potentially, one of the largest industries in the world?
The Giveth Roadmap 🛣️
✅ Step 1: GIVbacks — Donation Mining
Our first step in evolving the nonprofit space has been to give the community upside for donating. We introduced the GIVeconomy in Dec 2021 by launching the GIVbacks program to reward those who donate, in a similar fashion to how Bitcoin rewards miners. Read more here.
With GIVbacks, up to 80% of what you donate is given back to you in GIV streamed over time. If the GIV token price goes up, you could actually make more money than you donated!
✅ Step 2 : GIVpower — Decentralized Project Curation
GIVpower allows GIV holders to stake their tokens and signal their support for verified projects on Giveth, creating demand for GIV as is done in the Curve and Balancer ecosystems. GIV stakers can “boost” their favorite projects to give them a higher project rank. Top-ranked projects get increased visibility on the project page, more GIVbacks for their future donors, and as our ecosystem evolves, boosted projects will get even more benefits. The GIV stakers also receive benefits in the form of staking yield.
The most interesting outcome of the GIVpower system however is that real capital is now effectively locked behind specific projects. Read more here.
🔜 Step 3 — Impact DAOs
The most important step for transforming traditional nonprofit projects on Giveth into regen economies will be to have them launch their own impact DAO alongside their active Giveth project.
Successful projects on Giveth lead the creation of their own impact DAO by first distributing soul-bound tokens (SBTs) to their stakeholders — Not just to capital contributors and core team, but to all contributors, volunteers, relevant experts, other related projects, and even the beneficiaries. This larger stakeholder group changes the dynamic from a small group of leaders pitching donors an impact they will fund, to a well-rounded advisor group that has broad and balanced perspective for the allocation of funds.
After the initial distribution of SBTs, there will need to be continued distribution using tools like Otterspace, Coordinape, Karma or Praise so that new contributors can be recognized and old contributors can continue to gain more influence. So, what is Praise?
Praise is a system designed to cultivate a culture of giving and gratitude by acknowledging and rewarding community contributions.
With Praise, projects can strengthen their community culture while distributing voting power in a decentralized, bottom up fashion to all stakeholders — even when their contributions are qualitative and not easily quantifiable.
Projects on Giveth can use these SBTs to represent a “stakeholder score” which then gives quantifiable voting power for impact DAOs to govern their donations collectively. They can use new coordination methods like Quadratic Funding, Prop House, and Pairwise to engage their community in ways better than simple proposal voting. If stakeholders are not technically savvy enough to vote directly (e.g., indigenous in the Amazon) we need to get creative, like using delegates to talk with them regularly to fairly represent their interests.
While projects gain practical experience coordinating as a DAO, they can start to discuss future token utility, revenue streams and stakeholder management strategies to get ready to spin up their own startup regen economy with a Gurve.
🏁 Step 4 — GURVES
The real dream of Giveth is to help today’s most effective nonprofits build their own “regen economies” — economic systems that can support and financially reward public goods creation.
In order for a project to launch a full-blown regen economy, it will need to have its own transferable governance tokens. The project can use the token to reward contributors, and the market price of the token can represent the value of the community. When the economy is designed well, the price of the token allows for the public to give immediate feedback on the value being produced by the regen economy.
Transferrable governance tokens create entrepreneurial opportunities in the public goods space.
If regen economies become battle tested and understood, then when an entrepreneur sees demand for a specific type of public good, like a clean river, they can start their own regen economy. If they succeed, and the abundance they produce creates demand for their scarce token, they will actually be able to make an honest living cleaning rivers, without having to rely solely on donations and government grants.
For market feedback from the general public to exist, these governance tokens will need to be traded openly and therefore require accurate price discovery even in the low-liquidity start-up phase. This is why regen economies will need what we call a “Gurve”.
A Gurve is a bonding curve with GIV as the reserve collateral… Wait, what?
What is a bonding curve? 💻
A bonding curve is a smart contract that mints and burns tokens on demand. To mint a token using a bonding curve, you must send money to the bonding curve’s reserve. It will hold that money as collateral and mint a token for you while also algorithmically raising the price of the next token.
If you want to sell a token that was minted, it can be sold on an exchange, or it can be burned directly via the bonding curve. To burn a token, you would send it to the bonding curve, and part of the collateral held in the reserve would then be released and sent to you. The price of the next token would then be lower.
Gurves will have GIV as the reserve collateral, so a project token can be minted by sending GIV to the Gurve, and this will increase the price of the project token. If someone needs to sell a project token, they can send it to the Gurve, which will burn the project token and release GIV.
Gurves will enable projects on Giveth to launch thoughtfully engineered start up regen economies to actively reward their donors, contributors, and investors with their own token. At the onset of these startup regen economies, project tokens are already supported with liquidity. We call these tokens “project tokens” in this article, but of course each regen economy will name their token something unique.
Launching a Gurve will require some capital to use as collateral for the initial mint of tokens. Fortunately, projects on Giveth that want to create a Gurve will have a head start on raising capital because, with GIVpower, there is already GIV locked behind their project. If the GIVpower boosters opt-in, a project’s GIV can be used to initiate the Gurve, and the boosters will get the best price for the project tokens that are created by the Gurve.
At the launch of a Gurve, aligned, trusted supporters will be allowed to contribute more capital above what is locked in GIVpower to get project tokens, but also stakeholders who earned SBTs during the projects time as an impact DAO will also get free project tokens. All of the project tokens minted at the launch of the Gurve will be locked for a relatively long period of time, likely following the Hatch process outlined by Commons Stack and executed on by the Token Engineering Commons.
With the Gurve launched, contributors of capital and labor will get project tokens, and beneficiaries, relevant experts as well as contributors of labor can continue to earn SBTs to boost their stakeholder score. The project will have a polycentric governance model that ensures all stakeholders have a clear way to make their voice heard.
With Gurves, instead of simply donating to a project, financial supporters can also invest by buying project tokens via the project’s Gurve. With project tokens, these supporters become stakeholders in the project’s regen economy and are able to participate in collective governance over public goods. Best of all? If the project is successful, all its contributors can experience financial upside when the token price increases.
When any public goods project can launch its own regen economy, a system of healthy competition can emerge to meet the demands of society.
When an ecosystem of start up regen economies emerges, there will be rapid feedback and innovation in the public goods space. As a society, we will have the means and motivation to innovate in order to provide the best abundant goods and services, because everyone involved will have the opportunity to profit by meeting demand.
GIVbacks with Gurves
Once a project launches its own Gurve, GIVbacks will change for that project. People will still be able to donate to the projects they care about, but the donors will also become part of the regen economy and share the upside in the project token’s financial success.
When a Giveth project with a Gurve receives donations, the GIV from GIVbacks will go into the Gurve, and the Gurve will mint new project tokens and send them to the donor. The minting price of the project token will then algorithmically increase. Therefore, whenever the project receives donations, the price of their project token will go up, and those donations will only be able to be spent according to the votes of the token-holding stakeholders.
If a project has a Gurve, impact investors can choose to send GIV straight to the bonding curve, supporting the project without donating. They will get project tokens and experience financial upside if this regen microeconomy is successful. We call it a “GIVestment” for now—we’ll see if the name sticks. 😉
Once Gurves are live and battle-tested, nonprofits will have a straight forward model for collecting venture capital — just as tech startups have today — while still being structured to accept donations. And Giveth will become a launchpad for the first movers in what will eventually be a $35 trillion USD industry.
Note: The technology underpinning Gurves is an area of active research and in partnership with Commons Stack. We are learning what works and what doesn’t. The concepts and implementation will evolve as more experiments with bonding curves and public goods focused economies are launched. However, the initial research around the Augmented Bonding Curve is very promising. The Token Engineering Commons raised $1.5M in the summer of 2021 and has supported several important public goods initiatives in the TE space, and their token has actually out performed Ether. 🤯 Despite this success, we are not ready to commit to a timetable for Gurves until we see it live in more communities. Luckily we wont have to wait long…
Want to dive deeper? This post was first a talk! Watch it below.
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This post was written with the support of Lauren Luz, Tropical Mango, Suga, Cori, and Brichis.
