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October 27, 2022

How to Build Trust with Potential Funders for Your Gitcoin Grant

Building a successful web3 project is no small feat.

Building a successful web3 project is no small feat.

It’s one thing to build a prototype of a cool product concept, community design or generative art project. It’s another thing entirely to create a community that rallies around your project as its core users and biggest believers in its potential.

Many projects start at hackathons, or from a small group of people hacking on an idea and talking about it to, well, anyone who will listen–friends, family, or even community members who can become potential funders.

These passion projects all suffer from the same “chicken or egg” problem. They need resources, but can’t get them without a product.

But without resources– in the form of both money and networks– building a product is difficult. Mentorship, advice, connections (a founder’s personal network) and a community, dedicated users (the project’s home-grown network) are all needed for a project to grow.

But it’s hard to build a network from scratch. This is the crux of the cold start problem, first coined by Andreesen Horowitz’s Andrew Chen.

Chen says the cold start problem is, “Something every product faces at its inception when there are no users”.

He writes that when a product is launched, it has to find users as fast as possible, or risk death. Not just any users– a small, specific community of users who will jump start the spread of your product to other small, specific communities. No matter how impressive the tech is, the value of most web3 projects can only be unlocked when strong networks actively engage on top of them.

After all, web3 is just a series of network effects on steroids. The promise of ownership it provides is only worthwhile if people take advantage of it through active participation in networks. A layer one (like Solana, NEAR, or Ethereum) is worthless without a rich network of marketplaces, games, and other building apps built on top of it.

These in turn are worthless without their own networks of creators, players, and community members. Many of these smaller elements need their own networks too, such as NFT artists with cult communities.

To build an ecosystem– the core unit of web3– the network effects that need to be seeded are actually more complex than ever. This makes the cold start problem even harder to overcome, because it’s difficult to demonstrate value in some projects with tech alone.

For your web3 project to succeed, you’ll need to find a way to solve it.

To do this, you’ll need to understand how the network effect works, and how to use it to your advantage.

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So, how best to use network effects to scale your web3 project?

Start Small to Slay the Cold Start Problem

You may be familiar with Quadratic Funding (QF), and how it distributes funding to the grants projects that need it most. If you’re not familiar, the simple explanation is that, QF increases partner matching amounts of the donations of your community as more people donate to your project.

QF allows you to use network effects to more effectively fund your project. It means that the more people you get to donate, the greater their donations are matched by our ecosystem partners.

Gitcoin is already in the process of launching Grants Protocol. Grants Protocol aims to make QF and similar funding methods more widely available. This is done through a suite of tools allowing any community to internally distribute resources to projects in a transparent, accountable way with the help of blockchain.

One of those tools is Grants Hub, a universal project registry that aims to help early web3 projects address the cold start problem by making it easier for teams to find the right people to seed their community, and help people find the projects that resonate most with their values and interests.

An Open Protocol to Solve the Cold Start Problem Together

From working with grantees (typically software engineers, developers, and founders), we’ve seen that most of the time, grantees would rather be building (as opposed to marketing and promoting their grants project).

Fair enough–there are only so many hours in the day, and you’ve got a project to ship!

Grants Hub aims to improve on the Gitcoin Grants platform experience by allowing projects to create a single profile that can be used to apply to multiple grants, and manage grants across multiple rounds.

It also provides a deep, flexible registry of grants for communities to easily find and distribute resources across relevant projects.

We envision teams using Grants Hub to create a listing for their project that grows along with them, tracking milestones, roadmaps and more.

Grants Hub is also an open source and permissionless protocol. Because of this, we expect it to provide critical infrastructure to the web3 projects of tomorrow.

Grants Hub is currently in production, but you can expect a public beta available for testing in early 2023!

For now, read this deep-dive on Grants Protocol.

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