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tags: Grant Ships
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# Grant Ships FAQ

New to Grant Ships? See the [Overview Document](https://hackmd.io/06-DcdCuQmaBhKKjmlE-LQ) first.

## Reasoning

**Q:** **Why not just have a grants council?**
We wanted to emphasize a pluralistic approach and avoid centralization of power. Grant Ships unbundles the functions of a traditional, centralized grants-giving committee and distributes power and responsibility among 3 groups: Grant Ships, Referees, and the voting community.

Together, these 3 groups have all the power and responsibility of a grants council but ensure a broader representation of perspectives and mitigate the risk of undue influence. However, because many of the relevant permissions and processes are explicitly defined, we offload the governance overhead that a grant-giving organization would normally be responsible for designing.

Grant Ships are free to focus on transparently allocating funds. Referees make sure the rules are being followed. Members of Arbitrum DAO need only focus on voting on their favorite Grant Ships and checking power where needed.

In essence, we aim to get the best of both worlds. We get the capture-resistance of a decentralized organization, as well as the efficiency and clarity of a traditional structure.

Here is a diagram showing how this system could be built:

[](https://hackmd.io/_uploads/H1jJ2_NWT.png)

While we're mostly agnostic about the tech that each Grant Ship uses, we believe that **Hats Protocol** is an ideal tool for creating the structural 'skeleton' for this system.

**Q: This all seems complicated, why not do something simpler?**
**A:** The more distributed and decentralized a system is, the more its rules must be explicitly defined. In centralized grant-giving solutions, the complexity is hidden in the internal political dynamics and decision-making processes of the responsible team.

By providing this structure for a pluralistic approach, we relieve teams of managing a major portion of the complexity by systematizing it, and then allowing them to focus on the equally complex problem domain which is "How to Give Grants Effectively."

## Hats

**Q: Why Hats Protocol?**
**A:** Hats Protocol allows DAOs to create organizational structures that are capture resistant, transparent, and efficient.

A Hats structure is a network of non-transferable ERC-1155 compatible tokens. They allow a DAO to build a 'tree-shaped' role and permission structure where each token can manage the tokens below it, but not above. Placing the 'Top Hat' on Arbitrum DAO ensures that the ultimate decision-making power is granted to the most decentralized player in this game.

By offloading operational authority and responsibility, Arbitrum DAO needn't be burdened with every decision -- only revoking authority when needed.

Hats also have the additional benefit of providing an easy map of all the key players involved. Referees, Grant Ships, and Grant Recipients could all be made visible in one live chart that sources purely from on-chain data.

## Details

### Grant Ships

**Q: What is a Grant Ship?**
**A:** A Grant Ship is a subDAO. It receives funds each season based on its past performance, with the expectation that it will distribute those funds as ecosystem grants.

**Q: How are Grant Ships selected?**
**A:** When the game first begins, teams can apply to become Grant Ships. A weighted token vote is held, and the top 6 teams are assigned to become Grant Ships.

**Q: What powers do Grant Ships have?**
**A:** Grant Ships have 2 main powers: Distribution & Disclosure. A Grant Ship receives funding and has permission to distribute the funds. It also can make official on-chain disclosures.

**Q: What are the expectations of a Grant Ship?**
**A:** Grant Ships can operate however they like but are expected to submit a complete Portfolio Report at the end of a funding season, disclose who they are funding (as the funding occurs), and disclose major internal decisions and announcements on-chain.

**Q: What happens if a Grant Ship doesn't meet those expectations?**
**A:** The Referee Team assigns the Grant Ship a "yellow flag" (rules violation) or "red flag" (bad faith) that adds context for the end-of-season Ship Ranking Vote.

**Q: How does a Grant Ship receive funding?**
**A:** In the first season, all Grant Ships receive an equal portion of funding from a Common Funding Pool. In the following seasons, the Grant Ship's portion of the Funding Pool is proportional to their performance in the previous season, relative to other active Grant Ships.

**Q: How is Grant Ship's performance measured?**
**A:** At the end of each season, each Grant Ship is required to submit a Portfolio Report. Portfolio Reports are ranked during the Ship Ranking Vote at the end of each season.

**Q: Why isn't there a set governance structure for each Grant Ship?**
**A:** We believe that optimal models for grant distribution have yet to be discovered. Only through experimentation and real-world tests can we begin to narrow in on what might be the best model for a decentralized grants committee.

### Referee Team

**Q: What power does the Referee Team have?**
**A:** The Referee Team is a group of elected individuals that collectively has permission to assign yellow and red flags to Grant Ships. They can also initiate the Ship Ranking Vote at the end of the season and finalize the results.

**Q: What are yellow and red flags?**
**A:** Yellow and red flags are attestations issued by the Referee team. They are included as context in a Ship's Portfolio Report. Yellow flags are for rules violations such as failure to meet a reporting requirement. Red flags are issued to teams that have 'abandoned the ship' or are deemed to be operating in bad faith.

**Q: What are the responsibilities of the Referee Team?**
**A:** The Referee Team is expected to take care of any non-automated administrative or on-chain actions required by the Rule Book. This includes initiating funds disbursal proposals at the beginning of the season and initiating the end-of-season Ship Ranking Vote. They should also note and document any inconsistencies or flaws in the Rule Book and submit them for public review at the end of the season. They are the arbiters and adjudicators of the Rule Book and are responsible for providing interpretations if clarity is lacking.

**Q: How is the Referee Team selected and held accountable?**
**A:** The Referee team is elected through a volunteer/nomination process followed by a Token Vote. Referees can be replaced at any time through an Arbitrum Token Vote. Referee Team attestations can be contested by any Grant Ship with a counter-attestation.

### Season Cycle


**Q: What is a Grant Season?**
**A:** A Grant Season or Season for short, is a period of 3 months and is broken into 2 phases: the Allocation Phase and the Review Phase.

**Q: What happens during the Allocation Phase?**
**A:** This is the period where Grant Recipients are funded and begin producing results. This is also where most of the interaction between Grant Ships, Grant Recipients and the community occurs.

**Q: What happens during the Review Phase?**
**A:** This is the phase where Grant Ships submit their Portfolio Report for review by the community and Referees. A community vote is initiated and the results determine funding levels for the upcoming season. If a crew fails to receive a minimum threshold of support from the community, new crews are onboarded to that ship during this period.

### Reports & Voting

**Q: What is included in a Portfolio Report?**
**A:** The Portfolio Report should include expenses, funding allocations, and grant recipient progress. A template is provided and Referees review the report before initiating the token vote. Any yellow or red flags assigned by Referees are appended to this report.

**Q: How does the Ship Ranking Vote work?**
**A:** The Ship Ranking Vote is a weighted token vote that occurs at the end of each season, and is an opportunity for the Arbitrum community to rate and rank the performance of the active Grant Ships.

The Portfolio Reports from each Grant Ship are first made available for review. Then, each ARB holder has the opportunity to 'weight' the performance of each Grant Ship. They receive votes equal to their token count and can assign them across the Grant Ships as they see fit. The vote total received by each ship is divided by the total number of votes received by all ships. This number determines the proportion of the total funding pool they receive in the upcoming season.

Additionally, any new crew that have applied can receive votes at this time. If an active Grant Ship crew fails to receive a minimum threshold of support, they are evacuated from their ship and replaced with the highest-rated new crew.

### Other Questions

**Q: How does the Common Funding Pool receive funds?**
**A:** Presumably these funds are being supplied by Arbitrum DAO itself, so whatever process they use to disburse funds would need to be used to fill the pool. The pool could also be opened to receive funds from other sources looking to support Arbitrum Grants. Ideally, this Common Funding Pool would be refreshed each Season automatically.

**Q: What if this rulebook has a flaw or needs to be updated?**
**A:** During the course of a season, the Referee Team is responsible for adjudicating the rules. If they see an inconsistency or flaw, they have the purview to make adjustments on the fly to maintain the integrity of the game. These issues should be documented and submitted for review at the end of each season.

Variables such as the number of Grant Ships, minimum vote thresholds, size of the Referee Team, and funding levels can be set depending on the needs and wants of the community when the game begins.

**Q: When does the game end?**
**A:** Ideally, a token vote is held to initiate this game and then it would run indefinitely, ended only by a separate successful token vote initiative.