By nature of open source, the Stellar ecosystem and community can collaborate to build a truly decentralized network, finding diverse solutions one can’t discover alone. To accomplish our vision of greater financial inclusion for all, we at SDF have thought a lot about how to best support our ecosystem and community in reaching this goal.
One way to do this is through monetary support. Through grants and funds, we distribute lumens to teams and projects independently strengthening the ecosystem. The Stellar ecosystem would not exist without its community, so we set up the Stellar Community Fund (SCF) to give the community an opportunity to support developers and projects they believe in.
Five funding rounds later, we’ve concluded: sometimes SCF worked well, and other times, it hit roadblocks. Community feedback and our own observations have helped us tweak and adjust the fund. Now, we are ready to launch the new-and-improved Stellar Community Fund 2.0.
To understand why SCF 2.0 is launching, it’s important to know how SCF is structured today.
SCF delivers funding and support several times a year to projects and businesses built on Stellar and is powered by the Stellar Development Foundation. In total, we have announced 5 rounds between 3-month periods. Each round, 8 winning projects would split a pool of 3 million XLM.
It is important to us that SCF awards projects of high value to the ecosystem. Thus, proposals need to present a functional use case and cannot be purely conceptual. After all proposals are submitted, community members vote on their favorite projects in an initial nomination round. The top 8 projects then move onto a final voting round, where the final vote percentages determine what proportion of the lumens pool is distributed to each project.
Over the past year of running SCF, we saw that the fund wasn’t optimized to fully benefit the community. Not only was the voting process straining our community, but it was also susceptible to bad actors. This led to deserving projects getting nudged out of the final round while other projects that took their place ended up disqualified. Additionally, SCF wasn’t catering to the different types of project proposals being submitted.
Simply put, SCF needed a solution to address issues of previous funding rounds:
For SCF 2.0, we’ve come up with a plan to solve these challenges. First, we will be introducing a nomination panel and quadratic voting. By implementing these two, we ease the burden of participation for those involved while keeping things fair for applicants.
The nomination panel, composed of SDF members and ecosystem participants in a 40/60 split, will be responsible for vetting all applications, filtering out potential scams or technically infeasible or weak entries. This will present a strong pool of projects subject to community voting.
Speaking of community voting, how it is conducted is currently linear and one-dimensional, making it impossible to recognize exceptional projects. With a quadratic voting model, voters can express the degree of their preferences rather than the direction. We built a test voting interface to demonstrate the concept, but quadratic voting is best illustrated by this simple equation:
Cost to voter = (number of votes)²
What this equation means is that the more deeply you care about a project, the more you willingly have to invest in voting for it. Otherwise, you can equally and efficiently distribute your votes across the board.
Past participants generally fell in two buckets: those who were ready to build their business and those who were experimenting within the ecosystem. To better cater to those audiences, SCF will be split into two funds: a Seed Fund and a Lab Fund.
Fostering sustainable Stellar use cases is a top priority for SDF, so the Seed Fund aims to get viable and innovative new businesses up and running on Stellar. Ideal applicants are established entrepreneurs and teams looking to break into the digital value store and transfer space. By including a business model in their submission, applicants will demonstrate that their ideas can survive successfully beyond a year.
For the Seed Fund, 5 million XLM is split twice a year between 3-5 projects selected by a nomination panel. A quadratic community vote determines final amount allocation.
If your ideas lean more towards experimental use cases, open-source software, or real-market stress tests, start at the Lab Fund. The Lab Fund exists as an entry point for exploration and discovery. By offering 4 funding rounds of 500,000 XLM per year, the Lab Fund can support up to 12 projects and thus encourage testing out new ideas in the ecosystem.
Once again, there will be a nomination panel and quadratic voting involved, but there is little barrier to entry. As long as you use, talk about, or showcase Stellar in some way, you are welcome to participate.
We’ve learned a lot from SCF 1.0. It’s given us an even greater view into the many talented, innovative developers and businesses building on Stellar. We hope that with the SCF 2.0 redesign, we will make it easy for more inspiring projects to join, our community to engage, and the network to grow.
2.0 rounds are starting soon. Here’s a timeline of the next rounds for both funds:
If you want to learn more about SCF in general, visit the SCF site here.
If you want to dive deeper into our new voting structure, read this post on our Stellar Community Blog.