Written by Rohit Malekar, Carl Cervone, and Holke Brammer
Last update to article: May 11, 2023
The Hypercerts Foundation invited all eligible projects that participated in the Gitcoin Program Alpha Round to mint a hypercert for their past work and to allocate fractions of their hypercert to a list of supporters.
These were the first *official* hypercerts ever released!
The Hypercerts Foundation created its implementation of hypercerts using an ERC-1155 semi-fungible token with the information above stored as metadata on IPFS. The protocol is live on Optimism. (You can also play around with it on Goerli Testnet.)
The Foundation also created a dApp that pulls all of the data required to mint a project's hypercert directly from Gitcoin’s Allo Protocol. Project owners can fine-tune the properties, tweak the artwork, and review the distribution mechanism.
Once a Gitcoin Round hypercert is minted, anyone who supported a project with a contribution of at least $1 DAI can connect and claim their fractions. These hypercerts are soulbound – you won’t be able to sell or transfer them. Projects can, however, add benefits for hypercerts owners if they want to.
Projects themselves keep 50% of each hypercert, these fractions can be transferred or sold once, i.e. from the minter to a supporter. This functionality isn’t available in the dApp yet, but will be added later.
Imagine a world where positive impact was one of the most highly valued creations in our society; where entrepreneurs who pursued high-uncertainty, high-upside moonshots to radically improve society were rewarded directly for that impact; where becoming a patron of impactful causes was something people aspired to and displayed proudly; and where the methods used to evaluate impact were credible, transparent, and independently verifiable.
That world might seem a distance away, but it’s one we can build towards.
A pronounced split between the private and public sectors has created a long-standing struggle in funding public goods. We’re told that the private sector should focus solely on generating profits, and that the non-profit sector should focus solely on providing services to the community, without considering market economics.
It’s a false dichotomy. And it’s time to chip away at it.
A lack of resources and inadequate funding have hobbled the non-profit sector. Furthermore, many in the non-profit sector have neglected to consider the role that novel marketplaces and funding mechanisms can play in expanding public goods and services. Marketplaces, for example, provide valuable insights into resource allocation and efficient delivery systems, which, in turn, can improve the quality and accessibility of public goods and services.
We’d like to see more impact markets and innovation in the way we fund public goods.
In order for this to occur, we need protocols to track and fund impact. As ERC 11-55 semi-fungible tokens, hypercerts create a single, open, shared, and decentralized database for different impact funding mechanisms. However, for this to occur, we need protocols for tracking and funding impact.
From climate change to safe AI, the world faces unprecedented challenges that require billions, and even trillions, in public goods funding. Governments and foundations are the two largest sources of funding.
For governments, levying taxes is the most common method of raising money. Yet some argue that high taxes burden citizens and businesses, leading to reduced economic growth and lower consumer spending. Governments can also provide grants and subsidies to organizations or individuals that support public goods and services, such as education, health, and research. Like taxes, grants and subsidies are also subject to criticism, linked to corruption and inefficiencies.
With more capital at their disposal, foundations and private philanthropy have the capacity to fill in the crevices left by government spending, but they’re also subject to the whims of individual donors (read: highly centralized), making it difficult for organizations to plan and implement long-term initiatives. Additionally, philanthropic funding may not always align with the priorities and needs of the communities being served.
Due to the absence of incentives in our dominant public goods funding framework, we often overlook high-uncertainty, high-upside endeavors. Even milestone-based bounty frameworks are relatively uncommon and tend to focus on activities (which can be easy to game) rather than outcomes.
We need to pursue more moonshots when the expected positive value is very high.
One new impact funding mechanism is retrospective funding, which rewards projects on the impact they create after the impact is observable. Retrospective funding would provide incentives for creators to take on public goods projects with a potentially high, but uncertain impact; enable feedback loops to learn from successes and failures; and attract more talent to the public goods sector by improving performance-based compensation. We believe we can do better.
While hypercerts may be useful for any impact funding mechanism, we feel they’re particularly valuable for retrospective funding. As a single, open, shared, and decentralized database, they enable different funding mechanisms to interoperate.
On a micro level, a single hypercert is a semi-fungible token that accounts for work that’s intended to be impactful, and whose ownership can be fractionalized and even transferred under specific conditions.
Instead of imposing specific funding mechanisms, hypercerts provide baseline invariant guarantees so that claims will not be forgotten as different mechanisms come into and out of fashion. This is also why hypercerts are especially useful for any retrospective funding mechanisms – we can apply funding to claims of the past.
Each hypercert represents a unique impact claim capturing the following information:
Hypercerts facilitate retrospective funding as the impact claims are identifiable, traceable and transferable (under certain conditions). Creators can sell parts of their hypercerts to prospective funders to receive the necessary funding for their project. After evaluating the project’s impact retrospective funders can buy the hypercerts from the contributors and prospective funders if they retained a fraction of their hypercerts.
It can be difficult to coordinate among multiple funders on the same impact projects. Hypercerts make coordinating funding easier, building the basis for quadratic voting, bargaining solutions, DAO-style votes, milestone bounties, and simple unconditional grants.
Hypercerts don’t solve this coordination problem by themselves, but build the basis for different decision and funding mechanisms as shown below. Quadratic voting, bargaining solutions, DAO-style votes, milestone bounties, and simple unconditional grants all have their strengths, among others. Hypercerts don’t lock in any particular decision-making scheme for funders.
There’s a lot of work required to build out a full suite of impact-funding protocols. A few of the major boulders of work include:
Looking further ahead, if hypercerts become the primary medium for funding in an impact funding system, it’ll result in transparency and enable collective intelligence, empowering funders to make optimal decisions based on the funding choices of others.