Grants Program

Funding for core protocol improvements, feature implementation, and technical research. These grants are awarded to developers and researchers to build foundational infrastructure, such as new consensus mechanisms, scalability solutions, or security audits.

• Focus: Core protocol, node software, cryptography.
• Examples: Ethereum Foundation funding for client diversity, or a Layer 1 funding research into zero-knowledge proofs.
• Recipients: Primarily experienced development teams and researchers.

Funding to bootstrap the development of decentralized applications (dApps) and tools built on top of a protocol. The goal is to increase utility and user adoption by filling gaps in the ecosystem.

• Focus: End-user applications, wallets, oracles, DeFi protocols, NFT platforms.
• Examples: A blockchain granting funds to build a new decentralized exchange (DEX) or a cross-chain bridge.
• Recipients: Application development teams and startups.

Funding for non-technical initiatives that grow the community, improve documentation, and create educational content. This includes funding for local meetups, translation efforts, tutorial creation, and developer onboarding programs.

• Focus: Documentation, tutorials, workshops, content creation, community management.
• Examples: Grants for translating technical documentation into new languages or funding a series of developer workshops.
• Recipients: Educators, content creators, community organizers.

Funding for theoretical or applied research into cryptography, tokenomics, governance, and other foundational topics. Outcomes are often published papers, prototypes, or feasibility studies that inform future protocol development.

• Focus: Cryptographic primitives, mechanism design, game theory, security analysis.
• Examples: Funding academic research into novel consensus algorithms or the economic security of proof-of-stake.
• Recipients: Academic institutions, independent researchers, think tanks.

Grants programs are funded from a protocol's treasury, requiring disciplined capital allocation to ensure long-term sustainability. Key considerations include:

• Multi-signature wallets for disbursements, requiring approvals from multiple authorized signers.
• Vesting schedules and milestone-based payouts to align incentives and ensure deliverables.
• Transparent on-chain accounting for all inflows and outflows to maintain community trust.

A formal governance framework dictates how grants are proposed, evaluated, and approved. This typically involves:

• A public Request for Proposals (RFP) outlining focus areas and criteria.
• Submission of detailed proposals, often including technical specifications, timelines, and budgets.
• Review by a grants committee or decentralized autonomous organization (DAO) vote.
• Post-award reporting and accountability mechanisms for grantees.

Mitigating fraud and regulatory risk requires rigorous vetting of applicants. This process includes:

• Know Your Customer (KYC) and Know Your Business (KYB) checks for individuals and entities.
• Technical assessment of the team's capabilities and the project's feasibility.
• Evaluation of potential conflicts of interest and alignment with the protocol's values.
• Background checks to prevent funding from sanctioned individuals or regions.

Funds disbursed for development must be protected. Security measures include:

• Multi-sig escrow contracts that release funds only upon verified milestone completion.
• Mandatory code audits for any software deliverables before final payment.
• Clear intellectual property (IP) licensing agreements (e.g., open-source requirements).
• Incident response plans for potential exploits in grant-funded projects.

Measuring the return on investment (ROI) of grant capital is critical for program iteration. This involves:

• Defining Key Performance Indicators (KPIs) such as user adoption, code commits, or total value locked (TVL) generated.
• Regular progress reports and public demonstrations from grantees.
• Retroactive funding models (like those used by Optimism) that reward proven impact.
• Transparent reporting of successes and failures to the community.

Operating a grants program introduces legal complexities that must be managed:

• Structuring grants as contracts for services or donations with clear terms of service.
• Navigating securities laws; grants should not be structured as unregistered security offerings.
• Tax implications for both the granting entity and the grant recipients.
• Establishing legal entities (e.g., foundations) to manage the program and limit liability.

A funding model where projects are rewarded after they have delivered value, based on proven impact. This contrasts with traditional grants awarded prospectively. Key mechanisms include:

• Optimism's RetroPGF: Uses a badgeholder system to distribute funds to contributors of public goods.
• Gitcoin Grants: Employs quadratic funding to match community donations, often for work already underway.
• The goal is to fund what is useful, not just what is proposed.

A task-specific funding mechanism where a predefined reward is offered for the completion of a concrete, scoped objective. Unlike open-ended grants, bounties are milestone-driven.

• Examples: Fixing a specific bug, writing a technical audit report, or developing a predefined smart contract module.
• Payments are contingent on delivery and verification of the specified deliverable, making them lower-risk for funders.

A large capital pool, often managed by a foundation or DAO, dedicated to strategic investments and grants to grow a blockchain's entire ecosystem. It's a broader umbrella that often contains a grants program.

• Scope: Can include equity investments, token purchases, grants, and liquidity incentives.
• Objective: Accelerate developer adoption, user acquisition, and overall network effects. Examples include the Polygon Ecosystem Fund and Solana Foundation Grants.

A decentralized, community-governed approach to distributing grants. A Grants DAO uses token-based governance to propose, debate, and vote on funding allocations.

• Process: Community members submit proposals, and token holders vote to approve funding.
• Examples: Uniswap Grants Program (UGP) and Compound Grants are community-led. This model aims for permissionless innovation and aligns funding with the community's collective priorities.

A grant structure where funding is released in tranches upon the successful completion of agreed-upon milestones. This is a common risk-mitigation tool.

• Structure: An initial grant for Milestone 1, with subsequent payments locked until verification of Milestone 2, etc.
• Purpose: Ensures accountability, provides ongoing project support, and allows for course correction if milestones are not met. It is a standard practice in programs like Ethereum Foundation Grants.

A small, non-dilutive funding award designed to validate the technical feasibility or market interest in an early-stage idea. It is a precursor to larger grants or venture funding.

• Typical Use: Building a minimal viable product (MVP), conducting a small-scale pilot, or producing a technical whitepaper.
• Goal: De-risk innovation by funding the initial research and development phase, allowing teams to gather data for a full proposal.