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Intro to Direct Grants: How Do They Work?

Grants drive early support for web3 projects, maintaining their independence and nurturing talent within ecosystems. As Gitcoin evolves into a protocolDAO, we're excited to introduce Direct Grants on Grants Stack, diversifying funding mechanisms for a more robust web3 ecosystem.

Grants offer early support for web3 projects that drive progress while helping teams and communities maintain independence. This assists ecosystem funders - from well-known protocols to tokenized communities - in developing the necessary technology and creative assets to remain competitive. They also help attract and retain talent within ecosystems by providing opportunities for developers and creatives to work on challenging projects. In recent years, Gitcoin has emerged as a vital player in the web3 ecosystem, promoting innovation and growth through our platform that connects developers, funders, and users in a decentralized and collaborative way. By providing financial incentives linked to specific issue areas, we have run multiple grant programs that address shared needs within a community and have served as an important signal to engaged builders within an ecosystem. As Gitcoin evolves to a protocolDAO, we are thrilled to announce the addition of a new funding mechanism on Grants Stack in the form of Direct Grants. In this article, we will review:

  • Difference between Direct Grants and Quadratic Funding
  • The need for plural funding mechanisms in web3
  • The ease of setting up a Direct Grants round on Grants Stack

Face-Off: Direct Grants vs. Quadratic Funding

As part of operating the seasonal Gitcoin Grants program, we have first-hand witnessed how Quadratic Funding (QF) encourages a broader spectrum of experimentation by tapping into collective decision-making and funding, which might lead to the discovery and support of unconventional or niche projects. At the same time, different projects in an ecosystem have different funding needs, and having a variety of proactive and retroactive grant mechanisms allows for a better match between the project requirements and the grant structure. A blend of grant mechanisms contributes to a richer, more diversified ecosystem, enhancing the robustness and resilience for the community. By using Direct Grants, ecosystems can support builders by directly funding things that are complementary to or needed by their projects. 

Direct Grants are straightforward funding mechanisms where a certain amount of money is awarded to projects or individuals to support specific endeavors. Recipients are often expected to meet certain milestones or deliverables​. Funding amounts are predetermined and awarded based on grantors' criteria. On the other hand, Quadratic Funding enables a community-driven approach that calculates funding allocation based on both the number of contributors and the amount of funds raised, thus promoting a more democratized and transparent funding mechanism.

Direct Grants are more suitable for projects at an early stage or with clear, defined goals. They provide a straightforward funding method to kick-start development or to achieve specific milestones. Whereas, Quadratic Funding is often beneficial for ongoing or community-centric projects where a broader support base and engagement are crucial for success.

Direct Grants typically have less community involvement as funding decisions are made by grantors. They operate with a centralized decision-making process, where a single entity or a small group decides on funding allocation. This is preferable for projects that require a more controlled or directed development environment. Direct Grants can be directed towards structured innovation with clearer short-term goals, where builders can be funded by the organization more quickly than with QF. Thus, Direct Grants programs can offer high short-term value to fill gaps or needs within the ecosystem.

Setting Up Direct Grants Round on Grants Stack

Grants Stack provides the same level of ease for Direct Grants rounds, from deployment and application management to funds allocation, as it does for a QF round. To set up a Direct Grants round in Grants Stack and start receiving applications, follow these easy 4 steps in Manager:

  1. Once you create a program, choose “Direct Grants” for creating a new round

  1. Fill in details of the round 

  1. Add eligibility requirements

  1. Configure existing template with questions for applicants and launch the round!

To begin, you can share the "Round Applicaton" link with interested applicants, allowing them to start submitting their proposals in Builder. Afterward, you can review and approve applications, accepting projects into your round.

Interested in running your own Direct Grants round? Schedule a demo with our team. If you’re a round operator looking to learn more about Grants Stack, please check out our Manager Toolkit.

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