Blink, and you missed the big innovation news from the world of NGOs, institutions and ‘doing good’ last week: Gitcoin is teaming up with UNICEF’s Office of Innovation to launch a round of Quadratic Funding grants for 12 impact-focused, innovative projects worldwide, that use blockchain and artificial intelligence technologies for good.
Most will know UNICEF, but few will know Gitcoin. That’s because it’s an open-source web building platform for creating and funding projects in Web 3.0 . Almost all of Gitcoin’s funds go towards the creation of tools which positively impact the world, not just the internet.
Billed as an ‘innovation’ for UNICEF, this is possibly much bigger, for Web 3.0 x Impact, at least.
Because this isn’t just UNICEF’s first foray into Web 3.0 to administer grant funding: it’s the first time an institutional actor from the traditional NGO space has engaged with decentralized non-‘top down’ funding. It’s a moment. Potentially the beginning of a seismic shift, and it’s already carrying the baggage of being “a monumental step in bringing transparent, community-driven grant allocation to the NGO world”. Blockchain builders are watching with anticipation.
Why does this mean so much to Web 3.0 (Web3), and what do blockchains and social impact have to do with each other? Why does the impact sector need Web3? How are we seeing Web3 drive social impact today? What on earth is Quadratic Funding? And why is the Gitcoin collaboration with UNICEF such a “monumental step”?
Back in July 2022, we (Jacob Naish, Joe Mulberry and Lucy Mills) explored some of these questions in depth in our article “How do we know it works”. We explored this (because we’re geeks obvs, and) because we are collectively convinced that Web3 offers possible concepts and tooling for radically transforming the inherent power dynamics within the nonprofit sector. Not least the perceptions of it, the way it is funded, its governance, and administration. We focused on measurement, because that’s where lots of accusations around the performance of impact work persist, not all of them fair. And for those of you following the furore around Effective Altruism, you’ll know that social impact being perceived to have ‘worked’ (in some kind of rational sense), remains important.
Web3 and the disruption of social impact
Over the last 60 years, aid has changed dramatically. From the Bretton Woods System, to massive international charities, the Millennium Development Goals, CSR, SDGs, and now ESG. Money has shifted from cause to campaign, compelled by political trends. From faith and saviourism (inter-war years to 1950s), to reconstruction and anti-communism (1945 to 1980s), celebrity, famine response and the infantilization of Africa (1980s), HIV/AIDS (1990s to early 2000s), through to climate change prevention and mitigation (now).
Through these cycles, there has been progress against development indicators in some regions and under certain circumstances. However, the impact sector continues to exhibit systemic failures; misuse of funds, misplaced accountability, top-down decision-making, and perpetuation of neocolonialism. In response, the impact industry has soul-searched, analyzed its failings, and implemented changes that have facilitated localized funding solutions, greater voice from the Global South, and rigorous evaluation frameworks, to name a few. But it doesn’t seem to be enough. Why? Because all of these old - and new - problems derive from power imbalances that have remained fundamentally unchanged, and which are inherent and in-built within the top-down funding structures of the current impact system.
How is Web3 different?
The Web3 approach to social impact lies within the potential of blockchain technology to democratize and decentralize the architecture that forms the intermediary (‘middleman’) function in the current aid system, in so doing, disrupting the power asymmetries that plague the search for impact, and reversing their flows to run bottom-up. There are ecosystems which try to solve the coordination failures inherent within the existing aid system. Proof of Humanity, Celo and CoordinApe as Decentralised Autonomous Organisations (DAOs) attempt to incentivise impact (Gitcoin published a book on Impact DAOs). Protocols, such as Ethereum and Algorand, attempt to provide some of the infrastructure for ecosystems to grow upon. And movements, such as those based on the regen philosophy, coalesce communities (such as solarpunk, the mix of using technology in harmony with nature) towards planetary regeneration and investment in public goods.
At the intersection of all these are the technologies that make it possible. These blockchains are so important because they create (as of yet unrealized) potential to fairly and transparently price undervalued public goods, meaning communities can be supported to do more good things for the planet, and companies can be incentivised to stop doing the opposite.
When it comes to administering impact grants, smart contracts on blockchains power the possibility for hyper-local, transparent and frictionless governance and programmable funding for projects. True, there are also more traditional ‘crypto-giving’ projects: numerous decentralized finance (DeFi) and non-fungible token (NFT) campaigns that hive a portion of their profit off for good causes.
Gitcoin, for example, uses a quadratic funding method that 1) allows contributors to allocate funds using coins which can be distributed across more than one project and (2) allocates money to projects based on the number of contributors, rather than the quantity of each contribution. This distributes power away from those with the deepest pockets to those with the most plural support. And now in Web3, we have the possibility of certificating, via non transferrable Impact Certificates, denoting provable impact. Impact certificates, in their infancy, are being stress-tested in projects like Funding the Commons.
Gitcoin’s collaboration with UNICEF signals the potential of ‘a monumental step’ precisely because it marries some of these nascent technologies with the will to take decisions out of the hands of a few, well-resourced and powerful institutional funders, and hand that power to grassroots organizations, their supporters and their beneficiaries. It could turn program managers into investors, and community members into funders, all by means of their interaction with a smart contract on a blockchain.
With UNICEF piloting this approach, it’s possible that Web3 could be about to make a bigger debut in the mainstream administering of grant funding for impact.