Summary

Alice is a decentralized platform that allows NGOs, charities, and social impact organizations (social organizations) to provide more transparency and accountability. Alice does this by placing donations in escrow (smart contracts) on the Ethereum blockchain and only distributes funds once agreed upon goals are obtained and verified. Goals are verified by an independent validator (human or automatically depending on the goal); validators are picked by the charitable organization from a validator marketplace within Alice’s ecosystem. If goals are not achieved, funds are returned to the donor. All information (impact data) is placed on Ethereum’s blockchain and publicly available. Impact data is defined as information about the project, project assumptions, operational resources, and goals. The history of validators’ actions and decisions will also be publicly available on the blockchain, thus creating accountability for everyone who uses Alice’s platform.

 

Alice removes barriers to entry for non-technical corporations and individuals by accepting donations in fiat currency. Alice plans on converting donations into stablecoins to maintain the value of the donation, while funds sit in escrow until goals are achieved.

Some social organizations will need funds to get started and if donations are pegged to goals, an organization may not have the funds to launch. Alice provides an outlet for these organizations by allowing impact investors to provide support. There are three different types of investments on Alice’s platform.

1. Bonds that provide working capital. Repayment is in the form of a coupon token. The social organization sets the terms of the bonds. Coupon tokens can be sold on Alice’s network secondary exchange, providing liquidity. Money is provided upfront to the organization and is repaid plus interest (coupon token) as goals are achieved and donated funds are released. Trenched investments: Only part of the investment is released to the social organization to start, as benchmarks are achieved additional funds are released
2. Purchasing equity in a social organization. A token represents equity of the social organization (security token) and Alice is creating an equity market to provide liquidity.
3. Managed investments a. Pool funds together and have it managed by a fund manager

Alice will create four supporting markets which help run Alice’s ecosystem.

 

1. Validation market: People who validate goals, and initiate the release donated funds. Validators are paid a fee for each validation.
2. Knowledge sharing market, a data marketplace. The data marketplace allows people/organizations to submit information/research, and charge a fee for access.
3. Prediction market where people bet on the success or failure of a project
4. Grants market. This is a DOA which Alice calls a decentralized endowment fund (EVE). EVE funds will be disbursed based on votes cast by Alice token holders. EVE will initially be funded from the token sale, then support by fees.

Alice plans on implementing governance protocols to deal with changes in a project. If a project needs to be changed for any of a variety of reasons they must create a project update proposal (Pup). A Pup is voted on by stakeholders (investors and donors) and beneficiaries, each group accounts for 50% of the vote. Stakeholders’ votes are weighted based on the amount invested or donated. If 75% or more vote in favor of the proposed change, the changes are implemented. If only a simple majority vote in favor of the Pup, donors voting against the Pup have the option of canceling their donation and receiving a refund. If there is not a majority, the Pup fails and the organization must live within the original terms.

For a social organization to receive funds, a validator must verify that a goal has been achieved. A validator’s decision may be disputed by a challenger. To challenge a decision, a challenger is required to submit a deposit which will be forfeited if the challenge is lost. To settle the dispute an arbitrator (a person for now) will be nominated to rule on the issue.

ALX tokens are used to pay network fees and security deposits paid by validators. Tokens are also used to vote on the distribution of EVE funds. Once an organization is approved, EVE grants are paid in ALX.

 

Community

Alice has a relatively small following and presence on social media. This is a cause for concern as most crypto projects live or die by their following. Alice will need people to engage with their ecosystem as they are building marketplaces for validators, investors, content creators, donors, etc. Alice may be relying on social organizations that adopt their platform to direct all their donors/followers into their ecosystem. Social organizations may end up being Alice’s best marketers/cheerleaders. However, for this dynamic to work, it requires Alice to have a fantastic business development team who can get organizations onto the platform.

Market Comparison

Charitable giving was estimated at $390.05 billion in 2016, which is an increase of 2.7% from 2015. (Givingusa.org). Alice’s sales deck states that the size of the Impact investing market will reach $1 trillion in the future (date not provided). Alice is using a JP Morgan Chase report from 2010, which estimates a market size of $400 billion — $1 trillion within a decade, 2020. According to Businesswire.com impact investing for 2015 was $135 Billion and is expected to reach $307 Billion by 2020, with almost 20% growth. So this Chase’s predictions were a little off, but it’s still a rapidly growing market.

There are other projects similar to Alice, Giveth for instance. However, it seems instead of being competitors both organizations are working together. Alice is seeking Giveth’s help with setting up the EVE fund. Giveth allows people to rally around a cause, creating a community, and a campaign. Giveth’s campaigns are similar to a GoFundMe campaign. Once funds are raised and preset milestones are reached, funds are released. All information is imprinted on Ethereum’s blockchain, allowing for an individual to see exactly where their funds went and who benefited. Giveth allows for people to gather together to support a cause removing the need for a social organization as an administrator. Giveth is an interesting concept as it seeks to remove the middleman, in this case the social organization and directly supports the beneficiary.

 

Conclusion

I believe that Alice is correct; people want more transparency in social organizations. People want to know outcomes and if the social organization is operating as advertised. Alice believes people will be less concerned with where their money went as long as their stated goals were accomplished. I disagree with this somewhat; when I donate to an organization I want to know exactly how my money was spent along with what goals were accomplished. There could be positive outcomes, but salaries/expenses could be overinflated. Understanding how donations are utilized is very important as well as outcomes.

Bonds and equity markets created by Alice’s ecosystem are extremely interesting. More so the equity market, as I have reservations with the bond market. I am not sure how many impact investors are looking to provide working capital to social organizations. Obviously, it would depend on the bond yields, terms, and if the market provided liquidity. The ability to purchase equity in a social organization in the form of a security token is extremely interesting. Impact investing has increased almost 20% in the last year, and a security token provides instant liquidity for an investor.

Overall, Alice is trying to do a lot, maybe too much. Alice is planning on setting up a market for validators, investors, donors, bonds, security tokens, data, run arbitration, set up an autonomous fund (EVE), etc. Building one of these things would be challenging but everything together seems like an insurmountable task. It’s also concerning that they do not have a large community, which is necessary to fill the various marketplaces. Fees are something to think about as well. What do the fees look like, how much? Figure 1.3 shows Alice’s projected revenue for years 1–4. In the first year, revenue is projected at $50,000, which seems high. Alice’s only sources of revenue (fees) in year 1 will be from the impact investment pilot and impact data market, fees are not collected on donations. There are a lot of questions about the fee structure and social organization acquisition that need to be answered.