Reigniting the Signal
gm, it's been a minute.
The last time you heard from me was Sov's Song - a little over two years ago. That was a formative time for me, and I am forever grateful for the opportunities I had working with the teams at Blockworks, Questbook, and others.
Since then, I have had hundreds of conversations with DAO stakeholders, grant programs, and governance experts, dramatically deepening my understanding of crypto-native organizations and the opportunities and pitfalls of ecosystem funding approaches.
My biggest regret is not documenting the journey—after all, writing kicked this off and turned my bear market hobby into more. Too many Substacks I loved went dark, and I'm not about to join them.
So, why return now?
As someone considered an “expert” in grants, I feel less and less that way each day. With my reentry here, I hope to share my perspectives with all of you, continue growing my understanding, and (attempt) to stay relevant.
Shifts
Looking at the landscape today, I see some interesting shifts reshaping how organizations approach ecosystem growth through funding. The traditional funding model has expanded and evolved (and sometimes failed) in ways that reflect the maturing ecosystem and flight to value.
While the core concept remains - funding to grow - the execution has become more nuanced and sophisticated. Here are some trends I'm tracking that demonstrate this:
Verifiable Impact
Early grants programs operated with loose definitions of success - often measuring activity rather than outcomes. We now see examples of DAOs exploring and implementing impact measurement frameworks and defining KPIs beyond basic usage statistics.
IMHO, the most well-known and longest-running example of this at scale is Optimism. Optimism defines its intents and seasonal focus, and then all downstream projects, protocols, and programs work to align themselves with OPtimize for grants and incentives. Over time, Optimism has become more intentional in targeting specific domains and focus areas and tracking (as best they can) the impact in these areas.
It’s not perfect, but a genuine, ongoing spirit of intent exists to drive impact (and sequencer fees) back to The Collective. There are other examples of this emerging (along with teams like Open Source Observer!) that specialize in defining, surfacing, and measuring impact for these ecosystems at scale.
Markets Making Decisions
Traditional grant committees are being supplemented or replaced by market-based decision mechanisms. Futarchy models - where prediction markets determine which proposals get funded - are gaining traction because they can leverage collective intelligence more effectively than small committees.
MetaDAO is the best-known and most established example of a Futarchy today. Led by the enigmatic Prophet (one of my favorite founders of this cycle), they have built and launched multiple Futarchy markets on Solana for its major ecosystem players.
Other examples, like Butter, are starting to surface, and I believe we will see more use of these models compared to traditional decision marking in the days ahead.
Evolving Incentives
The administrative overhead and lack of incentives alignment with traditional programs have pushed more toward new models. Instead of reviewing applications and manually allocating funds, we now see a shift to embed incentives directly into protocols. This post by Tnorm provides the best primer on the concept.
An example is Berachain and the recent Boyco Incentives provided to bootstrap liquidity leading up to their TGE. This system was developed by the team at Royco, who has a really (really) interesting approach and protocol. The Boyco Vaults was a massive success, and now you are seeing Royco popping up again with Sonic (formerly Fantom; I wrote about their grant programs years ago here).
Grants and Incentives Bifurcating
We're seeing the long-overdue separation between grants and incentives take hold. Until recently, these approaches were often lumped under vague labels, creating confusion about their fundamentally different purposes.
Grants focus on building infrastructure and public goods with milestone-based delivery, while incentives target specific activities or behaviors with time-limited rewards.
Arbitrum is a relevant case study. Incentive programs (STIP and LTIPP) were structured like milestone-based grant programs but aimed to target outcomes best served by incentive frameworks. The programs had some short-term success through attracting mercenary capital but didn’t ultimately create sustainable adoption.
In seeing this, the community (led by L2Beat) initiated an "incentives detox" that paused incentives and engaged in learning what worked and didn’t and looked at ways that they could move forward. As an outcome of the detox, we now see Arbitrum starting to pivot to an approach that delineates between grants for ecosystem development (like with Questbook) and targeted incentives for specific metrics (and some intriguing proposals and approaches emerging as a result).
You are seeing ZKsync pause on their programs as well and have more active conversations across our space with other programs, questioning if their current mode of operations is what makes the most sense for ecosystem growth.
Downstream Programs
We're seeing the emergence of a multi-tiered funding ecosystem where major protocols delegate funds and execution to specialized entities. This creates two complementary developments: downstream grant programs with dedicated budgets and specialized service providers with technical expertise.
Parent protocols like Optimism, Arbitrum, and Polygon are establishing downstream programs (such as OP Grants to Superchain Members, Arbitrum's ecosystem program network, and Polygon's CTB Program) by allocating significant budgets to semi-autonomous entities that align with their strategic goals.
Simultaneously, specialized service providers have emerged to support these programs with expertise in grant management, impact assessment, and technical infrastructure. Rather than each protocol reinventing administrative processes, these providers bridge the gap between strategic vision and operational execution, bringing standardized workflows that benefit the entire ecosystem.
This relationship—protocols providing budgetary resources, downstream programs focusing on funding priorities, and service providers handling execution—can create a more efficient allocation of capital and expertise.
Looking Ahead
These shifts represent how we continue to evolve in funding public goods and ecosystem development.
As someone who's spent years studying these programs and their approaches, I'm even surprised by the pace of innovation and find it more challenging to keep track of everything going on (a key reason I intend to start writing here again).
I'll be diving deeper into each of these trends (and more!) in upcoming posts and will continue beaming updates on grants and incentives through my Crypto Grant Wire on Telegram.
DMs are always open if you want to discuss.
It’s good to be back, y’all. More to come!
- Sov