“Winning the SCF #10 wasn’t just about getting a grant, we had the opportunity to build and scale our mission with a community that really cared about what we were building and supported us through every step.” — Emmanuel Evarist, Link (winner of SCF#10)
The Stellar Community Fund (SCF) is an open-application grant program hosted by the Stellar Development Foundation (SDF) that distributes up to 24M XLM annually to Stellar-based developers, startups, and full-fledged companies based on community input. Not only do projects get a chance to win funding, but they also receive helpful feedback and support, make invaluable connections, and acquire a sense of belonging in the Stellar ecosystem.
As you may have read, we recently published a historical overview of the SCF detailing its evolution from its inception six years ago. We’ve iterated on the fund a lot over the years based on community feedback, and we will continue to do so as we strive to make SCF as effective and valuable as possible for those submitting projects and for the rest of the community.
Which is why we’re opening up an exciting new discussion: turning SCF into a DAO!
What is a DAO?
Decentralized Autonomous Organizations (DAOs) are a relatively new method of organizing initiatives, companies, or communities with a transparent set of rules encoded in smart contracts controlled by the organization’s members and not influenced by a central authority. DAOs aim to increase transparency, decentralize decision-making, and give ownership to the community. DAOs have been implemented in numerous forms to varying degrees of success — many face challenges around community engagement, security vulnerabilities, and decentralization.
Given these potential challenges, why are we considering DAOifying the SCF? Let’s start by asking what SCF’s main opportunity for growth is. As quoted above by previous SCF winner Emmanuel Evarist of Link, winning SCF isn’t all about the money but about the valuable feedback and support from the community. This sentiment leads us to think that growing community participation is key for SCF to reach its full potential. A DAO has the potential not only to increase community participation, but to empower its members and attract new, valuable participants.
In addition, native smart contract functionality is coming to Stellar, which turns a once far-fetched interest to build a fully functioning DAO directly on the network into an attainable possibility. Wouldn’t it be cool if SCF was the first successful DAO on Stellar, helping pave the way for others?
Digging deeper: SCF & DAOs
I’ve been involved in the SCF for six rounds now, and my most significant discovery to date is how valuable organic community participation is in helping companies and developers grow their projects on Stellar. Having an active and thriving community helps improve projects and makes applicants feel like they’re part of something bigger.
The SCF community is comprised of a diverse set of individuals who genuinely care about Stellar. They can be (among other things) previous SCF winners, SDF members, or supporters of SDF’s mission. These individuals are called verified members, and they have a proven interest in beneficially growing the Stellar ecosystem. In SCF, these community members review projects, provide feedback, share expertise and ideas, help onboard new members, and advocate on social media and at events. We currently have 100 verified members, half of which actively participate. Although this core community is infinitely valuable, SCF’s growth makes relying on them unsustainable.
Each round of SCF sees more and more submissions. With the vast increase of qualified, innovative, and exciting projects, we need to also see a growth in verified members to provide support. Attracting entrepreneurs, accelerators, venture capital investors, thought leaders, builders, experts, and more is essential to the sustainment of the program. To do this, SCF needs to foster an atmosphere beneficial to the community, where they feel valued, engaged, and motivated to get involved.
As we’ve learned from previous SCF winners, motivation does not necessarily have to be financially charged. But what does cause people to be intrinsically motivated? According to best-selling author Daniel Pink, motivation has three key drivers: Autonomy, Purpose, and Mastery. People need to have enough freedom to make their own decisions (Autonomy), a greater goal to work towards that’s making a difference in the world (Purpose), and the ability to grow and get better at what they’re doing (Mastery).
Applying this principle to SCF and DAOs: autonomy makes sense — it’s in the name ‘DAO’ itself (although not always followed in implementations). Purpose is something SCF already has — to advance the Stellar ecosystem by supporting valuable projects through community input. Mastery, however, is underexplored in SCF and DAOs. Would reputation-based membership, a relatively novel approach in DAOs where members earn reputation through participation, answer to this need?
Let’s stop there before I get too ahead of myself. We can discuss these considerations together as we explore the next iteration of SCF!
Where do we begin?
According to the researcher of decentralized technology communities, Kelsie Nabben, there are two main routes towards forming a DAO: the “DAO-First approach”, where the initial rules of token distribution and capital formation are determined at the outset of designing the DAO, and the “Exit to DAO approach,” or progressive decentralization, where an existing product, idea, or initiative wishes to decentralize decision-making power, and rules are determined after already having acquired a community.
SCF falls into the second approach — we already have an existing fund and community. This method comes with some added complexities, as decisions must be made with the existing community to be seen as legitimately decentralizing the project. Working with many people who may differ in opinion can be a challenge, but I see it as a unique opportunity to build something that really works and answers the needs of the community and ecosystem.
Our aim is to design a prototype to test and partly implement in the next round of SCF, which is scheduled for H1 2023. This gives us only a few months to research before collectively deciding how a more decentralized governance structure could work in SCF. Keep in mind: we want SCF to evolve into something that genuinely motivates community members to engage and participate!
How to get involved
We are introducing a new upcoming blog series on the Stellar Community Medium: DAOs & Don’ts.
Each issue of DAOs & Don’ts will explore one type of DAO and, as the name suggests, identify their successful features that we should further explore or even adopt in our own strategy (‘DAOs’). The blog series will also identify risks or potential downfalls we should avoid (Don’ts). Its goal is to explore potential solutions that support implementing a DAO structure within the Stellar Community Fund (SCF) in a way that educates and engages the Stellar community.
Most importantly, after each issue is released (and we’ll strive to churn out at least 3–4 before the end of the year), we’ll invite anyone interested to contribute their thoughts and join open discussions on the #dao-talk channel on the SCF Discord.
Throughout the series, we want to find the answers to the following questions:
- When have DAOs succeeded, when have they failed, and why?
- How do we incentivize community members without losing intrinsic motivation to do something good for the ecosystem?
- How can we create and enforce rules but keep things flexible to allow for iteration?
- How do we roll out a DAO in phases?
- How do we promote behavior that achieves Stellar’s mission and discourage bad behavior?
- How can we verify reviewers and decision-makers to ensure they’re qualified for necessary tasks?
- How will making SCF a DAO grow/improve the community?
- And many more.
To get you started and ready for the first issue, I’ve compiled a list of must-reads to understand what DAOs are, how they’ve come to be, what types of DAOs are out there, and more in the SCF Handbook. It’s a growing library, so feel free to suggest changes or additions! I’m by no means an expert, but I intend to become one with all of you readers. Stay tuned for the first issue on the Stellar Community Medium, and engage on the SCF Discord to join me on this exciting journey!
P.S. if you find more good DAO puns and memes, please share them in the SCF Discord.
The Future of Community Funding was originally published in Stellar Community on Medium, where people are continuing the conversation by highlighting and responding to this story.