When Kimbal Musk began telling the online cryptocurrency community in September that he was thinking of starting a crypto venture, he says, it urged him: “You gotta do a coin!”
Musk, who sits on the boards of Tesla Inc. and SpaceX, told them he wasn’t going to create a digital currency. But the crypto enthusiasts couldn’t understand. Their response would always be: “But you’re still doing a coin, right?”
He’s not. But at the end of November, Elon Musk’s younger brother inaugurated the Big Green DAO, or “decentralized autonomous organization.” An offshoot of Big Green, the Colorado-based school-gardening nonprofit he founded in 2011, the DAO is a sort of digital foundation that plans to take money from donors and dispense it according to a strict set of rules encoded in blockchain technology.
If it works the group could provide an easier, faster way for small nonprofits to get funding from big donors that are otherwise out of reach. The DAO, which was launched with $1 million in funds from Musk, will be required to distribute an ambitious percentage every quarter, starting with at least 20% in the first quarter of 2022.
Put simply, a DAO is a community bound together by rules written into the blockchain, so financial transactions and other interactions don’t need to be monitored by a government or third party. All votes and key transactions involving group members are publicly tracked and verifiable.
DAOs recently got attention when a group called ConstitutionDAO tried and failed to buy a copy of the U.S. Constitution. (It was outbid by billionaire Ken Griffin.)
The Big Green DAO’s main innovation is that it allows both donors and grant recipients to cast votes to decide who gets the group’s money and how much of it. Each donor receives a governance token, and when funds are given to a new nonprofit, that recipient gets one as well. Each of the tokens, which are run on the Ethereum blockchain, has a voting power of one.
In theory, then, the more funds the DAO distributes, the more votes will be cast in subsequent rounds of funding. And since local nonprofit organizations often have the most knowledge about which other nonprofits operate best in a given space, Musk hopes the DAO’s money will increasingly find its way to the appropriate local groups—perhaps ones otherwise overlooked by deskbound bureaucrats at big philanthropies.
“Money will be trackable, votes will be transparent, in a way that doesn’t happen with the traditional philanthropic system,” says Mat Markman, who helped design the Big Green DAO’s structure alongside Musk. And even if you give more money, you still only get one token.
“The plus that I see here is that the organizations that are actually doing the work have a voice in making decisions about where the funds go,” says Melissa Berman, president and chief executive officer of Rockefeller Philanthropy Advisors. As an example, Musk points to Big Green, which he started in order to provide learning gardens for underserved schools. “We’re in Boulder, Colo., and we know all the nonprofits here.”
The problems in philanthropy that Musk’s DAO is trying to address are well known. Foundations and charities are often bureaucratic and top-heavy, failing to understand the communities to which they give.
After an earthquake crippled Haiti in 2010, for example, the American Red Cross was inundated with almost $500 million in funding. But officials struggled to find the right groups to support, and a study by NPR and ProPublica showed a large portion of that was eaten by management fees while leaving little evidence of long-term impact.
Musk is hardly the first to try to find another way. Billionaire MacKenzie Scott, one of the world’s richest people, has been emailing multimillion-dollar surprise checks to nonprofits. Yet while her stealth-mode philanthropy has earned her praise from some, it’s also deprived grantees of a way to get her attention through a traditional application process.
A DAO could address this issue while also making the grant-giving process itself easier and faster. Big foundations often don’t have the time to write lots of small grants that are appropriate for more modest or local groups, so it’s tempting to write big grants only to organizations with the infrastructure to handle them.
Musk argues this may exclude the most effective grassroots ones. But if the review work is performed by a network of nonprofits, the individual burden is lifted. (Grant seekers, hopefully nudged by token holders, still need to submit an online application to the Big Green DAO.)
“One of the key issues in philanthropy is equity and justice,” says Berman. “And that applies not just to the results that we want to see but to the ways decisions are being made.”
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