How DeFi can Reform School Funding Models

Collaboratively written by Scott Meyer & Vriti Saraf

Education is the elixir of life. With the right access to learning, humans can improve themselves, the wellbeing of others, and the fate of the world. Education and medicine are probably the only industries we can say that about. So why are they both so broken?

Don’t worry, this article isn’t a rant about that. Instead, we’re interested in breaking down some of the main problems in education and figuring out clear solutions with new innovations, specifically within web3. Our previous article about Web3 to Ed3 starts to present a few of those.

There are two ways of thinking about change: revolution and reformation. Most web3 solutions ask for revolution... to upend 100 years of institutional success & failure to restart from scratch. The reality is, that’s nearly impossible to do, especially in public education. If the legacy systems in the US that provide schooling to 50 million children of varying economic and learning levels were shut down in order to be reinvented, not only would kids lose learning, a place to be safe, food to eat, and opportunity for upward mobility, but also, 5 million educators would lose their jobs. The COVID-19 pandemic provided a window into what this post-revolution system could look like. While there was value gained in short-term innovations particularly with online and hybrid learning, the tradeoffs do not justify this level of disruption. Revolution as a point of entry is often a non-starter. But reformation on a path to revolution is far more attainable.


This is a series of articles to break down the concepts in education that are holding the industry back, while promoting web3 solutions to evolve the industry from the inside. Hopefully, education will look entirely different and the revolution will come soon... but in the meantime, we think it needs to be set up for success.

We’ll work backwards from web3 concepts as a way to expand our minds & perspectives. Some of these include: NFTs, tokens, DAOs, DeSo, XR, Metaverse, DeFi, & more. Let’s get started.

Funding Education

Our public school funding model is unfortunately, set up to fail at scale.

Public school financial models have been a point of discussion for decades. Some say schools don’t have enough while others say schools don’t manage their funds well enough. Before we think about solutions, let’s break down the process. Candidly, this is a simplified diagram.

A simplified graphic of how school funding models work
A simplified graphic of how school funding models work

Our public school funding model is unfortunately, set up to fail at scale.

At the very top, public funds are accrued mostly through local taxes, meaning that there is a natural funding disparity between neighborhoods. Then, district level management makes decisions for schools to minimize generalized wholesale costs like text books, facilitates, transportation, technology, and to create consistent structures around salaries. All of this makes sense of course, but this leaves very little autonomy for schools to make decisions and promotes legacy systems because one change effects changes across all schools in the district. Districts also need to keep some of the funding to manage their own operations.

Enter DeFi.

Decentralized Finance for Education

Decentralized finance enables an individual to become the owner of their own finances. They can earn, spend, and transfer money without a central authority like a bank or government in the middle. In the context of education, that “individual“ could be a school district, a teacher, a parent, or a student. So the question is: can decentralized finance help schools, parents, and teachers better control their finances and raise funds for their educational efforts? And, when a central lender is not needed, how can funding & disbursements be reimagined?

Here are our ideas.

1. Funding incentives & returns

A major challenge for districts and individual schools is generating revenue. Decentralized finance offers new opportunities for return and additional access to capital. Additional tokenization models offer an avenue for funding public goods, like education, without additional taxes.

Earning Returns

DeFi offers much higher returns than traditional banks. The annual percent yield, or APY, increases rapidly with risk. However, the most conservative investments in stable coins - crypto currency pegged to a fiat currency like the US dollar - yield around 8% per year. A tool like Yearn can make it easy to do without having to have deep knowledge of crypto currency as explained here.

Simply diversifying the investment portfolio could generate substantial revenue for districts and schools.

Access to Capital

DeFi also enables access to capital, often at lower interest rates than traditional banks. Tools like Aave enable borrowing against crypto assets. What’s interesting about these loans is that you can also earn interest - or yield - while borrowing. That means that your 8% (or higher) will automatically pay off your loan.

Tokenization for Public Good

Schools themselves could mint currency, often called tokens. Teachers and administrators could receive a percentage of these tokens, similar to owning equity in a company. If the school does well and more people buy the token, their shares go up in value and the school has more revenue.

This idea may seem far fetched, but innovative public agencies, such as the city of Miami, have already minted their own currency called MiamiCoin. This token can be bought and sold like any currency, but the city of Miami earns a percentage from all of the coins. Additionally, other benefits can be built on top of the coin, so anyone who owns it gets access to specific amenities - think front row parking if you are a token holder!

These coins, or tokens, can be used for decision-making but can also generate revenue. Miami estimates it will earn over $60 million from its currency that will help it fund civic projects without additional taxes.

2. Attracting Students and Donations

Investing and lending crypto currency will be a pretty big jump for most school districts. However, DeFi can also enable new ways to attract students and donations. The potential is unlocked thanks to the frictionless transfer of funds. This could attract a global student body, enable atomized education, and encourage donations and philanthropic support.

Global Student Body

DeFi eliminates borders. There are no longer transaction fees for international exchange, and it is seamless to convert one crypto currency into another. That means that students, teachers, and donors around the world can now be a part of a school.

Students anywhere in the world could pay for class and login to join. Students across town or across the world could easily enroll. Dexter is experimenting with using tokens to attract students from around the world - a play-to-learn model. They envision students enrolling for free online and earning tokens for completing assignments. When they have enough tokens, they can take an exam and move forward.

Just as students could login from anywhere, educators could work anywhere around the world and be easily paid. Donors can also engage with a school regardless of location or currency.

DeFi might enable school to become less of a physical place and more of a virtual organization that shares educational processes and beliefs. In this future, a school can setup multiple locations around the globe and easily take payment.

Balaji summarizes it as an order book in this podcast clip. Soon, all assets will become liquid and priceable.

Atomized Education

DeFi enables micro transactions. Since there are little to no fees, it is easy to reward and charge for smaller activities.

For schools, this could unlock atomized education - small pieces of learning that could generate revenue. This trend is already happening in the private sector with companies like Outschool and Outlier. Now, any school could begin to offer (and charge) for specific lessons, activities, or resources.

That might mean charging by the class period, paying tutors by the minute, or enabling students to earn your school coin for each minute studying. When there is little to no friction to move money, the product of education can be reimagined.

Donations and Philanthropic Support

DeFi enables the easy movement of money, which also means the easy movement of philanthropic support - think Pencils of Promise with crypto.

By opening a wallet, a school can immediately accept donations in any digital currency. As some people have generated extreme wealth recently in crypto currency, it unlocks a new donor base. Tools like Endaoment are making it easy for people to give. As a school, you could work to be added as an option for crypto donors.

The additional benefit of blockchain technology is all donations are transparent (provable) with the option of also being anonymous. Donors can receive an NFT as a way to show off that they supported your school instead of getting a picture with an over-sized check.

3. Decision making

DeFi enables decentralized governance structures and decision-making, including the distribution of funds.

Governance Structures

In a traditional public school, voters elect the school board, but most voters don’t have their own kids in the school. Every voter’s voice is equal - so those without direct involvement have as much say as those whose families are directly affected. Some communities may prefer this direct democracy approach. Others may want additional options. While there are myriad debates on the best administrative structures, the key takeaway is DeFi creates optionality.


DeFi also enables more frequent input. Instead of waiting for an election to choose a board who then oversees decision-making, votes can be taken online at any time over issues facing the school. In this way, the token-holders can act as a school board, providing guidance and decision-making. What typically happens online (and in the real world) is a core group of stakeholders works through details and proposals, and then presents them for the community to approve. With this model, schools could think about more people being involved in specific aspects of a school. Instead of a school board making all the decisions, different committees could look at infrastructure, curriculum, staffing, etc. Decision-making becomes atomized and shared among the school.

Parents or teachers could be provided tokens that enable additional decision-making to ensure their voices are heard. Token holders could also receive a voting share and contribute to the school. The local community could even be given tokens to ensure they have a say in the school while welcoming other voices to contribute.

Distribution of Funds

Because DeFi uses incentives based systems, it encourages participation in allocation of funds. Contributors not only have incentives to earn, they can also vote on how funds are distributed. Since all protocols are automatically verified on chain, voting is simplified and unbiased. The most important stakeholders in a school, for example, can be both contributors and voters, enabling schools to personalize their students’ needs. Since contributors will earn more with successful outcomes, they are incentivized to help the school and stay active.

Through our research, we’ve discovered just one student project that is attempting to improve the school funding model with DeFi. We’re surprised there are no other models out there but we do think Satchel has potential. Three students out of Berkeley are setting up infrastructure to use contributions from community members (parents & other stakeholders) and non community members as collateral for crypto lending. After one year, contributors can withdraw their original funds (so they get their $ back) along with a percentage of the interest (so they’re actually making more $). The remaining interest is given to their school, where the funds are used based on votes from all contributors.

We know these solutions are not simple. We also know that reforming the financial models of public schooling is protected by red tape. But today, experimenting with DeFi is astoundingly accessible and we hope districts and schools consider some of these solutions as they prepare for the next century of learning.

Where to learn more

Subscribe to the Metaverse for education newsletter, where web3 is contextualized for education. And check out this list of thought-leaders on Twitter.

Who wrote this?

Scott Meyer (@MrScottMeyer) is an entrepreneur and former professor working to scale and democratize education. He recently launched Ed3 - a consultancy working to scale education. Subscribe to learn more (

Vriti Saraf (@vritisaraf), the founder of k20 Educators, is building the Eduverse on web3, a virtual hub for sharing ideas, professional development, innovative programming, and resources to support progressive teaching practices. She is also the co-founder of k20 DAO, the first DAO for educators, by educators. Vriti's goal is to break down silos among educators through web3.

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