Decentraland: How to get your wish Granted
In my last post, What would you do for a million dollars?, we introduced the Decentraland Grant Program and presented a general overview of how Decentraland utilizes the DAO to fund community projects. We discussed, very broadly, what a grant is and the kinds of projects the Decentraland DAO is looking to support. In this article, we will dive into the details and discuss how the budget is decided and the mechanics of getting your grant passed.
How does the Decentraland Grant Process work?
At its core, it is a simple process. You have an idea, you present it to the community, and if the community likes and supports your idea, you get funding to make it a reality.
To reduce the misuse of funds and improve accountability for grant recipients, the Decentraland DAO voted to pause the Grant Program at the end of 2022. Over a three-month hiatus during the first three months of 2023, the dao defined and implemented a number of changes at the end of Q1 2023.
Along with restructuring and defining the grant categories we discussed last week, the DAO has formalized the process and created a committee to review DAO-funded projects, hold them accountable in a timely manner, and better understand the return on investment generated from each Grant Program-funded project.
Before these changes, there were six different tiers with four requirements for approval. Now there are two tiers: A Low Tier and a Higher Tier. With a Low Tier Grant for amounts up to $20,000 and High Tier Grants for $20,000-$240,000 grant requests.
Lower Tier:
Up to $20,000, payable in stablecoins or MANA using a Vesting Contract or a one-time payment (after 30 days).
Vesting duration can range from 1 to 6 months.
Voting Period: 2 weeks.
Voting Power threshold: 2M.
Higher Tier:
From $20,000 to $240,000, payable in stablecoins using a Vesting Contract.
Vesting duration can range from 3 to 12 months.
Voting Period: 2 weeks.
Variable votation threshold, using the formula: 1.2M + TOTAL_BUDGET * 40VP/USD
Both tiers have the same voting duration of two weeks, but that is where their similarities end. The big differences between the two tiers, besides the amount of money you can request, are:
Low Tier Grants
Can be awarded in a one-time payment
Maximum 6-month vesting period
Can request to be paid in MANA
Have a 2 Million VP threshold; it doesn't matter if you want $1 or $20,000.
High Tier Grants
Minimum 3-month vesting period
Maximum 12-month vesting period
Only available in Stable Coin
A variable based Voting threshold: 1.2M + TOTAL_BUDGET * 40VP/USD
Naturally, as we start adding algebra problems and niche industry terms like "Vesting Period, " many people will start feeling overwhelmed or bored. Trust me. We are almost past it; just give me two more sentences. "Vesting Period" means how long it takes to receive all the funds paid in equal monthly installments. All the Algebra problem means is, "the more money you ask for, the more Voting Power is required to get approved." If you ask for $25,000, it will require 2.2M VP; if you ask for $240,000, it will require 10.8M VP.
At first glance, 10.8 million VP might seem like a lot, but it is important to remember there is over 180 Million VP from LAND and a circulating supply at the time of writing of 1.8 Billion MANA. While there may only be 10-20 million VP worth of active participants at any given time, a voting threshold that requires under 1% of available Voting Power is the lowest of any DAO I am familiar with and very attainable.
How is the Decentraland Grant Program Budget Calculated?
If you are one of the previously discussed people who doesn't enjoy Algebra problems, it might be a good time to scroll down past some AI-generated art and read the tl;dr at the bottom because there is no way around math. In fact, this might be more boring than regular math; this is budgeting.
In December of 2022, Yemel Jardi, founding team member and now Executive Director of the Decentraland Foundation, submitted a proposal to define a budgeting strategy for the Decentraland DAO, to create a community consensus around how the DAO is utilizing the treasury.
While there are some small revenue sources, the Decentraland DAO gets its funding primarily via a 10-year 222 million MANA Vesting Contract. This contract began releasing funds every second on February 19th, 2020, and will continue until February 2030. Given the nature of the vesting contract and it being the overwhelming majority of the DAO's revenue, it is logical that the budget Yemel proposes is heavily based on that revenue.
With the vesting contract generating 5.5 million MANA a quarter, the inherently volatile nature of crypto, and the necessity for real-world budgets to be based in fiat, the budget is calculated quarterly and set in USD using the formula:
5,500,000 * MANA_PRICE * 0.7
So if MANA is worth $1, the quarterly budget formula would look like this: 5.5m * $1 * 0.7 = $3.85m. If MANA were to return to its all-time high of $5.85, that budget would skyrocket to $22,522,500. At the time of writing, MANA is $0.46; if the quarterly budget were being calculated today, it would be $1,771,000. Had the DAO budget been calculated at the lowest MANA price over the last 12 months, $0.29, the budget would have been $1,116,500.
Along with the proposal to create the budget formula, Yemel also proposed the creation of, and budget allocation for the seven different categories we discussed last week.
Platform 40%
In-World Content 20%
Core Unit 15%
Sponsorship 10%
Accelerator 7%
Social Media Content 5%
Documentation 3%
With the most significant amount of the treasury being dedicated to Platform improvements and the next largest allotment being for In-World Content, the budget is aligned with the overwhelming sentiment, both in the community and out, that Decentraland's primary focus needs to be on building a fun and easy to use product.
tl;dr - The DAO budget is based on how much mana the DAO receives and how much that MANA is worth. The majority of those funds are intended for use in improving the platform.
Conclusion
In conclusion, the Decentraland Grant Program has undergone significant changes and improvements to enhance transparency, accountability, and efficiency in funding community projects. The program now operates with two tiers: the Low Tier and the Higher Tier, offering different grant amounts and requirements. The grant process involves presenting ideas to the community, gaining support, and receiving funding if approved.
To ensure responsible fund allocation, the Decentraland DAO implemented measures such as pausing the Grant Program temporarily and establishing a committee for project review and accountability. The revised grant categories and formalized process aim to better understand the return on investment generated by each funded project.
The budgeting strategy for the Decentraland DAO is primarily based on a 10-year vesting contract, releasing funds from a treasury consisting of 222 million MANA. The budget is calculated quarterly and set in fiat currency, considering the MANA price and the revenue generated by the vesting contract. The proposed budget formula factors in the volatile nature of crypto and aims to align with real-world budgeting principles.
The allocation of funds across different categories reflects the community's desire for platform improvements and in-world content development. The largest portion of the budget is dedicated to Platform enhancements, followed by In-World Content. While the budget allocation aligns with community sentiment, there is always room for improvement and potential adjustments in the future.
Overall, the Decentraland Grant Program has evolved to facilitate the funding of innovative projects and promote the growth of the Decentraland platform. The implementation of stricter guidelines, a defined process, and an accountable committee ensures the responsible and effective use of funds for the benefit of the Decentraland community.
