Gitcoin Case Study2022-03-16T18:35:20-07:00
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Grants Investigation Agency: Collectively Making Web3 Crowdfunding Trustful and Fair

Gitcoin needed a new way and more hands on deck to detect fraud in the grant proposals being submitted to its Web3 public goods crowdfunding platform. Using Ethelo’s platform and algorithm, they launched the Grants Investigation Agency, which allowed community members to collectively assess whether flagged projects were committing fraud or malpractice. After a thorough audit of each proposal, most were eliminated from the crowdfunding platform as a result. The GIA proved itself and will have plenty of work to do going forward: In future grant rounds, the wisdom of the crowd will be harnessed to screen every project before it goes live on the platform.


Projects Identified That Were in Violation of Policies


DAO Members Involved in Assessing Projects

GitcoinDAO is a community of internet citizens that builds and funds public goods, such as Open Source Software (OSS) and climate solutions projects. As a decentralized autonomous organization (DAO), they are part of the burgeoning Web3, within which Gitcoin offers an empowering, open and collaborative space for individuals and communities to access resources in proportion to their value creation for the public. Since its inception in 2017, Gitcoin has distributed more than $51.4 million USD in funding to date to open source and public good projects and help support a pool of over 312,000 monthly active web developers. 

These developers are funded through grants, hackathon prizes, and open bounties on bugs and security goals. Their output is designed to be non-excludable and socially beneficial – public goods for the implementation of Web3. Crowdfunded grants are one of the most important means through which Gitcoin provides funds to Web3 projects.

Ensuring the Good in Public Goods

Gitcoin came to Ethelo with a challenging task ahead of them: they receive hundreds of applications for their grant disbursals. Predictably, some applications may be fraudulent or have malicious intent.

Although Gitcoin’s Fraud Detection and Defense (FDD) team has established manual screening procedures, they were hoping for a more detailed and transparent process that would take the decision-making process off from a few team members and get more Gitcoin members involved. 

Additionally, as the Gitcoin platform continues to grow, it has become increasingly important for the FDD team to be able to identify fraudulent submissions. That’s why Ethelo was brought in to enable the community to take part in identifying fraudulent applications, through an anonymized yet validated voting process that relied on a mashup of Gitcoin’s validation tech and Ethelo’s proprietary algorithms.

Enter the Grant Investigation Agency (GIA). Ethelo and Gitcoin created a decision-making platform where a collective of Gitcoin community members could gather to do detective work and closely inspect suspicious grant proposals. Agents sharing the workload of a weighted, 8-point audit of each. GIA agents assessed flagged proposals for fraudulent activity in the form of deception, scams, or quid pro quo offers. They also evaluated projects for any misconduct in the form of racism, sexism and other hate speech and other policy violations, such as having received external funding of over $500k or having held IDOs or ICOs.

In the early stages of collaboration, Gitcoin’s Fraud Detection and Defense (FDD) group selected a subset of grant applications that had been automatically flagged as potentially fraudulent. They then worked with Ethelo to transform FDD’s submission judgment process into an engagement on the Ethelo platform. Thousands of dollars in what’s known in Gitcoin terms as “Quadratic Funding” was on the line. The consensus reached was that a binary pass-fail metric in combination with a discussion thread was most effective for quickly judging and ranking the likelihood that any given application was fraudulent. This enabled the “wisdom of the crowd” to quickly weed out potentially malicious tools, aimed at scraping personal data or siphoning off funds.

This crowdsourced funding model distributes money to software designed as public goods. The distribution is not matched at a one-to-one ratio, but many people vote on a given project, with matched funding from bigger pools of funds from donors. Votes are not one-to-one with the ratio of funding, with proprietary algorithmic controls that, for example, prevent any one project from claiming more than a certain percentage of the total, and overall help to ensure a fairer allocation of capital.

Participants engaged in a lively discussion about what projects should be approved, and appreciated the Ethelo process. 

“The designers [of this project] have a perfect understanding of the black box, this is perfect! It is important to ensure that the critical factors are in compliance with Gitcoin vision and mission values. Also, it is important to accurately capture opinion because some are based on facts known about the grantees, otherwise failure in one major critical factor to Gitcoin would suffice to deny or approve the grantee application.”

Setting the Foundation for Fraud-Free Grant Rounds

The project was viewed as a success. The results from this anonymized yet validated voting process determined which proposals needed to be revised or had to be denied. Only projects that received a 90% minimum score and had not committed any Policy Violations were recommended to be approved. About 60 community members came together and participated as GIA agents and identified 12 ineligible proposals. As a small token of appreciation, all participants could claim a free POAP (proof of attendance protocol) NFT*, which was very popular.

In the following grant round, the FDD team is using Ethelo to determine which projects should be allowed to be funded as well as at the tail end of the process.


*POAPs, or Proof of Attendance Protocol NFTs, are hosted on the XDAI blockchain, which is far less carbon intensive than Bitcoin or Ethereum.

Industry: Web3

Location: Online

Project type: Web3 Governance, Fraud Detection

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