The Future of Public Goods Funding: Octant V2 & Direct ETH Donations

Transcript

You don't no longer need to stake GLM in order to participate in the round. You can now use Ethereum as well to do direct donations. >> Ethereum in one word. >> Connection. Proper QF means, but it basically goes back to the initial quadratic funding article that Vitalik [music] wrote with some others about how to run a quadratic funding round, and we adopted that mechanism fully as it was supposed to be.

>> ZK proof, magic, math, or both? >> Magic. Well, I would say both, but it's more magic than math, although it's mostly math. The Octant V1 was exclusively for Golem Foundation to run rounds, but now Octant V2 is open [music] for any foundation, any DAO, any sort of organization. It's an exciting time for us where we are expanding the the Octant world, and yeah, Octant is now for everyone. >> [music]

>> Octant, built by the Golem Foundation, is a popular name in Ethereum ecosystem. For those who aren't familiar, [music] it's a public good funding platform with a simple yet beautiful idea [music] of funding public good projects with donation of a portion of staking rewards to the project that keep our ecosystem healthy. Welcome back to Ecosystem [music] Project Demo. This is episode 34. I'm your host Pooja Ranjan, and this episode is [music] brought to you by ECE Institute. With me is Nico from Octant to talk about Octant V2 [music] because there's a lot to unpack. Nico, welcome to the show.

>> [music] >> Thank you, Pooja. It's awesome to be here, and excited to show you what we've been cooking for the last few weeks and months. >> As we know, since launching in August 2023, Octant has run multiple successful allocation windows and have funded many real public good projects within the Ethereum ecosystem. I'm excited for Epoch 12 and want to learn more about what changed. But before we go there, for our listeners, can you please tell us a bit about your journey into Ethereum and how you ended up working on Octant at the Golem Foundation?

>> Yeah, absolutely. So, when I started working in fintech in my past life, let's say, and then that was pretty much a natural progression to get into crypto. I was working on on my own projects in fintech, and when I discovered crypto, I completely understood how this would be the future of of finance and digital finance. So, I went into that. Initially, I was working on a project around collaborative finance to help people have a shared wallet and invest and manage assets together as a group. And that's when I discovered Ethereum and

completely fell in love and went very deep down the rabbit hole. During that time, I also created Ethereum Bolivia together with multiple others that helped take it off. And yeah, now it's now we organize at least one hackathon or buildathon a year in in different cities around Bolivia. So, in Bolivia, there is like a big banking crisis and economic crisis, so people are actually using it finally after a few years of it being forbidden and being banned. I think we helped also bring awareness to that through the Ethereum Bolivia community. But yeah, that journey of building a project when

I decided to to build on Ethereum also unlocked a lot of things and helped me understand how value works in in this ecosystem and when I pivoted the project, I decided for it to focus on public goods and build something called Lotto PGF that was a a protocol to deploy lotteries to fund public goods and through that work is that I got to know Octant at a deeper level. We worked together in on a project with them and then when we closed down the the Lotto PGF project, well, I joined Octant as a community lead, which was a super exciting time and now working as a ecosystem lead also with a

little bit of business development and organizations who would want to to use Octant to fund their ecosystems and grow. So, yeah, that's been the journey and it's been super exciting. >> Indeed, it's an exciting journey like from Fintech to organizing community meetups for Ethereum and now funding the public good projects with Octant. So, it's kind of natural progression. Yeah, it's very interesting to learn about your journey and I understand like as you have mentioned about Lotto PGF, you already have some background of how public good funding should be managed and how it should be allocated.

So, for people who are following this podcast, they may know about Octant V1. We have recorded with James earlier, but I imagine V2 is a bit different. So, for anyone who knows Octant V1, what's the one-sentence version of what is different in V2? >> That's a great question and the sentence would be Octant is for everyone because what's new in V2 is that you don't no longer need to stake GLM in order to participate in the rounds. You can now use Ethereum as well to do direct donations. There is a mechanism there to equalize the let's say the cost

of participating, right? Like for GLM holders is having to lock GLM and for people who want to do direct donations with with ETH, half of the contribution gets burned and half gets allocated so that it can get matching from the matching fund. And yeah, the other thing for V2 is that it's for everyone not only for the users who contribute, but also for the organizations who want to run rounds. So Octant V1 was exclusively for Golem Foundation to run rounds, but now Octant V2 is open for any foundation, any DAO, any sort of organization to park their treasury into one of our D 5

vaults that is connected to battle-tested DeFi protocols, generate yield that way, and automatically distribute the yield toward their ecosystems with different mechanisms that they can basically decide based on based on their preferences, based on how they believe is the best way to allocate. And we can of course help with making those decisions as well with our experience funding public goods. So, yeah, it's it's an exciting time for us where we are expanding the the Octant world and yeah, Octant is now for everyone.

>> Octant is for everyone. A very beautiful line. I'm sure that there are so many things which is exciting right over here. And if we can maybe get into a little bit deeper to understand the V2 mechanism for new users. So, for a first-time staker, maybe if you can explain in simple terms how someone goes from holding GLM to actually funding a public good project. I know you have mentioned a process on a very high level, but if you would like to maybe demo and walk us through what an epoch should look like and what are the expectation of stakers as well as participants of each epoch.

>> Yeah, absolutely. A live voting experience. This is on Sepolia, um but you will be able to to work on it when it goes live on Ethereum mainnet. So, this is the screen that you will see when you go to a funding round. And the first thing that you will see here is your budget, how many projects are participating in the round, the matching pool, and the method. And maybe now it's a a good time to explain what the matching pool is.

And that's related to to your question around how can a GLM staker participate. So, Golem Foundation in this case generates yield from 100,000 ETH that's staked in validator nodes. And that part of that yield goes to a matching pool that's going to be distributed based on the donations of other people. And for that, we use in this case the quadratic formula that basically favors smaller donors over bigger donors so that the matching pool is not distributed too unevenly. So, yeah, in this case we have 0.001

ETH matching pool. This is, of course, a test round, that's why it's so small, but for our epochs we've had um somewhere between 200 and 300 ETH depending on what the reward rate is uh during that quarter. But, we will see how it works in action. So, you also have this AI assistant in case you want to know a little bit more about anything related to the Epoch and Octant, so you can use that. And here we have our six test projects that we can use. So, if we click on the plus here, then the

projects will be added to our ballot. So, we'll pick these three projects and once we do that, we go up here again and we see that this button is now available for us to click. When we review ballot, then we can decide first how much do we want to contribute. In this case, I'm going to contribute, let's say, 0. 0.5 0.05 ETH. And here is what I was telling you earlier about, that the actual voting power is going to be half of that and the matching access, that's what gets burned. So, this this matching access,

this ETH burns buys GLM and burns the GLM so that it equalizes with the folks who stake and lock GLM. So, yeah, now here we can decide what percentage we allocate to each project. So, something like that, let's say. And then we have the different allocations. We can also see what it means in percentage. And the next step is to review and sign. Once we do that, we will have to sign two transactions.

And of course, we get a a warning that once the this matching buy-in gets swapped to GLM, it gets permanently burned so something to consider, maybe a motivation for people to instead of doing that, buy GLM and and lock it so that they only use their staking rewards for that. So, simulating the transaction now to see if everything is going all right. You need to sign a couple of transactions for that. There we go. Looks good. And now we go sign and submit.

And just signing transactions here, you will need to sign two transactions to contribute your ETH and then to sign your ballot. Popped up again. So, I'm signing my ballot and it's ready. Here we go. As we can see our our vote is in. I can see the overview of the projects that I have funded. Uh in this case, I'm the only voter uh in this round so far, but we will see uh when more people join that um this number goes up and uh I can also share on X what's happened so that more people participate in the round. And yeah, that's pretty much it. It's a

very, as you've seen, simple and easy experience for people to participate in Octant rounds. In my opinion, it's a big upgrade from the V1 interface that was maybe a little bit more complicated. I think this walks people through more easily and the UI looks better, but also it allows people to contribute with direct ETH donations instead of having to stake GLM. So, it's pretty exciting for us. >> Of course. I have a quick follow-up to you. So, if I understand correctly, earlier there was the term donation which was used most of the time. So, how much you want to donate we there was a scale where we can decide how much

percentage of my staking we can donate to this project, this project, and others. Here we are using the term voting. So, will that be equivalent to what I wanted to donate, or is it something different, just helping out to figure out how much QF this project should be receiving? >> Yeah, right. I mean, you're still donating ETH, so your your votes are, let's say, denominated in ETH, and and it's ultimately a donation. And uh we just announced that we are doing what we call proper QF for these upcoming rounds. What that means, and you can go to the Octant app profile on on X to check the latest article that we've published that explains what proper QF

means, but it basically goes back to the initial quadratic funding article that Vitalik wrote with some others about how to run a quadratic funding round, and we adopted that mechanism fully as it was supposed to be. What it basically means is that there might be the allocation is a little bit different. In some cases, if there are not enough donations, the full matching fund also doesn't get allocated. So, it's pretty interesting, and it should motivate more people to join. But, yeah. So, the matching and and the money that the projects receive goes accordingly to to how many people contribute, and also the amount of money

that they contribute. >> Quadratic funding reimagined. Well, this is the part I'm most excited about. You mentioned about proper QF. So, for our listeners who know classic quadratic funding, what's actually different with the proper QF? If you could maybe explain it with a demo here. >> Awesome. Yeah, so here is um qf.octant.app. You can see these what is proper quadratic funding site to understand how it goes better. Um, you can see how it works. So, here is an explanation of how things get allocated. Now, as you can see in the old ways, pro rata matching

where one whale that makes a big donation takes the majority of the matching fund, while if it's like a lot of people with smaller donations doesn't get matched as much versus in quadratic funding that it gets distributed differently, favoring the people that the prize that receive more money even if the they have lower amounts. For those math nerds out there, here is the the exact formula that is being used and broken down. So, it's it's pretty interesting.

We don't need to get into that right now. Like, you can read it yourself. I think what's more interesting is here like these two sliders that show you based on how many contributors there are, how much total funding the projects receive. So, yeah. We you can play around with with this calculator. And yeah, here is what I was explaining earlier that in proper QF, we can see the weights of the projects. So, we can see how much are they underfunded or overfunded in the the old formula, but here you we can sort of make it more

clear that it's with proper QF, all the projects are on target. And this this works with the with the alpha. So, if the alpha is lower than one, then the match is scaled down to that percentage, basically. So, ideally, we have enough contributors so that so that the matching allocates to the the projects that need the funding. And yeah, here is the calculator where you can run your own round.

Let's say we do 100,000 uh dollars matching fund. We have four contributors raising $100. Much is 300. We can maybe add another zero here, and then it becomes more interesting. These are the projects that are participating. So, let's say we add 150 here. Oh, I only three contributors, and the whale project that has, I don't know, donates 5,000.

And yeah, here with this example, we can see that maybe let's add one more here. The one that has more contributors receives a way larger size of the matching pool, even if these smaller contributors donate more money. So, they would need to have like way bigger donations so that it sort of matches the matching part of the project that receives contributions for the larger amount of people. So, yeah, but as we can see, the whale project basically with one single contributor doesn't really get matching. Even if we have one with 10, matching starts to

appear, but it's very minimal compared to the ones that receive donations from a bigger amount of people and bigger amount of donations. So, yeah, that's the calculator. I recommend that you go there and try it out yourself on qf.octant.app. >> This is very interesting. I really love that how transparent the process has been made here. The formula that actually will be used during the round is shared, so people may have the right estimation of uh the total fund that they would be able to raise during the epoch. It's so good, and they mentioned that other projects can run their own round.

>> [snorts] >> So, that is even better. They don't have to put too much into it because the platform is already out of the box, ready for the project to use it. So, let's talk a little bit about how to participate. So, you mentioned about uh non-lockers. Like, now people can participate not only with locked GLM, but also with uh uh their ether. They can bring the ether, donate it, and you mentioned about a burnt and allocated concept. So, could you maybe explain it a little bit more about this burnt and allocation concept? For example, if a donor brings $5 worth of ETH to donate, will the portion of that $5 be burnt or the 100%

will go to allocation? What does the process look like? >> Yeah. So, probably the best way to think about this is through uh voting power, like ETH as voting power. When you lock GLM and generate ETH, then the ETH that you generate is your voting power, basically. With the direct donations, if you decide to donate like one ETH, for example, then 50% of that ETH gets is used to buy GLM, and that GLM gets burnt. Especially like that mechanism is to equalize a little bit the fact that there's other people who

have locked their GLM, and uh that's how they generate their their voting power. So, we need to have an equalizing force there. And uh yeah, once you've done that, which is what happens in the background, you don't need to pay too much attention to it, you get, let's say, 0.5 ETH as voting power. That's, you know, equivalent to to the same amount if people would have locked GLM for months in advance and generated the ETH rewards that are equivalent to that. So, yeah, that's how it works.

It's a relatively simple and for the user it's also everything is sort of hidden. I mean, you get information that of what is happening in the background, but you only need to, let's say, decide on the amount that you want to spend and sign transactions that are going to execute what you asked for. >> Interesting. And if I remember correctly, earlier there was this feature that once you have done your allocation, you are allowed to change your allocation. You can change how much you want to contribute to a certain project. Is it still valid for epoch 12?

>> You can change as long as the as the round is is open. What you cannot do is uh you at the beginning when you accept like set up your budget and make the first allocation, you need to decide between if you want to use your ETH rewards from GLM locking or if you want to do direct donations. You cannot combine both. >> That makes sense. Yes, of course. Opt-in helped uh fund many big names including ETH Institute. I wonder if you have any funding story to share that give you the feeling this is why we do this.

>> Yeah, so the mechanism itself is designed to involve the community, right? So, the community's front and center of it. And with this new V2, we are welcoming other communities belong beyond the GLM community to participate as well. So, it should become more interesting. But, for example, projects like Shutter are already using it and bringing their communities to participate in the rounds that they are running and Gitcoin is going to do that soon as well because they also have some of their treasury staked in Octant vaults. So, generating yield and yeah, it's going to be

exciting when when they come join and and participate in and run their own rounds. Because, yeah, it's going to be a cross-pollination thing where yeah, well, you will have the GLM community participating in the Gitcoin community and in the Shutter community and the many more projects that come on board the Octant family. So, it's going to be a big family. >> Octant is growing. Octant is for everyone. >> [laughter] >> Yeah. It's going.

>> Earlier in the conversation, you mentioned about including Vitalik's paper on PQF. I wonder if Octant is imagining to be a part of Crap's vision. Where do you think Octant fit in the bigger Crap vision? >> Yeah, totally. Well, Crap's is pretty much also what we've been or we funded in the past. Maybe it was not the sole focus, but it was like it had already a very important weight. It's good that now we give it the name like Crap's, right? Because it helps kind of people align towards that direction a little bit

better. And yeah, I mean, we believe it's like a incredibly important part of helping Ethereum move forward and we're going to support it as much as we can or enable others to support it as well and educate people about how to do that. Yeah, well, I personally believe that's also a lot of the value that that Ethereum has provided. Uh maybe on the privacy part, there's still work to be done, but we're seeing a lot of brainpower being poured into it. So, it's exciting.

And well, security also, it's feels like we went through a sort of security restart with AI capabilities that are becoming pretty sometimes dangerous for protocols. So, it's it's good that the focus on on security is refreshed and there's a lot more weight, especially now that we're bringing like traditional finance and institutions to the industry. >> Of course. And we have noticed quite a lot of initiatives that's going around Ethereum ecosystem in direction of privacy. I also have heard about some work around privacy by default on chain.

And of course, security. We recently noticed that the Dow along with Giveth went ahead with a security round. So, people are focusing on these prime area, which is important for the growth of this ecosystem. >> Yeah, absolutely. >> Well, looking ahead, what should we be watching for the next Octant round? Will that be stream voting? Will that be PQF or anything in particular that you think that people should be looking forward to? >> Yeah, well, Epoch 12 starting maybe at the time this video is released. So, you can go to octant.app to participate. As mentioned earlier, if you are not a GLM locker, you're still going to be able to participate by

using direct donations with ETH. And the other thing is that indeed we will be introducing proper QF. Projects will be allocated based on on that formula that you've seen and that you can play around yourself. So, yeah, it's a pretty exciting round for us. Aside from the fact that we have a completely fresh new UI, right? That in my opinion looks way better than the old one and becomes a little bit more intuitive than the old one. But uh yeah, I would say those are the three main things people should uh look forward to in Epoch 12.

>> I'm of course looking forward and I hope this round is going to be one of the biggest round of Octant so far. >> I hope so, too. And I hope Ethereum Cat Herders has a lot of success in that round as well. >> Yes. Octant has been a great supporter for Ethereum Cat Herders. We love the community and community has shown their love for us as well. So, thank you so much for supporting Ethereum Cat Herders and now ECH Institute's work. >> Yeah, thank you for all the work that you've done.

And for all the collaborations we do. >> Well, Nico, we are heading towards the most interesting round of this podcast, [music] which is called rapid fire round. We generally try to [music] get to the answers in one word, one sentence, as small as possible, as quick as possible. We don't want the guest [music] to overthink for any of the answers. So, if you are ready, we can get going. >> All right. Let's do it. >> Ethereum in one word. >> Connection.

>> The use case for Octant V2 you would tell a newcomer to try first. >> Supporting projects. >> Public goods funding, myth or a reality? >> It's a reality. >> Favorite Octant funded public good project. You can pick more than one if you would like to. >> I cannot pick one, honestly. I love all of them equally. >> Cool. If you have to name one Ethereum public good project that you think is generally underfunded.

>> I think Ethereum development itself. Maybe we don't feel it now because they EF still participating, but I feel it's still under funded. I think there's a lot more we can do maybe on other sides as well like marketing and and stuff like that. >> Right. I understand protocol guild is there to support the protocol level of development. That's there for Ethereum, but yes. If we can get more support, we can get more developers on board and we can have even more secured ecosystem here. Well, my next question is on chain governance exciting or overwhelming?

>> Overwhelming. >> ZK proofs magic, math, or both? >> Magic. Well, I would say both, but it's more magic than math, although it's mostly math. >> GLM locker or non-locker, which path would you recommend to a new participant to pick? >> Locker, of course. Great rewards are ahead. >> If Octant were a superhero, what would its superpower be? >> That's a good question. I was thinking something around kind of maybe like magically improving things like objects or people or around the world.

>> Where do you see Octant fitting into Ethereum 5 years from now? >> 5 years from now, well, I think the EF might be a lot smaller in 5 years from now and I hope Octant can support close the gap of funding and coordinating the community around uh funding what's important for Ethereum development. >> Discord, Farcaster, or X? Where does Octant community hang out the most? >> On X.

>> And the last question for rapid fire is finish this. The future of public goods funding is >> yield. >> Very well. If you have to summarize V2 in just one sentence, what that one sentence version of what's different in V2? >> I would repeat what I said earlier that Octant is for everyone. That's what's different. It can be for more organizations beyond Colon Foundation and participants can do direct ETH donations, not don't have to lock GLM and it's more beautiful. So, more people would like it, I think.

>> I really hope so. Well, Nico, this has been such a great walk-through of how Octant has come so far. Thank you so much for breaking down V2 so clearly for us. >> Thank you, Pooja, for having me and for all the work that you're doing at ECH Institute. >> Dear listeners, please go check out [music] octant.app, lock some GLM, participate in Epoch 12, and support the backbone of Ethereum ecosystem. If you like this episode, please share and don't forget to subscribe. We'll get more interesting [music] projects in ecosystem project demo until next time.

Cheers everyone.