The Cost of Centralized Grant Committees in a Decentralized World

Grants are awarded for marketing and integrations that serve the foundation's narrative, not for core protocol R&D. This creates a Potemkin village of activity while core infrastructure at the protocol and client level remains underfunded.

• Funds Marketing, Not R&D: Grants favor dApps that boost TVL metrics over foundational work like P2P networking or state management.
• Creates Protocol Risk: Neglecting MEV research, sequencer decentralization, or fraud proof tooling leaves the entire chain vulnerable.

Closed-door committees with undisclosed criteria create an insider network. Funding flows to known entities, stifling innovation and replicating TradFi's gatekeeping.

• The 'Known Dev' Premium: Teams with prior foundation relationships secure funding over superior, anonymous builders.
• Zero Accountability: No public scoring rubrics or feedback for rejected proposals, preventing a meritocratic feedback loop.

Shift from speculative grants to rewarding proven, deployed work. Let builders ship first, then let the market of users and node operators decide what was valuable. This is the model pioneered by Optimism's RetroPGF and Ethereum's Protocol Guild.

• Funds Outputs, Not Promises: Pays for code that is already running in production and providing verifiable value.
• Aligns with Usage: Value capture is tied to real adoption, not a committee's opinion.

Replace committees with credibly neutral, on-chain mechanisms. Moloch DAOs and platforms like Clr.fund use quadratic funding to aggregate community preference. Developer DAOs create liquid labor markets for open-source work.

• Transparent Voting: Funding allocations are public and auditable on-chain.
• Skin-in-the-Game: Voters use stake or reputation, aligning incentives with ecosystem health.

Delegate grantmaking to expert sub-DAOs focused on specific technical verticals. A ZK Research Ship or Client Diversity Pod has the domain knowledge to evaluate high-risk, high-reward infrastructure work that a general committee would reject.

• Domain Expertise: Reviewers are active practitioners in the field they are funding.
• Faster Iteration: Small, focused groups can make decisions and disburse capital in weeks, not quarters.

A live case study in moving beyond committees. Optimism has run multiple rounds, distributing over $50M to developers based on community-nominated impact. The mechanism is imperfect but proves that retroactive funding attracts more high-quality, public-goods-oriented builders than speculative grants.

• Community-Driven Badgeholder Model: A large, rotating set of ecosystem contributors vote on impact.
• Iterative Design: Each round introduces new mechanics (e.g., voting power caps, categorization) to improve outcomes.

The original grants DAO demonstrated that even a small, expert committee suffers from coordination overhead and capital inefficiency. The process was manual, slow, and opaque, leading to high opportunity costs for builders.

• Key Issue: ~6-8 week decision cycles for proposals.
• Key Outcome: Capital sat idle in multi-sigs, failing to compound or be deployed efficiently.

Centralized, large-scale funding creates a winner-picks-winner dynamic, distorting the ecosystem's innovation vector. Projects optimize for committee approval, not market fit.

• Key Issue: $100M+ in allocated grants creating a central R&D roadmap.
• Key Outcome: Homogenization of research and development, crowding out fringe but vital experiments.

A well-funded committee ($74M treasury) became a bottleneck, struggling with subjective evaluation and community disputes. The program was eventually sunset, highlighting the failure of centralized curation at scale.

• Key Issue: Subjective meritocracy led to controversy and slow disbursement.
• Key Outcome: Program dissolved after <2 years, failing to become a sustainable public good funding mechanism.

Faced with committee fatigue and slow execution, Aave Grants decentralized into a community-driven, domain-specific council model. This increased accountability but introduced new political layers without solving capital efficiency.

• Key Issue: Transition from foundation to politicized sub-DAOs.
• Key Outcome: Faster niche funding, but still reliant on small-group consensus and vulnerable to internal politics.

A data-driven attempt to move from proactive grants to retrospective rewards. While innovative, its centralized committee (Citizens' House) for voting weight distribution recreates the very governance capture it aimed to solve.

• Key Issue: $40M+ rounds decided by a <100 person curated set of badgeholders.
• Key Outcome: Proves that even 'retroactive' models bottleneck at the voter selection layer.

The antidote is permissionless, algorithmically-driven funding via mechanisms like Harberger taxes, quadratic funding, and intent-based marketplaces. Protocols like Gitcoin (QF), Radicle (collaborative funding), and emerging retroactive funding markets remove committee bottlenecks.

• Key Benefit: Capital follows proven usage, not subjective committee whims.
• Key Benefit: Real-time allocation via on-chain activity and verifiable metrics.