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title: Upfront Funding for Commons

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# Upfront Funding for Commons

I've written about commons in the following posts.

* [Components for Commons](https://mirror.xyz/adamstallard.eth/YzIKozL7NagiKllG_KzbReeXvL_NYI4uYpJeyn7MGHY)
* [Components for a Better World](https://mirror.xyz/adamstallard.eth/sCLuBfiIbW3jiowGZRfv0XuETlTnWNJmvgmWxbKVS9A)
* [Four Virtues of Universal Dividends](https://mirror.xyz/adamstallard.eth/NOJI8U2X_MHoqXBmPZLTmC19shkoPF2x4t40ynzI0V0)
* [How to Make Commons More Common](https://adamstallard.medium.com/how-to-make-commons-more-common-23da2269d58e)
* [Post-Tina, Post-Peak (part 2)](https://adamstallard.medium.com/post-tina-post-peak-part-2-616a4733e67b)

This post will cover strategies for commons to acquire upfront funding to become operational.

A commons won't have an investor class that holds perpetual rights to its income (if it generates any). The benefits of a commons belong to everyone equally. Luckily, there are funding methods that respect this.

I'll talk about eight methods for commons funding and when it makes sense to use them.

## 1. Bonds

This is a quintessential method for funding public works. A bond is an agreement to pay back a loan with a set amount of interest at a set time.

Bonds work best when an entity has a track record of steady income that makes it clear that under normal circumstances the bonds can be repaid--or if it has collateral that can be liquidated in case of default.

An example is a municipal government with property tax income that wants advance capital to build a park.

## 2. Terminating bonding curves

In [Components for Commons](https://mirror.xyz/adamstallard.eth/YzIKozL7NagiKllG_KzbReeXvL_NYI4uYpJeyn7MGHY), I mentioned the [augmented bonding curve](https://medium.com/giveth/deep-dive-augmented-bonding-curves-3f1f7c1fa751) as a method for raising funds when a fee to support the commons can't be identified, but there are other kinds of ABCs which do work well with fees, which I will explain later.

An ABC loses its ability to generate a return for buyers once interest in the commons has been saturated. A normal ABC doesn't make sense, therefore, as an ongoing source of funding, but can be used to raise upfront funding.

There is a form of ABC, however--[the continuous organization](https://github.com/C-ORG/whitepaper), in which some fee revenue can be used to distribute more of the ABC-issued tokens to holders. The tokens in this case are securities, and might require registration to legally sell them. To avoid creating an investor class, these tokens would need to lack governance rights or be widely distributed as with a [universal distribution](#4-Community-tokens--universal-distribution). 

Alternatively, to make a more attractive and orderly exit for an ABC, a commons can create a *terminating, augmented bonding curve* by preselecting a number of tokens (of the same type as the bonded tokens) that will be added when commoners have determined that the ABC has reached the end of its useful life. This means the commons should collect and set aside fee income to reach this goal. When the ABC ends, the extra tokens are added, buying and selling is discontinued, and all participants can withdraw bonded (and extra) tokens proportional to the number of ABC-issued tokens they hold.

Unlike a normal [community token](#4-Community-tokens--universal-distribution), an ABC token has pump-and-dump protection due to the ABC's exit fees.

## 3. Fee presales

In [Components for Commons](https://mirror.xyz/adamstallard.eth/YzIKozL7NagiKllG_KzbReeXvL_NYI4uYpJeyn7MGHY), I talked about the possibility of creating a fixed-supply token that would be used to collect fees for using a commons. The community (token holders) would set the amount of the fee through a median vote. It benefits the holders of the token to set the fee as low as possible (but not so low that the commons can't be maintained), and to spread interest in the token as widely as possible.

To raise upfront funding, the token could be sold before the fees are ready to be collected. [Batch auctions](https://hackmd.io/@chenm/BJ_2IVdI_) could be a useful tool to achieve this.

## 4. Community tokens + universal distribution

A community token allows holders to vote on proposals to use funds from a community pool and set parameters, such as fees to use the commons.

To keep the governance of the commons from becoming entrenched, a recurring universal distribution of tokens should be an inseparable part of the governing contract. ([See my post on universal dividends with choice](https://mirror.xyz/adamstallard.eth/sCLuBfiIbW3jiowGZRfv0XuETlTnWNJmvgmWxbKVS9A): Each person has limited number of types of tokens they can collect, which increases the likelihood that they will want to use a token they collect and not just dump it.) This can be accomplished even with a fixed supply token if the commons collects fees to be put back into the community pool.

## 5. Attention streams

According to the [Attention Stream document](https://docs.google.com/document/d/1TKA-K8YadRdgz-Qek01TUcCkRaI9CKCXGtJ31AbVWIU/),

> The goal of attention streams is to take a familiar strategy for making money in an economic realm-- i.e. finding an idea early that proves to be popular--and make it work in a governance realm.

Decisions relating to a commons (how will it be used, who can use it, etc.) can be discovered using attention streams.

If the operation of the commons relates in some way to crowd wisdom or skills (solving problems, creating art, choosing memes, finding grant awardees, etc.), attention streams can allow commoners to earn money by choosing their favorite submissions.

A portion of any money raised by attention streams can be set aside to fund the commons itself. ([See the fees possible for arenas, topics, and choices](https://docs.google.com/document/d/1TKA-K8YadRdgz-Qek01TUcCkRaI9CKCXGtJ31AbVWIU/edit#heading=h.owwoe9cooj5t).)

## 6. Grants

Ecosystem funds and DAOs give grants to public goods that help the ecosystem or align with their mission. They recognize that other forms of upfront or ongoing funding might be impossible for commons or public goods projects.

##  7. Exit to community

Some commons begin their lives as for-profit ventures. An "[exit to community](https://www.colorado.edu/lab/medlab/2020/08/31/exit-community-community-primer)" is an array of strategies to convert a venture-backed startup into a commons. The exit might be baked into an investor term sheet, or set in motion later in a company's lifespan.

Issuing redeemable shares (non-voting) and buying back stock are ways to prepare for an exit to community. A stock buyback that wasn't preplanned as redeemable shares might require an addition capital raise using, for example, the strategies mentioned in this document.

[Gitcoin](https://www.gitcoin.co/) is an example of a venture-backed startup that decentralized and open-sourced its tooling, released a community token, and moved its governance to a community DAO. 

## 8. Crowdfunding

This is a well-known strategy that can work for upfront financing for a commons in some cases.

To quote the [Exit to Community Primer](https://www.colorado.edu/lab/medlab/2020/08/31/exit-community-community-primer), 

> [crowdfunding] depends on having an existing, enthusiastic community with savings available for investing.

## Conclusion

Funding for commons differs from funding for competitive organizations in that it doesn't perpetually reward an investor class. This is accomplished by strategies of collecting donations (grants, crowdfunding), investments that have a defined end (bonds, terminating bonding curves, exit to community), or perpetual funding that avoids creating an investor class and keeps the commons open (fees, community tokens, attention streams). Several strategies can often be combined.