--- TITLE: Gitcoin 2.0 Essentials DESCRIPTION: Explore Gitcoin's whitepaper for insights into democratic capital allocation and Ethereum ecosystem growth. LANGUAGE: English WRITERS: TRANSLATORS: X LINK: https://app.banklessacademy.com/lessons/gitcoin-2.0-essentials FORMAT: LESSON --- ``` __________________________________________________________________________________________________________________________________________________________ $$$$$$$\ $$\ $$\ $$$$$$\ $$\ $$ __$$\ $$ | $$ | $$ __$$\ $$ | $$ | $$ | $$$$$$\ $$$$$$$\ $$ | $$\ $$ | $$$$$$\ $$$$$$$\ $$$$$$$\ $$ / $$ | $$$$$$$\ $$$$$$\ $$$$$$$ | $$$$$$\ $$$$$$\$$$$\ $$\ $$\ $$$$$$$\ | \____$$\ $$ __$$\ $$ | $$ |$$ |$$ __$$\ $$ _____|$$ _____| $$$$$$$$ |$$ _____|\____$$\ $$ __$$ |$$ __$$\ $$ _$$ _$$\ $$ | $$ | $$ __$$\ $$$$$$$ |$$ | $$ |$$$$$$ / $$ |$$$$$$$$ |\$$$$$$\ \$$$$$$\ $$ __$$ |$$ / $$$$$$$ |$$ / $$ |$$$$$$$$ |$$ / $$ / $$ |$$ | $$ | $$ | $$ |$$ __$$ |$$ | $$ |$$ _$$< $$ |$$ ____| \____$$\ \____$$\ $$ | $$ |$$ | $$ __$$ |$$ | $$ |$$ ____|$$ | $$ | $$ |$$ | $$ | $$$$$$$ |\$$$$$$$ |$$ | $$ |$$ | \$$\ $$ |\$$$$$$$\ $$$$$$$ |$$$$$$$ | $$ | $$ |\$$$$$$$\\$$$$$$$ |\$$$$$$$ |\$$$$$$$\ $$ | $$ | $$ |\$$$$$$$ | \_______/ \_______|\__| \__|\__| \__|\__| \_______|\_______/ \_______/ \__| \__| \_______|\_______| \_______| \_______|\__| \__| \__| \____$$ | $$\ $$ | PORTABLE LESSON DATADISK COLLECTION \$$$$$$ | \______/ __________________________________________________________________________________________________________________________________________________________ ``` --- # Welcome to Gitcoin 2.0 | Gitcoin = Grants = Growth Welcome to the revolution in onchain capital allocation 💰 In this lesson, we explore the **Gitcoin 2.0 white paper** to discover innovative approaches to public goods funding and growth in the Ethereum ecosystem. Having surpassed **$60 million in funding distributed**, Gitcoin is at the forefront of a movement towards more democratic, efficient, and transparent capital allocation in web3. The publication of the Gitcoin 2.0 white paper marks a pivotal moment in Gitcoin’s history. It provides an in-depth look at how its infrastructure and the implementation of `Allo Protocol` are helping to steward its mission. For quick reference during this journey, you can access the publication [here](https://www.gitcoin.co/whitepaper/read). This lesson has been curated by contributors at Gitcoin and Bankless Academy, aiming to provide a fun, unique, and web3 native way of learning about Gitcoin’s new stage, **Gitcoin 2.0.** Prepared to explore the future of onchain capital allocation? If so, let’s dive in! ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/welcome-to-gitcoin-2.0-gitcoin-grants-growth-3e78d2ef.png) # Introduction to Quadratic Funding `Quadratic Funding` (QF) originated from the ideas of Glen Weyl and Vitalik Buterin. It's a mechanism designed to allocate funds in a fair and democratic manner by leveraging matching funds to **amplify the impact** of small individual contributions. QF debuted with **Gitcoin Grants** (GG), marking a pivotal moment in enabling democratic donations to projects that matter. Since the launch of GG Round 1, the QF model has been finely tuned with each iteration. Now, **Gitcoin 2.0** extends further into the grants space to include funding mechanisms like Direct Grants, delivering a more decentralized and modular experience for users and grantees. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/introduction-to-quadratic-funding-e38257e1.png) # Gitcoin’s role in the Ethereum ecosystem As of May 2024, twenty editions of the Gitcoin Grants program have been run by Gitcoin, disbursing funds to diverse projects building on Ethereum, averaging nearly one major round per quarter. Although rounds ebb and flow depending on market cycles and participating project maturity, these rounds are an important touchstone especially for the **open source Ethereum community**. Prior to Gitcoin Grants Round 20, the total amount of funding raised through the program reached $29 million. In 2023, the past four rounds—α, β, 18, and 19—have been deployed on a variety of chains, from Ethereum mainnet to L2s such as Arbitrum and Optimism, as well as sidechains like Polygon and Fantom. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/gitcoins-role-in-the-ethereum-ecosystem-b699b9ea.png) # …and there’s more! Gitcoin's dynamics most often reward projects that **play the long game** — that is, projects that appear consistently throughout grant rounds, making connections over time, and building community and a following. A notable finding is the **correlation between Gitcoin Grants rounds and developer growth**. The [Open Source Observer Impact Analysis](https://docs.opensource.observer/blog/gitcoin-grants-impact/#grants-on-allo-alpha-round-to-gg19-2023) shows that of a group of 50 open source software projects that have received funding across multiple Gitcoin Grants rounds, for every $1 million paid out in grants since 2019, there are 7 full-time developers who are _still active today._ If we factor in the crowdfund multiplier, every $1 million contributed to the matching pool is associated with 13 retained full-time developers, with these numbers holding steady even during the bear market! ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/and-theres-more-99247fc7.png) # Knowledge Check 1 What funding mechanism is designed to democratically allocate funds by amplifying the impact of individual contributions? - [ ] Direct Grants - [ ] Allo Protocol - [x] Quadratic Funding - [ ] Matching Funds # Carving a Path Gitcoin 1.0 was used by many top leaders in the space including Ethereum founder **Vitalik Buterin** and by major protocols like WalletConnect, Uniswap, Yearn, and 1inch. Since its inception in 2017, this first version of Gitcoin primarily focused on hackathons and bounties, followed by Quadratic Funding (QF) powered grants. The recent upgrade to Gitcoin 2.0 was driven by many changes in the market, including the **expansion** of the Ethereum ecosystem with L2 launches, the **growth** of open source development, and **increasing adoption** of grant programs. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/carving-a-path-ffb2f198.png) # Evolutionary Development Gitcoin’s transformation breaks down as follows: 1. **Decentralized Modular Protocols**: moving from a centralized, Gitcoin-operated platform to a suite of modularized products and protocols that anyone can use and build with or on top of. 2. **Plural Funding Mechanics**: moving from QF only to many ways of allocating capital, namely Direct Grants, Retroactive Public Goods Funding, Streaming QF and Conviction Voting. 3. **Open for EVM-Based Community:** expanding beyond Ethereum-only to implementation across EVM-based networks such as Optimism, Arbitrum, Base, Polygon, zkSync, Scroll and Avalanche. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/evolutionary-development-092753e6.png) # Knowledge Check 2 What was Gitcoin focused on before 2.0? - [ ] Hackathon platform > ℹ️ Right! But this isn’t the only correct answer. - [ ] Bounty platform > ℹ️ Right! But this isn’t the only correct answer. - [ ] Quadratic Funding > ℹ️ Right! But this isn’t the only correct answer. - [x] All of the above > ℹ️ Correct! Gitcoin technically focused on bounties, hackathons and QF before the 2.0 launch. # The Impact of Capital Allocation Gitcoin harnesses the positive attributes of high speed internet and immutable blockchain tech to address the following capital allocation issues: 1. **Gatekeeping**: using small groups of decision makers, who may otherwise become power brokers and are unwilling or unable to be democratic. 2. **Not Scalable**: taking advantage of the primitives the internet (easy access, direct to consumer interfaces) and Ethereum (credible neutrality, composability, transparency, democratic decision making, censorship resistance) have to offer. 3. **Not Precise:** by programmatically managing large amounts of information at scale, enabling high resolution capital allocation. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/the-impact-of-capital-allocation-1c17e0b8.png) # Expanding beyond EVM with Allo Protocol Allo Protocol is a set of smart contracts designed for democratic onchain capital allocation and distribution, developed to empower the Grants Stack. Allo’s simple, generalized architecture allows it to be **easily customized** for a wide range of use cases. Its power lies in its ability to **deepen impact** by allocating capital at scale. There are three key components to the protocol: 1. **Tokens:** funding sources sending tokens into a pool. 2. **Registry:** structuring data of possible participants that are eligible for distribution of tokens. 3. **Strategy:** designating how tokens will be allocated and distributed to recipients. 💡  An easy way to remember what Allo Protocol is or does, is that it’s short for _Capital Allocation Protocol_. For a deeper understanding of what people can create using Allo, checkout the design space-focused [rainbowpaper](https://www.gitcoin.co/rainbowpaper). ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/expanding-beyond-evm-with-allo-protocol-c8a108f7.png) # Grants Stack & other use cases Grants Stack, built on top of Allo Protocol, is the **primary application** in the Gitcoin ecosystem. Grants Stack is designed to be a trustworthy, enterprise-grade tool that grant customers can rely on. It also serves as a reference app for Allo Protocol builders, as it is **open source** and **forkable**. Grants Stack invests in several core areas to provide grants managers with the tools they need to run successful grants programs. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/grants-stack-other-use-cases-7334384f.png) # Grants Stack & other use cases continued **Grants Stack** currently supports two funding methods: [Quadratic Funding](https://www.wtfisqf.com/) and [Direct Grants](https://www.gitcoin.co/blog/intro-to-direct-grants-how-do-they-work). As new funding mechanisms arise, Gitcoin quickly adapts and integrates them. A relevant example of this is [EasyRetroPGF.xyz](https://easyretropgf.xyz/). Originally deployed by Optimism, the ability to operate a retroactive grants round is now open source. Complementary applications such as reporting and discovery tools may follow suit, creating a **flywheel of grants innovation** that allows Grants Stack to remain a **stable, trusted solution**. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/grants-stack-other-use-cases-continued-df15ee70.png) # Knowledge Check 3 Allo is the ______ layer for distribution of capital allocation, while Grants Stack is a _____ for running ______ programs. - [ ] community - application - funding - [x] protocol - tool - grants - [ ] program - product - builder - [ ] None of the above # Let’s go over what we learned… 1. Gitcoin's journey from 1.0 to 2.0 represents a leap towards modular systems and diverse mechanisms in the **decentralized funding** industry. 2. QF emerged as a pivotal mechanism, facilitating distribution of **+$60M to public goods** in the Ethereum ecosystem. 3. Gitcoin 2.0 includes Direct Grants, Retroactive Public Goods Funding, and operates across multiple EVM-based networks. 4. Onchain capital allocation offers **transparency, efficiency, and democratization**, challenging traditional gatekeeping and scalability issues. 5. Grants are a **catalyst for growth** in web3, underpinning community engagement, builder retention, and positive-sum outcomes. 6. Gitcoin **delivers decentralization** by layers. First, at the protocol layer with Grants Stack and at the app layer with Allo Protocol, providing a modular framework for effective capital allocation. ![](https://app.banklessacademy.com/images/gitcoin-2.0-essentials/lets-go-over-what-we-learned-a902dc9c.png)