Network activity is a core metric that defines growth for web3 protocols. Investors largely commit funds to projects that boast of consistent high network activity as it signifies strength in the market.
However, boosting network activity isn't an easy process even when your project provides unique value. The vehicle to maintain consistent high network activity consists of several moving parts that combine to make it efficient.
In this piece, we explored one of these moving parts - grants - and its role in the success of top web3 projects.
Growth in Web3 Follows a Different Pattern
Growth in network activity is often a hard nut to crack for emerging web3 projects, especially because of their platform-centric nature. Unlike web2 where you can launch a product and employ traditional growth strategies to scale, web3 culture and standards somewhat force most projects to launch as platforms.
In web2, you don't necessarily have to consider strategies to attract creators if you aren't launching a platform. Growth in network activity is hinged upon improving your product offerings and marketing to consumers.
On the other hand, network activity in web3 is majorly constituted by a blend of both creators and consumers. If your project takes a one-sided approach - brand to consumers - then it would have a hard time scaling (except you're launching as a web2 product for web3).
For example, in a decentralised exchange platform, without liquidity providers (creators) there would be zero funds to facilitate trades of investors (consumers) and vice versa.
Without developers in layer ones, they would have no dapps on their networks for consumers' use.
Without creators in metaverse platforms, there would be no immersive experiences for consumers.
The right balance of creators and consumers will spur network activity in your project.
While you and your team may run the project alone at the beginning stages, the community (creators + consumers) would have to eventually take the baton for network activity to grow. As a result, web3 projects have to factor in strategies that can attract both creators and consumers if they want to see long-term growth in their network activity.
The Role of Grants
Grants refer to non-refundable funding an organisation gives to an individual or company for some specific purpose.
Grants are a core strategy that has proven to help web3 projects unlock network activity. With the right strategy, grants can attract creators to build on your product/platform features and the right consumers that will utilise them. For example, layer one blockchain networks often use grants to encourage developers to build relevant solutions on their infrastructures.
Similar to VC bets, not all projects that receive your grant will come out successful, but a few good ones will provide the spark that your platform needs. As these solutions attract consumers, they would ultimately accrue value to the underlying blockchain infrastructure. If consumers seem not to be coming, web3 projects often try to attract them through another layer of unconventional grants - airdrops. Most web3 projects owe the certain surge in network activity they see to airdrops. An airdrop announcement, for example, will get the market talking about and exploring the utility your project offers. Seal it up by further tying the airdrop to certain tasks that involve exploring the unique value and other utility in your project.
Launching strategic airdrops in conjunction with grants for creators can move the needle and trigger an upsurge in your project's network activity.
While grants may seem like free money to the beneficiaries, it's a marketing/growth technique on your end.
However, it's essential to note that grants alone can't do the job without good utility. Grants are more like the accompanying strategy to complement the utility your project offers. Regardless of the "free money" you have to offer, creators and consumers would abandon your project if there's no underlying utility that can make them come back.
Dishing out grants when you have poor utility is a guaranteed way to waste money.
While grants may seem like an expensive process, they don't have to be purely in cash. For example, an NFT marketplace can offer free listing and transactions to creators and consumers. A DeFi protocol can offer easy integrations to certain projects that align with their vision.
Trading platforms can reward top traders with free conversion fees, etc.
Below, we explored several web3 projects that have boosted their network activity through grants:
Aave Grant DAO - a sub-DAO of the broader Aave DAO - is a grants program that assists Aave's developers' community to fund ideas, projects and events that are beneficial to the Aave ecosystem. Since its inception, the program has successfully awarded millions of dollars to over 200 projects including Aavegotchi, EPNS, DeFi Saver and Jarvis Network. As a result, Aave has seen healthy developments that have enabled it to maintain a competitive edge over other DeFi platforms.
The Chainlink community grant program supports development teams and researchers that are building solutions aimed at the creation of developer tooling, the addition of high-quality data and the launching of key services around the Chainlink network. The grant program is subdivided into community grants, integration grants, social impact grants, bug bounty programs and research programs. Recipients of the Chainlink grants include Gorm, Chainsafe, UNICEF Innovation Fund, Immunefi, Filecoin, Coorest, Stacks, etc. Through these grants, Chainlink has successfully integrated with several other platforms and onboarded thousands of users.
Polygon runs two funds - Polygon Ecosystem Fund and Polygon DAO - that occasionally award grants to developers building DeFi, NFTs, metaverse, GameFi, infrastructures and more on Polygon and Ethereum. Polygon's grant programs have awarded millions of dollars to different web3 projects and initiatives including Symphony Finance, Ethlas.com, OpenBiSea, Peachfolio, etc. Some of these projects have contributed to the continuous growth of the blossoming Polygon ecosystem.
The Uniswap Grant program rewards developers and builders building on Uniswap with direct grant funding to enable them to scale their projects and, in turn, expand the Uniswap ecosystem. The main focus of UGP is to fund projects and initiatives that aim to improve Uniswap in areas of user experience, community growth and developer toolings. Since its founding, UGP has disbursed over $6 million to several projects including Other Internet, Rabbithole L2, UNI voting system, Gitcoin grants, Rotki, Gelato Finance, GFX Labs, v3 staking frontend, etc. These projects have improved Uniswap in different ways, making it one of the largest DeFi platforms in the world.
Ecosystem Support Program, an arm of the Ethereum Foundation, is a true example of how grants can help boost network activity and propel growth in your ecosystem. ESP supports builders that aim to build infrastructures and developer tools, carry out in-depth research and community development for the Ethereum ecosystem. Several other brands have also partnered with the Ethereum Foundation to expand the reach of its grants. Some of the top projects and initiatives that have received grants from ESP include Gitcoin, Starkware, Uniswap, Parity Technologies, ETHGlobal, etc.
You can check here for a comprehensive list of web3 grants and the projects/companies behind them.