Wulf A. Kaal

Impact Investing Innovation - From Impact 1.0 to 3.0

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Impact Investing Innovation - From Impact 1.0 to 3.0

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# **`Impact Investing Innovation`**

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-
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From Impact 1.0 to 3.0
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by Wulf Kaal, Ph.D. 1
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# **`Abstract`**

```
Impact innovation has evolved from Impact 1.0 to 3.0. Each phase
of impact innovation iterates on prior improvements and adds new
components. Whereas Impact 1.0 has emerged with Carbon Credit
Trading and Impact 2.0 has contributed participatory
grantmaking, impact measurement, and price competitions. Impact
3.0 builds on those prior accomplishments with emerging Web3
community toolsets and impact certificate trading. These
combined features enable Impact 3.0 to scale philanthropy to
unprecedented levels.
```

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Key Words : Social Impact, ESG, Impact Certificates, Carbon
Credits, Decentralized Autonomous Organization, Finance, Token
Models, Cryptocurrencies, Feedback Effects, Emerging Technology,
Tokens, Blockchain, Distributed Ledger Technology
```

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JEL Categories : K20, K23, K32, L43, L5, O31, O32
```

> `1 Professor of Law - University of St. Thomas School of Law. The author is grateful for feedback and discussions with Eric Kessler, Sampriti Ganguli,`

> `Amir Ansari, and Phillip Alvarez. The author is also grateful for excellent research assistance by Nicole Catlin and Beau Raymond.`

# **`Table of Contents`**

|**`Introduction ................................................... 3`**|
|---|
|**`Target Audience ...................................................... 8`**|
|**`Evolution of Impact Innovation ................................. 9`**|
|`Impact 1.0 .................................................. 10`|
|`Carbon Credits ........................................... 12`|
|`Social Impact Credits .................................... 18`|
|`Impact 2.0 .................................................. 21`|
|`Participatory grantmaking ................................ 22`|
|`Impact measurement ....................................... 24`|
|`Innovation & Impact Prizes ............................... 29`|
|`Impact 3.0 .................................................. 31`|
|`Collaborative Giving Communities ......................... 39`|
|`Impact Certificate Marketplace ........................... 42`|
|**`Roadmap for Impact 3.0 ........................................ 47`**|
|`Scaling Impact 3.0 .......................................... 48`|
|`Standardizing Impact 3.0 .................................... 53`|
|`Funding Sources Impact 3.0 .................................. 55`|
|`Credential Tracking in Impact 3.0 ................................. 57`|
|**`Conclusion .................................................... 60`**|

# **`Introduction`**

```
Growth in philanthropy is the main driver of impact innovation.
Since the turn of the century, the number of private foundations
in Brazil increased by 300%, producing 5.5 billion USD in
donations, India’s philanthropy exceeded 5 billion USD in 2006
alone; in China, over 800 private foundations were established
between 2006 and 2011. 2 The transfer of impact donations from
OECD countries to developing countries increased from around 5
billion USD in 1991 to over 53 billion by 2008. 3
```

```
Impact innovation is evolving. Key components of the evolution
of impact innovation can be summarized by the transition from
Impact 1.0 to Impact 3.0. Impact 1.0 describes the traditional
model of impact giving and pledges. Impact 2.0 involves
participatory grant-making, use of technology, impact
measurement innovation, and innovation and impact prices. Impact
3.0 further upgrades the Impact 2.0 accomplishments via
collaborative giving communities and impact certificate
marketplace. Impact Certificates are “electronic tickets” that
can be sold to claim a project’s impact akin to a carbon credit.
Each phase improves prior phases and their accomplishments,
builds upon them, and optimizes them further.
```

```
Growth-driven impact industry improvements are the main driver
of impact innovation from Impact 1.0 to 3.0. For example,
Impact 2.0’s participatory grant-making helps increase the
```

> `2 David Moore & Douglas Rutzen,` _`Legal Framework for Global Philanthropy:`_

> _`Barriers and Opportunities`_ `, 13 I NT ’ L J. N OT - FOR -P ROFIT L AW 5, [X] (2011).` `https://www.icnl.org/resources/research/ijnl/legal-framework-for-global-ph ilanthropy-barriers-and-opportunities`

> `3` _`Id.`_

```
erosion of public trust 4 in charitable giving. Through increased
public trust in charities’ ability to allocate donations per
donative intent, charities can expand fundraising, attract the
necessary talent, and increase advocacy. 5 The traditional private
foundation model in Impact 1.0 can be improved with the
transparency of WEB3 in Impact 3.0.
```

```
Through enhanced transparency in impact certificate markets,
Impact 3.0 upgrades private foundations and overcomes the lack
of transparent and accountability mechanisms 6 that afflicted
Impact 1.0 foundations. Impact 3.0’s WEB3 collaborative
communities further improve Impact 1.0 private foundations by
adding collaborative WEB3 democratic measures that address
plutocratic power structures in Impact 1.0 foundations that
originated in the lack of democratic elections of Impact 1.0
foundations’ organizations’ leaders or trustees. While Impact
3.0 still relies on those foundation structures, the WEB3
collaborative community involvement removes the power centers
and makes the decision processes in foundations much more
transparent. While foundations’ trustees, councils, boards, and
their leaders may still be allowed in Impact 3.0 to work in
```

> `4 Ben Gose,` _`The Trust Crisis`_ `, C HRON . P HILANTHROPY , Jan. 2020, at 12. According to the 2019 Edelman Trust Barometer (an annual study of institutions around the world) only 52% of Americans have faith that nonprofits will do the right thing. Id. A survey by the Better Business Bureau found that 70% of Americans said that trust is essential before making a donation, but fewer than 20% of Americans said they highly trust charities. The lack of public trust towards charities is illustrated by CharityWatch reports cases of abuse of the`

> `charitably giving system. For example, two separate actions were filed by the Federal Trade Commission in conjunction with state charity regulators from across the U.S to crack down on predatory practices of companies that solicit donations on behalf of charities. Charity Watch,` _`Fundraisers for ‘F’ Rated Charities Hit with a Combined $170.2 Million in Legal Judgments`_ `(May 19, 2021),`

> `https://www.charitywatch.org/charity-donating-articles/fundraisers-for-f-rated -charities-hit-with-a-combined-1702-million-in-legal-judgments`

> `5 Gose,` _`supra`_ `note 4, at 12–14.`

> `6 Robin Rogers,` _`Why the Social Sciences Should Take Philanthropy Seriously`_ `, S OC ’ Y , Dec. 2015, at 533.`

```
perpetuity, without the required operational accountability and
transparency, 7 Impact 3.0’s use of WEB3 collaborative communities
significantly curtails the power of such leaders. It enhances
operational efficiency while addressing issues of accountability
and transparency. As such, Impact 3.0 enhances transparency in
philanthropy with overall enhancement of democracy and civic
equality that were previously afflicted in Impact 1.0. 8
```

```
The crowd wisdom of collaborative WEB3 communities in Impact 3.0
helps overcome the lack of checks and balances and misallocation
of donor funds in the inherent power imbalances that can afflict
Impact 1.0 and 2.0. Impact 1.0 philanthropic strategies
entrusted individual donors, not collectives of donors as in
Impact 3.0, with identifying the impact problems that needed to
be solved. Through their charitable organizations,
high-net-worth individuals and organizations have unparalleled
influence over social institutions. 9 At its worst, high-net-worth
individuals may leverage underfunded causes with corporate
strategies to reduce problems corporate interests helped
create. 10 Individual philanthropists can leverage underfunded
causes and reshape them according to their ideals without
significant checks and balances or crowd wisdom considerations.
Individual donor power and the associated misallocation of
impact funding are curtailed in Impact 3.0 as donor power is
exercised mostly by collaborative donor communities.
```

> `7 Rob Reich,` _`Philanthropy in the Service of Democracy`_ `, 17 S TANFORD S OC . I NNOVATION R. , 26 (2018).`

> `8 D AVID C ALLAHAN , T HE G IVERS : W EALTH , P OWER , AND P HILANTHROPY IN A N EW G ILDED A GE (2017); Una Osili, Kinga Zsofia Horvath, Sasha Zarins, et. al.,` _`An Annotated Bibliography`_

> _`of Recent Literature on Current Developments in Philanthropy`_ `, Feb. 2019, https://hdl.handle.net/1805/20454.`

> `9 M ATHEW B ISHOP & M ICHAEL G REEN ,` _`P HILANTHROCAPITALISM : H OW G IVING C AN S AVE THE W ORLD`_ `(2008).`

> `10 Robin Rogers,` _`Why the Social Sciences Should Take Philanthropy Seriously`_ `, S OC ’ Y , Dec. 2015, at 533.`

```
Impact 3.0 enables capital allocation timely and efficient.
Impact 3.0 improves on Impact 1.0 and 2.0 capital allocation
timeframes, lowering the time between donors receiving their tax
deductions and deploying the donated funds to the impact
projects. While boards and donors in Impact 1.0 and 2.0 often
seek to preserve their endowments rather than deploy the
assets, 11 Impact 3.0 incentivizes asset deployment by listing
impact projects post due diligence by expert communities. With
the certainty of impact outcomes created by expert community
crowd wisdom upvotes, the donor community deployment of funds
can happen faster, with more process efficiency, and with more
confidence because information asymmetries are minimized through
the process.
```

```
It is important for purposes of this whitepaper to highlight
that the target audience for this paper depends on donor
motivation. There are many different kinds of donors some of
whom may be more some less inclined to engage with
technology-based technology solutions for philanthropy. Some
donors are motivated by inherently personal and indicidualized
causes. ssome donors have personal experience with causes that
impact their lives and motivate them to support the cause. For
example, a particular hospital may have safed the child of a
donor and the donor feels strongly about helping other children
and their parent in the same situation with the same disease.
Accordingly, the donor may set up a particular charity for
purposes of healing children that suffered form that particular
disease. Similarly, some donors may wish to help a particular
institution, such as their alma mater, regardless of how funded
```

> `11` _`Put a Stake in ‘Zombie Charity.’ Philanthropy Is for the Living`_ `. C HRON . P HILANTHROPY , Sept. 2019, at 31. In 2021, US foundations were only required to`

> `spend 5% of their assets per year. Although this is a minimum requirement for US foundations, many boards view 5% as the default rule.`

```
such institution may already be. The key here for those
personally motivate donors is their personal experiences with
the institution and their desire to “give back” or “pass on”,
including but not limited to religrious, DEI, SDG, and other
causes. This can also apply to corporate donations motivated by
a board decision with board members who care particularly about
a certain cause. In short, donors who are motivated by their
personal or local interests may not be motivated by scaling
impact overall. The target audience of this paper is the donor
base that cares about technology-based improvements in
philanthropy. This whitepaper focuses on a subgroup of the
global philanthropy market consisting of high-dollar impact
focused donors who wish to utilize WEB3 tools to attain enhanced
transparency, immutability of outcomes, and accountability for
their donations.
```

```
The transition from Impact 1.0 and 2.0 to Impact 3.0 is an
iterative process. Most donors will realize over time what
inefficiencies are created in the Impact 1.0 and 2.0 systems.
Once the donor communities realize those inefficiencies, they
may begin to turn a certain proportion of their donations into
contingencies in impact certificates. In this iterative process,
donors may experience what works in the impact certificate
market allocations they created. That experience may help donors
learn by doing and experiment further in the impact certificate
marketplace. This process will take time. As the impact
certificate market matures, even donors who are motivated by
personal experience with causes may over time realize that they
can support the personally motivated causes through the
efficiencies created by the impact certificate marketplace in
Impact 3.0. It is the authors assumption that most donors,
regardless of their heritage and personal motivations, will over
```

```
time realize that their cause benefits from the uses of WEB3
Impact 3.0 systems.
```

```
Target Audience
```

```
The target audience for this paper depends on donor motivation.
There are many different kinds of donors some of whom may be
more some less inclined to engage with technology-based
technology solutions for philanthropy. Some donors are motivated
by inherently personal and indicidualized causes. Some donors
have personal experience with causes that impact their lives and
motivate them to support the cause. For example, a particular
hospital may have safed the child of a donor and the donor feels
strongly about helping other children and their parent in the
same situation with the same disease. Accordingly, the donor may
set up a particular charity for purposes of healing children
that suffered form that particular disease. Similarly, some
donors may wish to help a particular institution, such as their
alma mater, regardless of how funded such institution may
already be. The key here for those personally motivate donors is
their personal experience with the institution and their desire
to “give back” or “pass on”, including but not limited to
religious, DEI, SDG, and other causes. This can also apply to
corporate donations motivated by a board decision with board
members who care particularly about a certain cause. In short,
donors who are motivated by their personal or local interests
may not be motivated by scaling impact overall. The target
audience of this paper is the donor base that cares about
technology-based improvements in philanthropy. This paper
```

```
focuses on a subgroup of the global philanthropy market
consisting of high-dollar impact focused donors who wish to
```

```
utilize WEB3 tools to attain enhanced transparency, immutability
of outcomes, and accountability for their donations.
```

```
The transition from Impact 1.0 and 2.0 to Impact 3.0 is an
iterative process. Most donors will realize over time what
inefficiencies are created in the Impact 1.0 and 2.0 systems.
Once the donor communities realize those inefficiencies, they
may begin to turn a certain proportion of their donations into
contingencies in impact certificates. In this iterative process,
donors may experience what works in the impact certificate
market allocations they created. That experience may help donors
learn by doing and experiment further in the impact certificate
marketplace. This process will take time. As the impact
certificate market matures, even donors who are motivated by
personal experience with causes may over time realize that they
can support the personally motivated causes through the
efficiencies created by the impact certificate marketplace in
Impact 3.0. It is the authors assumption that most donors,
regardless of their heritage and personal motivations, will over
time realize that their cause benefits from the uses of WEB3
Impact 3.0 systems.
```

# **`Evolution of Impact Innovation`**

```
Impact innovation is evolving. Key components of the evolution
in impact innovation are signified by the transition from Impact
1.0 to Impact 3.0. Impact 1.0 describes the traditional model
of impact giving and pledges. Impact 2.0 involves participatory
grant-making, use of technology, impact measurement innovation,
and innovation and impact prices. Impact 3.0 further upgrades
```

```
the Impact 2.0 accomplishments via collaborative giving
communities and impact certificate marketplace.
```

```
Impact 1.0
```

```
Legacy philanthropy in Impact 1.0 is characterized by donors
funding NGOs based on promises to create target impacts. Aside
from their goal of discovering the most qualified project
candidates to fund the best, not just the known candidate
projects, the goals of Impact 1.0 donors typically focus on
attaining critical mass of funding in a bid to make tackling big
challenges worthwhile and possible while at the same time
reducing the risk of bad investments by diversifying.
Diversification helps ensure that the Impact 1.0 donors may be
guaranteed a small part in a breakthrough impact project. Like
all impact donors, Impact 1.0 donors want to ensure the
identified impact project candidates are qualified and have the
potential to succeed. Moving as much funding as possible from
process to impact results is key for the operations. However, to
maximize the chances of success, Impact 1.0 donors often create
a support network for the funded projects, which increases the
cost of Impact 1.0. Support networks for projects may include
collaborations with other innovators, as well as university,
research, and corporate partnerships.
```

```
Legacy and WEB2 technology limit philanthropy in Impact 1.0.
Impact 1.0 often made it harder to form philanthropic
syndicates because donor networks operated in silos and were not
incentivized by the Impact 1.0 technology system to work
together. Forming consortia was difficult in Impact 1.0 because
of complicated decision-making processes, compliance
```

```
requirements, and fiscal controls. If consortia were formed in
Impact 1.0, they often spend too much time soliciting additional
donations and not enough time on pursuing their goals. Raising
funds and leveraging funding for impact projects in Impact 1.0
was also rather time-consuming as compared with Impact 2.0 and
3.0 technology systems. Donors in Impact 1.0 were able to fund
outlier projects because crowd wisdom and syndication were not
fully incentivized. Impact verification was not a high priority
in Impact 1.0 systems. Access to the top deals was not always
possible in Impact 1.0 because of the silos and lack of
collaboration technology systems. Because of the unavailability
of advanced technologies, Impact 1.0 often suffered from a lack
of transparency and accountability. Impact projects with
certifiable records were rare. Therefore, the overall
performance record of Impact 1.0 suffered. Individual donors
were often not able to fully finance the breakthroughs they
needed or desired.
```

```
Because Impact 1.0 does not support a liquid and efficient
marketplace for funding, funding results in Impact 1.0 are
logistically difficult to attain. To protect their interest in
impact results, donors often overinvest in the process not in
impact outcomes directly. Because of the lack of a central
marketplace, funding sources that are not well-known often can
only generate exposure to a very limited purview of the impact
market. Without a full view of the market, impact donors in
Impact 1.0 often end up funding projects by people they know
through their existing networks, not the most qualified projects
based on objective standards. Conversely, when impact investors
are well known, they are often overwhelmed by the response from
projects and spend a lot of time on due diligence processes and
compliance processes to discern unqualified project applicants
```

```
and candidates with poor fits from the desirable impact
projects. Because of the lack of an efficient marketplace,
impact intermediaries, such as foundations, DAFs, NGOs, and
fiscal sponsors, among others, often experience their priorities
being hijacked by big-dollar donors. This often results in a
feast or famine situation for fundable projects in Impact 1.0.
```

```
Because of the lack of a marketplace, grant recipients,
innovators, and implementers in Impact 1.0 often spend too much
time on fundraising efforts. Grant applicants’ information
asymmetries attributable to the lack of the impact marketplace
result in grant applicants’ inability to apply to all potential
target funding sources, making it harder for impact projects to
establish a fundable reputation. Similarly, the lack of an
impact marketplace can result in opaque decision processes from
funders.
```

# **`Carbon Credits`**

```
Carbon credits are a key Impact 1.0 innovation. While they were
mostly a niche commodity in the fight against climate change,
carbon credits have become a crucial tool competition-based tool
in mitigating global greenhouse gas emissions. Purchasing carbon
credits allows companies to produce CO2 emissions and then
offset those emissions from the purchased carbon credit. 12
Subsequently, carbon markets allow investors and companies to
trade both carbon credits and carbon offsets simultaneously,
creating a new market for these commodities. While these credits
are actively traded on carbon credit marketplaces, there is no
```

> `12` _`The Ultimate Guide to Understanding Carbon Credits,`_

> `https://carboncredits.com/the-ultimate-guide-to-understanding-carbon-credits/ (last accessed Jan. 9, 2024).`

```
established national market in the United States for this
trading. Only California has a formal cap-and-trade program. 13
The amalgamation of evolving carbon credit standards,
technological advancements, and market dynamics have shaped the
impact trajectory for carbon credits in Impact 1.0. Impact 3.0
may follow the same trajectory with impact certificate
marketplaces.
```

```
The historical origin of carbon credits can be traced back to
pivotal international agreements aimed at mitigating climate
change. The Kyoto Protocol of 1997 was a watershed moment that
established flexible market mechanisms and three ways for
countries to meet their emissions targets: International
Emissions Trading, the Clean Development Mechanism, and Joint
Implementation. 14 The Clean Development Mechanism laid the
groundwork for the trading of carbon credits, enabling developed
nations to offset their emissions by investing in emission
reduction projects in developing countries. 15 The Kyoto Protocol
also established International Emissions Trading which
```

```
established carbon credits as a commodity that countries that
had emission units to spare could sell to other countries that
are over their targets. 16 The transfer and acquisition of these
units would be registered through a registry system established
by the Kyoto Protocol and tracked through an international
transaction log to facilitate international sales of carbon. 17
```

```
Two types of carbon credits emerged from the original carbon
```

> `13` _`Id.`_

> `14 U.N. Framework Convention on Climate Change, What is the Kyoto Protocol?,` `https://unfccc.int/kyoto_protocol , (last accessed Jan. 9, 2024).`

> `15` _`Id.`_

> `16 U.N. Framework Convention on Climate Change, Emissions Trading,` `https://unfccc.int/process/the-kyoto-protocol/mechanisms/emissions-trading ,` `(last accessed Jan. 9, 2024).`

> `17` _`Id.`_

```
credit trading market: allowances and offsets. 18 In cap-and-trade
frameworks such as the International Emissions Trading,
participants receive a finite allocation of tradable emission
allowances determined by a specified reduction objective. 19 This
finite allocation serves to amplify both the demand and pricing
of these allowances. Conversely, offsets are products of
baseline-and-credit mechanisms like Clean Development Mechanism
or Joint Implementation, generating credits solely when new
emission reduction initiatives exhibit additionality, meaning
they result in greater emissions reductions than would have
naturally occurred without the project. 20 The fundamental
disparity lies in the origin of credits: allowance credits stem
from direct reductions in an entity's carbon emissions, whereas
offset credits involve the reduction, prevention, or elimination
of carbon emissions in alternative locations, either within or
external to the same entity. 21
```

```
Over subsequent decades, carbon credits evolved in tandem with
global climate policies, highlighting the importance of
political engagement and compromise in Impact 1.0. The Paris
Agreement of 2015 solidified their role as a linchpin in climate
strategies. The Paris Agreement provided a framework for
financial and technological evolution which sparked the creation
of the Enhanced Transparency Framework (ETF). 22 Under ETF,
```

> `18 Anja Kollmuss, Helge Zink, & Clifford Polycarp,` _`Making Sense of the`_

```
Voluntary Carbon Market: A Comparison of Carbon Offset Standards , WWF Ger.
```

> `(Mar. 2008).`

> `19` _`Id.`_

> `20` _`Id.`_

> `21 Gary E. Marchant, Zachary Cooper & Philip Gough-Stone,` _`Bringing`_

```
Technological Transparency to Tenebrous Markets: The Case for Using Blockchain
to Validate Carbon Credit Trading Markets , 62 N AT . R ES . J . 159 (2022).
22 U.N. Framework Convention on Climate Change, The Paris Agreement: What is
```

> `the Paris Agreement?,`

```
https://unfccc.int/process-and-meetings/the-paris-agreement , (last accessed
Jan. 9, 2024).
```

```
starting in 2024, countries will report transparently on actions
taken and progress in climate change mitigation, adaptation
measures and support provided or received. 23
```

```
As with most technology-driven impact innovation in Impact 1.0 -
3.0, the objectives for carbon credit trading are evolving.
While they were initially conceived to incentivize emission
reductions in Impact 1.0, carbon credits have metamorphosed into
multifaceted impact tools. The core carbon credit principles
evolved to focus on integrity and transparency within the carbon
credit market. These principles are pivotal in guiding the
market toward effectively achieving emission reduction goals
while maintaining trust and credibility. Multinationals are
increasingly signing up for Science-based Targets, aligned to
the goals of the Paris Agreement, committing to the use of
offsets equivalent to only 5-10% of their overall emissions. 24
The purpose of these commitments is to maintain integrity and
transparency and to ensure their credits are credible, both in
the eyes of the public and of all stakeholders. 25 However, the
pursuit of these objectives is not without challenges. Credibility
remains a paramount concern. Foreshadowing the challenges of Impact
3.0, Impact 1.0 carbon credit trading had to ensure the accuracy and
legitimacy of emissions reductions to maintain the credibility of
these markets. Additionally, the principle that projects funded by
carbon credits would not have occurred without such financing, and
leakage, the risk of emissions shifting elsewhere, are critical
factors in determining the real impact of these initiatives. These
challenges are emulated in the Impact 3.0 impact certificate market.
```

> `23` _`Id.`_

> `24 Felicia Jackson,` _`Voluntary Carbon Markets Get an Integrity Floor`_ `, F ORBES`

> `(Apr. 4, 2023).`

> `25` _`Id.`_

```
Credential tracking is a key issue in Impact 1.0, as exemplified by
the carbon credit market. Many companies that committed to achieving
"net zero" carbon emissions failed in that objective. Particularly
those companies that are dependent on carbon offsets sourced from
agricultural and related undertakings are often in non-compliance with
their net zero objectives. 26 The failure to enforce and monitor net
zero commitments in Impact 1.0 foreshadows the issue of credential
tracking in Impact 3.0, where the stakes are much higher. Any Impact
3.0 platform without WEB3 credential tracking systems is bound to
encounter significant disruption over time. The Impact 1.0 disruptions
associated with credential tracking provide important lessons in this
context. Ascertaining a specific Impact 1.0 entity's adherence to its
pledge poses considerable challenges. Assessing the actual actions of
companies becomes an arduous task in Impact 1.0 without the
transparency and accountability afforded by WEB3 systems, especially
in the absence of mandated disclosure of comprehensive climate-related
data and amidst the substantial variability in corporate commitments,
rendering the benchmarking of progress nearly unfeasible. 27 With the
problems of transparency and accuracy in mind, there is a considerable
shortage of verified carbon emission credits in Impact 1.0. 28 Moreover,
```

```
the concept of additionality, crucial to ensuring that funded
projects are truly reducing emissions beyond what would have
occurred naturally, poses a significant challenge in Impact 1.0.
Establishing costly centralized validation and verification
protocols that are already fully integrated in Impact 3.0 at the
core of the WEB3 protocols is still essential in Impact 1.0 to
fortify the credibility of carbon credits. Furthermore, the
current state of the global voluntary carbon market is
fragmented, with little uniformity and lacking transparency,
```

> `26 Jocelyn Timperley,` _`The Truth Behind Corporate Climate Pledges`_ `, T HE G UARDIAN`

> `(July 26, 2021).`

> `27` _`Id.`_

> `28 Gary E. Marchant, Zachary Cooper & Philip Gough-Stone,` _`Bringing`_

> _`Technological Transparency to Tenebrous Markets: The Case for Using Blockchain`_

> _`to Validate Carbon Credit Trading Markets`_ `, 62 N AT . R ES . J. 159 (2022).`

```
which can undermine its effectiveness. 29 WEB3 systems in Impact
3.0 impact certificate markets equally address those issues of
fragmentation, transparency, and associated effectiveness in
Impact 3.0.
```

```
Carbon credit design in Impact 1.0 WEB2 designs can be optimized
with WEB3-based Impact 3.0 architecture. Carbon credit markets
in Impact 1.0 can be upgraded by WEB3 technology by providing a
secure and transparent ledger. WEB3 technology upgrades in
Impact 3.0 can mitigate concerns about data accuracy and help
ensure the integrity of transactions in Impact 1.0. 30 Rewarding
eco-friendly actions with money, called regenerative finance, or
ReFi, is growing. New WEB3 technology can help upgrade the
regular carbon market. 31 Using WEB3 technology in this market
could make it better by valuing saving nature instead of
consuming nature. Web3 technologies have the potential to act as
a contributing force that can make a meaningful and measurable
impact in the fight against climate change for individuals,
households, and communities across the world. 32
```

```
Standardization concerns in the carbon credit market in Impact
1.0 foreshadow the standardization issues Impact 3.0 impact
certificate markets will encounter. WEB technology can help
```

```
address the standardization issues encountered in Impact 1.0.
For example, an industry-wide carbon sequestration standard for
Carbon Credits, fortified by a transparent blockchain protocol,
aimed at enhancing the prevailing voluntary carbon market
```

> `29 Nicholas P. Espenan,` _`Improving Voluntary Carbon Markets Through`_

> _`Standardization and Blockchain Technology`_ `, 23 W YO . L. R EV . 142 (2023).`

> `30` _`Id.`_

> `31 Owen Baim, Curbing Climate Change: An Analysis of the Blockchain’s Impact on the Voluntary Carbon Market (Apr. 20, 2023) (B.B.A. thesis, University of Michigan Stephen M. Ross School of Business) (on file with the University of Michigan Library).`

> `32` _`Id.`_

```
framework within the United States could be a promising first
step. This proposed standard would necessitate market
participants to adhere to consistent and transparent reporting
procedures, compelling the submission and divulgence of carbon
inventory and methodologies by carbon registries operating in
the United States. 33 The integration of a standardized carbon
market and blockchain protocol is poised to facilitate
self-governing reporting of all transactions involving carbon
credits, spanning from inception to retirement.
```

# **`Social Impact Credits`**

```
Social impact credits, in Impact 1.0 parlance, and social impact
certificates, in Impact 3.0 parlance, refer to certificates or
tokens created on a database or network to track, verify, or
incentivize social impact activities or initiatives. Impact
```

```
credits or certificates can be created in WEB2 - Impact 1.0 and
WEB3 - Impact 3.0 contexts. Such impact credits are typically
stored through the use of either centralized WEB2 or more
decentralized WEB3 technology.
```

```
In a WEB3 Impact 3.0 context, impact certificates leverage the
transparent and immutable nature of WEB3 technology to ensure
the credibility, traceability, and accountability of social
impact efforts. WEB3 Impact 3.0 technology presents a
particularly promising avenue for tackling the inherent
challenges within the impact investing sector. 34 By transforming
non-financial value, such as impact, into trackable digital
tokens, the technology facilitates the creation of impact tokens
on a blockchain.
```

> `33` _`Id.`_

> `34 David Uzsoki & Patrick Guerdat, Report,` _`Impact Tokens: A Blockchain-Based Solution for Impact Investing`_ `, I NT ’ L I NST . FOR S USTAINABLE D EV . (2019).`

```
Across Impact 1.0 and Impact 3.0, impact certificates are
specifically designed to unlock investments for projects
contributing to positive social and environmental impacts,
aligning with the goals outlined in the SDGs. 35 Impact teams can
```

```
“mint” a certificate of impact that is associated with their
project and declare themselves to be the owners. 36 This can be as
simple as making a public statement, analogous to acknowledging
a funder. For example, at the bottom of a press release, an
impact team could write “This post backs social impact
certificate “XYZ”, which is now owned by XYZ as evidenced by
this link. Or, you could post an offer to sell these
certificates to philanthropists who express interest in
purchasing them. By deciding which certificates they are willing
to pay for, altruists using the system define the rules of the

game.
```

```
Social impact credits in Impact 1.0 bear some resemblance to the
carbon credit marketplace in Impact 1.0. Yet, drawing a parallel
with the carbon credit marketplace can be challenging: at their
worst, carbon credits in Impact 1.0 are non-transparent,
fraudulent and fail to mitigate climate change. Nonetheless,
operational shortcomings do not necessarily invalidate the
underlying theory, and a well-executed carbon credit system
holds the potential to wield substantial influence in curbing
climate change via Impact 1.0 systems. 38 Setting aside instances
```

> `35` _`Id.`_

> `36 Paul Christiano,` _`Certificates of Impact`_ `, E FFECTIVE A LTRUISM F ORUM (Nov. 10, 2014),`

> `https://forum.effectivealtruism.org/posts/yNn2o3kEhixZHkRga/certificates-of-im pact#2__Certificates_of_impact.`

> `37` _`Id.`_

> `38 Daniel Goodwin,` _`Exploring Impact Certificates: Could a New Certificate Make Funding Public Goods a Successful as Venture Capital?`_ `, P UNK R OCK B IO (Jul. 5, 2022), https://www.punkrockbio.com/p/exploring-impact-certificates.`

```
of inadequacy, the substantial influx of capital into carbon
credits signifies a rationale, presumably poised to spur
significant advancements in supply, demand, and market integrity
(e.g., verification) in the near future. 39 Social impact models
```

```
influence consumers’ perceptions of venture legitimacy in Impact
1.0. 40 Legitimacy perceptions are, in turn, related to consumers’
purchase intentions and willingness to recommend the venture to
others. Therefore, social entrepreneurs in Impact 1.0 can appeal
to consumers to create financially sustainable ventures through
social impact models. 41
```

```
Impact certificate markets in Impact 1.0 offer a potential
solution to numerous challenges encountered by philanthropists
in Impact 1.0. Primarily, they enable impact grantmakers in
Impact 1.0 to entrust the task of selecting startups to
profit-focused investors, investing their resources only in
cases where a project aligns with their success criteria. 42 This
approach enhances the efficiency of funding allocation for
Impact 1.0 funders focused on high-impact outcomes, potentially
increasing it by one or two orders of magnitude. 43
```

```
Impact markets in Impact 1.0 are subject to a number of risks.
Such risks include bening risks that can cause them to fail as
well as more dangerous risks that can cause them to be harmful. 44
Impact markets, particularly those promoting retrospective
funding and the resale of impact, carry a significant inherent
```

> `39` _`Id.`_

> `40 Jason Lortie, Kevin C. Cox, & Philip T. Roundy,` _`Social Impact Models,`_

> _`Legitimacy Perceptions, and Consumer Responses to Social Ventures`_ `, 144 J. B US . R SCH . 312 (2022).`

> `41` _`Id.`_

> `42 Dawn (Denis) Dresher,` _`Toward Impact Markets`_ `, I MPARTIAL P RIORITIES (March 14, 2022), https://impartial-priorities.org/toward-impact-markets.html .`

> `43` _`Id.`_

> `44` _`Id.`_

```
risk: they may incentivize ventures prone to substantial
net-negative outcomes. 45 This risk stems from the potential for
individuals to benefit from causing positive impacts without
bearing the costs if their actions result in negative impacts. 46
Furthermore, mitigating this risk in Impact 1.0 poses
considerable challenges. Consequently, the establishment of
impact markets in Impact 1.0 itself represents a risky
undertaking. Impact 1.0 markets typically have more sellers
than buyers and many potential buyers would have done those
projects anyway thus removing the need for a secondary market. 47
This imbalance of high supply and low demand significantly
reduces the “resale” value of generating social credits in
Impact 1.0 and thus sellers would lose the financial incentive
of selling the isocial impact credits in the first place.
```

```
Impact 2.0
```

```
The dramatic increase in private philanthropy since the turn of
the century 48 triggered changes in endowment practices. Such
changes in Impact 2.0 included modern charities transitioning
```

> `45 Ofer & Owen Cotton-Barratt,` _`Impact Markets May Incentivize Predictably Net-Negative Projects`_ `, E FFECTIVE A LTRUISM F ORUM (Jun. 21, 2022),` `https://forum.effectivealtruism.org/posts/74rz7b8fztCsKotL6 .`

> `46 I D .`

> `47 Chris Leong,` _`Making Impact Purchases Viable`_ `, G REATER W RONG (Apr. 17, 2020),`

```
https://ea.greaterwrong.com/posts/AMQg4hCRGFXaHzvsd/making-impact-purchases-vi
able .
```

> `48 Moore & Rutzen,` _`supra`_ `note 2.`

```
from advocates to investors. 49 Especially social and educational
problems are increasingly being organized and addressed under
the guise of new philanthropy or Impact 2.0. In Impact 2.0,
philanthropists apply market-based solutions to modern
problems. 50 Impact 2.0 philosophy blurs the lines between
foundations, start-ups, social ventures, and venture capital. 51
In Impact 2.0, the traditional grant-driven style of
philanthropy of Impact 1.0 is increasingly giving way to
entrepreneurial ventures in the context of charity, 52 including
through competitions that crown a winner who may be investable
in follow-on rounds. 53 The Impact 2.0-driven reconfiguration of
charitable work has resulted in corporate foundations and
philanthropists assuming social and moral duties that had
historically been fulfilled by civil society organizations like
government and state agencies. 54
```

# **`Participatory grantmaking`**

```
The participatory grantmaking model in Impact 2.0 is inspired by
venture philanthropy. It presents several distinct upgrades from
Impact 1.0 to Impact 2.0. First and foremost, participatory
```

> `49 Phil Buchanan,` _`5 Issues Foundations Must Confront to Stay Relevant,`_ `C HRON . P HILANTHROPY , June 2016, at 36; Alex Daniels & Rebecca Koenig` _`, How New`_

> _`Philanthropy Is Divvying Up the Charity Dollar: And why nonprofits fear they`_

> _`are losing out,`_ `C HRON . P HILANTHROPY , Dec. 2017, at 18.`

> `50 Stephen J. Ball & Antonio Olmedo,` _`Global Social Capitalism: Using`_

> _`Enterprise to Solve the Problems of the World,`_ `C ITIZENSHIP , S OC . E CON . E DUC . (2011).`

> `51` _`Id.`_

> `52 Alex Daniels & Rebecca Koenig` _`, How New Philanthropy Is Divvying Up the Charity Dollar: And why nonprofits fear they are losing out,`_ `C HRON . P HILANTHROPY , Dec. 2017, at 18.`

> `53 Philanthropists who focus on the seeding of other businesses post impact`

> `investment are called philantrepreneurs. Ball & Olmedo,` _`supra`_ `note 50.`

> `h ttps://www.researchgate.net/publication/275684301_Global_Social_Capitalism_Us` `ing_Enterprise_to_Solve_the_Problems_of_the_World`

> `54 Ball & Olmedo,` _`supra`_ `note 50.`

```
grantmaking fosters inclusivity by involving diverse
stakeholders in the decision-making process, amplifying
perspectives from different backgrounds and expertise. This
approach enhances the relevance and effectiveness of funded
projects, aligning them more closely with community needs. 55
Additionally, it promotes transparency and accountability, but
without the WEB3 component upgrades, as the process becomes more
open and comprehensible to both grantmakers and recipients. By
incorporating elements of venture philanthropy, such as
strategic thinking and performance measurement, the
participatory grantmaking model encourages a more
results-oriented approach, maximizing the impact of
philanthropic investments and upgrading Impact 1.0 to Impact
2.0. 56
```

```
For example, a participatory grantmaking model known as the
Impact Grants Initiative, is based on venture philanthropy. 57 It
offered high engagement opportunities for previously
unaffiliated local donors and community leaders while
identifying high-performing nonprofits capable of making
significant impact. 58 For example, it has been used by local
Jewish communities as a community grantmaking model, called the
“Jewish Communal Fund,” to spark novel and international
partnerships, cultivate new community leaders and
philanthropists, generate more charitable contributions, and
help make the fund not just a philanthropic catalyst but also a
learning organization and emerging center for philanthropic
```

> `55 Tyler Dale Hauger,` _`Nothing About Us Without Us: Innovating Grantmaking Processes With Participatory Methodology`_ `, 36 Innovation: Eur. J. Soc. Sci. Rsch. 631 (2023).`

> `56` _`Id.`_

> `57 Adin C. Miller, Elisa Gollub, Ilana Kaufman, & Adina Danzig Epelman,`

> `The Impact Grants Initiative: Community-Participatory Grantmaking Modeled on Venture Philanthropy, 6 F OUNDATION R EVIEW 6 (2014).`

> `58` _`Id.`_

```
education and training. 59
```

```
Despite its upgrades to Impact 1.0, participatory grantmaking in
Impact 2.0 encounters several challenges. Balancing inclusivity
and efficiency can be complex, potentially leading to longer
decision-making processes and increased resource allocation for
facilitation. Ensuring meaningful participation from all
stakeholders without dominance by particular voices or interests
requires skillful facilitation and management which is costly.
Moreover, there might be a learning curve for both grantmakers
and participants in adapting to this collaborative
decision-making approach. Establishing clear guidelines,
managing conflicts of interest, and maintaining focus amidst
diverse perspectives are ongoing challenges that need careful
navigation within this model of grantmaking.
```

# **`Impact measurement`**

```
Social impact measurement in Impact 2.0 refers to the process of
assessing and evaluating the effects and outcomes of an
organization's actions or initiatives on society or specific
segments thereof. 60 It involves quantifying and qualitatively
understanding the changes, benefits, or drawbacks resulting from
these activities. Social impact measurement aims to gauge the
effectiveness, relevance, and sustainability of interventions,
```

```
whether they're undertaken by nonprofits, businesses, or
governmental entities. 61 It encompasses a range of metrics, both
quantitative (such as numbers served, funds raised, or lives
```

> `59` _`Id.`_

> `60` _`How to Meaure Social`_ `Impact, B RIGHTEST ,`

> `https://www.brightest.io/social-impact-measurement#:~:text=A%20Definition,to%2 0an%20organization's%20direct%20actions . (last accessed Jan. 11, 2024).`

> `61` _`Id.`_

```
impacted) and qualitative (examples include changes in behavior,
improved well-being, or community empowerment), allowing
organizations to understand their contributions to societal
welfare, refine strategies, and make informed decisions to
optimize their social impact. 62
```

```
The benefits of social impact measurement in Impact 2.0 are
numerous. Firstly, it enables organizations to demonstrate
accountability and transparency to stakeholders, including
donors, investors, and the public, thereby building trust and
credibility. 63 Measurement helps in understanding what works and
what doesn't, allowing for evidence-based decision-making and
the allocation of resources towards the most effective
interventions. 64 It also aids in communicating impact to attract
funding or support, encouraging collaborations, and fostering
continuous improvement by providing insights for refining
strategies. 65 Furthermore, social impact measurement promotes a
focus on outcomes rather than just outputs, ensuring that
initiatives create meaningful and sustainable changes in
society.
```

```
Impact measurement in Impact 2.0 is subject to several
obstacles. Identifying, measuring and improving social impact is
a significant challenge for corporate and private foundations,
charities, NGOs and corporations. 66 One major challenge is the
complexity of measuring intangible social outcomes in Impact
2.0, such as changes in attitudes, empowerment, or community
```

> `62` _`Id.`_

> `63 Unmesh Sheth,` _`Why You Should Measure social impact?, S OPACT`_ `(July 22, 2023) https://www.sopact.com/perspectives/measure-social-impact.`

> `64` _`Id.`_

> `65 Chris Lau,` _`Why Should You Measure Your Social Impact?,`_ `J UNXION , (Oct. 25,`

> `2022) https://junxion.com/insights/why-should-you-measure-your-social-impact/.`

> `66 M ARC J. E PSTEIN & K RISTI Y UTHAS , M EASURING AND I MPROVING S OCIAL I MPACTS : A G UIDE FOR`

> `N ONPROFITS , C OMPANIES AND I MPACT I NVESTORS (2014).`

```
cohesion, which are often harder to quantify compared to
straightforward metrics like funds raised or people served.
Limited resources, including time, expertise, and funding, pose
barriers for impact measurement in Impact 2.0, especially for
smaller organizations or initiatives without dedicated
evaluation capacities. Standardization and consensus on
measurement methodologies and metrics remain elusive, leading to
variations in approaches and sometimes hindering comparability
across different programs or sectors. 67 Additionally, resistance
to change within organizations, reluctance to embrace new
measurement practices, and concerns about the potential
administrative burden can impede the adoption of robust impact
measurement frameworks. WEB3 solutions in Impact 3.0 can address
many of these challenges.
```

```
The consulting business of impact measurement in Impact 2.0
typically involves specialized firms or consultants offering
services to organizations, whether they're nonprofits,
businesses, or government entities, to help them assess,
evaluate, and enhance their social impact. These consulting
services vary based on the specific needs and objectives of the
client but they all follow a distinctly centralized business
approach to impact measurement. Without crowd wisdom and
community audit that are part of WEB3 Impact 3.0, such
consulting practices can often be subject to single points of
failure. Consultants specializing in this field offer a
spectrum of services. This includes aiding organizations in
defining social goals, establishing key performance indicators,
and devising measurement strategies aligned with these
```

> `67 Hans Rawhouser, Michael Cummings, & Scott L. Newbert,` _`Social Impact`_

> _`Measurement: Current Approaches and Future Directions for Social`_

> _`Entrepreneurship Research`_ `, 43 Entrepreneurship Theory & Prac. 82 (2019).`

```
objectives. They assist in data collection and analysis,
utilizing diverse methods to gather and assess quantitative and
qualitative data against predetermined metrics. 68 These
professionals conduct comprehensive evaluations to gauge the
effectiveness, efficiency, and sustainability of an
organization's initiatives, determining their impact on social
change. 69 Additionally, consultants provide capacity-building
workshops to bolster an organization's internal capabilities for
impact measurement, create compelling reports for stakeholders,
and offer ongoing advisory services to refine and enhance social
impact strategies based on evaluation outcomes.
```

```
Consulting firms in impact measurement often possess expertise
in various methodologies, frameworks, and tools for assessing
social impact across diverse sectors. They tailor their services
to meet the unique needs and goals of each client, supporting
them in enhancing their social contributions while aligning with
their overall mission and objectives. While there isn't a
universally standardized set of metrics for measuring social
impact across all initiatives or sectors, several commonly used
metrics and frameworks exist. These metrics aim to evaluate
different aspects of impact and vary based on the specific
goals, context, and nature of the program or organization. Some
widely used metrics and frameworks include but are not limited
to the following:
```

● **`Social Return on Investment (SROI):`** `This metric quantifies the social value generated relative to the resources invested. It incorporates financial and non-financial`

> `68` _`See Measuring the Social Impact of Corporate Investments`_ `, D ELOITTE ,` `https://www2.deloitte.com/us/en/pages/consulting/solutions/corporate-social-im pact-measurement-metrics.html (last accessed Jan. 10, 2024).`

> `69` _`Id.`_

```
outcomes, translating them into a monetary value. 70
```

- **`Theory of Change:`** `This framework outlines the pathway of how activities lead to desired outcomes and impacts. It identifies key indicators and milestones along this pathway, providing a structure for measurement. 71`

- **`Impact Reporting and Investment Standards (IRIS):`** `IRIS offers a catalog of standardized metrics used to measure social, environmental, and financial performance. It provides a common language for impact investors and organizations to report and compare metrics. 72`

- **`Global Reporting Initiative (GRI):`** `GRI provides a framework for sustainability reporting, including social impact metrics. It focuses on various dimensions of impact, such`

```
as human rights, labor practices, community engagement, and

more.
```

- **`United Nations Sustainable Development Goals (SDGs):`** `The SDGs offer a comprehensive framework encompassing 17 global goals with associated targets and indicators. Many organizations align their impact measurement with these`

> `70 Laura Arrillaga-Andreessen & David Hoyt, An Introduction to Social Return`

> `on Investment, Standford Graduate School of Business Case Study No. SI65`

> `(2003)https://www.gsb.stanford.edu/faculty-research/case-studies/introduction-`

> `social-return-investment.`

> `71 Andrew Dillon, How to Measure Your Organization’s Social Impact, Kellogg Insight (June 10, 2022)`

```
https://insight.kellogg.northwestern.edu/article/measure-your-organizations-so
cial-impact .
```

> `72` _`Impact Reporting and Investing Standards,`_ `W ATER E QUITY`

```
https ://waterequity.com/term/impact-reporting-and-investing-standards/ (last
accessed Jan. 10, 2024).
```

> `73 G LOBAL R EPORTING I NITIATIVE , https://www.globalreporting.org/ (last accessed Jan. 10, 2024).`

```
goals to demonstrate their contribution to global
development priorities. 74
```

● **`Benefit-Cost Analysis (BCA):`** `BCA assesses the net benefits generated by an intervention by comparing the costs incurred to the benefits achieved. It helps in understanding whether the social benefits outweigh the costs. 75`

```
These metrics and frameworks are adaptable and can be tailored
to suit specific contexts and objectives. While they provide
guidance and a starting point, selecting the most appropriate
metrics requires consideration of the organization's mission,
stakeholders, and the nature of the interventions being
evaluated. As a result, there's often a need to customize
measurement approaches to best capture an organization's unique
social impact.
```

# **`Innovation & Impact Prizes`**

```
Impact innovation and impact prices are a significant impact
innovation contribution of Impact 2.0. Impact prices follow the
basic logic that applying teams will compete to complete core
metrics for an impact price. The hosting organizaiton is then
tasked to select the best team based on the chosen metrics which
will then be presented to the donor of the price.
```

```
As of the time of this writing several different innovation and
impact prizes were available. For example, the iF SOCIAL IMPACT
```

> `74` _`Sustainable Development Goals`_ `, U.N. D EP ’ T E CON . & S OC . A FFS . ,` `https://sdgs.un.org/goals (last accessed Jan. 11, 2024).`

> `75 R ICHARD ICHARD O. Z ERBE ERBE & T YLER YLER S COTT , A P RIMER FOR COTT , A P RIMER FOR , A P RIMER FOR RIMER FOR B ENEFIT -C OST ENEFIT -C OST -C OST OST A NALYSIS , NALYSIS , ,`

> `R ICHARD ICHARD O. Z ERBE ERBE & T YLER YLER S COTT , A P RIMER FOR COTT , A P RIMER FOR , A P RIMER FOR RIMER FOR B ENEFIT -C OST ENEFIT -C OST -C OST OST A NALYSIS , NALYSIS , ,`

> `https://aisp.upenn.edu/wp-content/uploads/2015/09/0033_12_SP2_Benefit_Cost_000 .pdf (last accessed Jan. 11, 2024).`

```
PRIZE 76 invites projects contributing to societal betterment,
prioritizing those aligned with the UN Sustainable Development
Goals. Applications are free, with an annual donation of EUR
100,000 from iF Design supporting selected projects. Eligible
projects must be established, allowing a maximum of two
applications per project, excluding student concepts.
```

```
Additionally, there are various specialized prizes that target
distinct goals. The 2030 Social Impact Special Prize 77 aims at
European startups addressing inequality, particularly focusing
on UN SDGs 1, 3, 4, 8, 9, 10, 11, and 16. DBS Foundation's
global, regional, and local awards spotlight innovative entities
addressing urban social and environmental challenges. 78
Similarly, the F. M. Kirby Prize 79 recognizes impactful
enterprises globally, amplifying solutions to social or
environmental issues, valuing courageous leadership and proven
traction. XPRIZE operates by identifying global challenges,
designing competitions around them, attracting diverse
participants worldwide, evaluating solutions against specific
criteria, awarding substantial prizes, and supporting the
implementation of winning solutions for real-world impact. 80
These competitions aim to spur innovation, collaboration, and
progress in addressing significant global challenges.
```

> `76` _`iF Social Impact Prize`_ `, IF D ESIGN , https://ifdesign.com/en/if-social-impact-prize (last accessed Jan. 11, 2024).`

> `77` _`2030 Social Impact Prize,`_ `T ORINO S OCIAL I MPACT ,`

```
https://www.torinosocialimpact.it/en/activities/2030-social-impact-prize/
```

> `(last accessed Jan. 11. 2024).`

> `78` _`Social Impact Prize: Calling for Bold ideas for a better world`_ `, DBS B ANK ,`

```
https://www.dbs.com/foundation/our-support/social-impact-prize (last accessed
Jan. 11, 2024).
```

> `79` _`F.M. Kirby Prize for Scaling Impact`_ `, Duke University Fuqua School of Business CASE,`

```
https://centers.fuqua.duke.edu/case/practitioners/funding/kirby-impact-prize/
(last accessed Jan. 11, 2024).
```

> `80 XPRIZE F OUNDATION , https://www.xprize.org/ (last accessed Jan. 11, 2024).`

```
Lastly there is the new xFoundry@UMD prize through their
Xperience program. 81 Xperience unites all 12 schools and colleges
at UMD to confront significant societal challenges. Through an
integrated resource ecosystem, they look to facilitate seamless
collaboration, knowledge management, and investment
opportunities to sustain their programs. Guided by a
multidisciplinary curriculum and annual targeted competitions,
students not only earn academic credits but also stand a chance
to launch well-funded ventures. Each Xperience cohort focuses on
a distinct challenge within seven competition domains, aligning
with real market needs and investor interests. The ultimate
reward is a new venture with funding ranging from $250K to $2M,
supported by an external CXO network for success, with student
team members becoming integral co-founders, and earning
extensive local and national press coverage. Xperience wants to
cultivate a dynamic exchange of ideas and merge creative
expression and critical thinking across disciplines to propel
teams toward groundbreaking solutions and transformative impact.
It's an immersive program transcending academics, inviting teams
to compete, innovate, and emerge as pioneers tackling society's
grand challenges.
```

```
Impact 3.0
```

```
Impact 3.0 builds on the accomplishments of Impact 1.0 and 2.0.
Yet, it takes impact investing innovation beyond the current
trajectory and enables impact investments to turn into
for-profit scaling ventures. Impact 3.0 scales through a
combination of: a.) collaborative giving community, b.) funding
```

> `81` _`xFoundry Xperience`_ `, U NIVERSITY OF M ARYLAND X F OUNDRY ,` `https://xfoundry.umd.edu/xperience (last accessed Jan. 11, 2024).`

```
a mix of effort, via non-profit grants, and results, via
post-grant for-profit ventures that launch after impact
verification via collaborative communities, and c.)
certification of impact via listing of impact certificates.
```

```
WEB3 technologies for community governance provide a
distinguishing feature of Impact 3.0. Whereas WEB2 technology
limits the applications and uses of social impact certificates,
WEB3 technology enables an ever-expanding variety of social
entrepreneurs, impact activists, donors, and impact investors to
collaborate. In particular, emerging WEB3 technology allows
impact certificates to expand the Impact 1.0 market for carbon
credits beyond the current emphasis on carbon emissions. By
broadening the scope of impact trading via impact certificate
issuance, impact measurement, and verification expands in scope
and scale.
```

```
Unlike Impact 1.0 and 2.0, Impact 3.0 allows the funding of a
mix of effort and verifiable results. Funding effort alone is
possible through the regular grant screening process that
eventually may lead to an impact certificate issuance. But,
Impact 3.0 also funds verifiable results. WEB3 expert
communities verify the attained impact of a team before the
impact certificate listing. Moreover, this initial result of a
verified project is ideal typically only partially funded with
an initial release of assets, which in turn triggers the impact
certificate listing. Subsequent results of the listed impact
team are screened for each subsequent release of impact
certificate fractions. Such fractions are released to the larger
donor market. If the larger donor market should not purchase the
impact certificate fractions, the original underwriting donor
community has underwritten the impact certificate listing.
```

```
Through firm commitment underwriting of impact certificate
listings, the project team and the investing community obtain
assurances that the entire impact certificate listing will be
purchased, including all fractions of impact certificates, if
the respective impact milestone deliverables are upvoted by the
respective WEB3 expert community.
```

```
Key to the potential of Impact 3.0 is the listing of impact
certificates on an impact certificate marketplace. Through the
listed impact certificates, impact projects demonstrate their
ability to perform verifiable impact. Unlike Impact 1.0 and 2.0
where projects may receive funding despite a lack of impact
verification, Impact 3.0 only allows project funding if projects
are verified and demonstrate impact via milestones. To ensure
impact verification, projects are listed on the impact
certificate marketplace only after they have either: a.) won a
competition (utilizing an Impact 2.0 idea), or b.) received an
upvote from a community of experts utilizing a decentralized
voting design. 82
```

```
Through the impact certificate marketplace, Impact 3.0 expands
Impact 2.0 initiatives of participatory grantmaking, impact
measurement, and competitions. Impact certificates expand the
ideas of participatory grant giving in that they allow projects
to apply directly and seek impact certificate listing status.
Moreover, the impact certificate marketplace epitomizes impact
measurement but does so through more decentralized means that
allow the impact projects and the overall impact marketplace to
scale directly. It awards the verified winners of the
```

> `82 Craig Calcaterra, Wulf A. Kaal, & Vlad Andrei,` _`Blockchain Infrastructure for Measuring Domain Specific Reputation in Autonomous Decentralized and Anonymous Systems,`_ `Univ. St. Thomas (Minn.) Legal Stud. Rsch. Paper No.`

> `18–11(February 18, 2018), https://ssrn.com/abstract=3125822 .`

```
competition and impact community upvotes immediately through
impact certificate listing. In contrast with Impact 1.0 and
Impact 2.0 it creates a much broader primary and secondary
market for good.
```

```
Impact 3.0 is configurable and therefore allows donors to use a
conventional innovation fund with traditional Impact 1.0 and 2.0
features or upgrade it materially with Web3 features. Such WEB3
features may include but are not limited to the following:
```

● **`Donor Crowd Wisdom`** `– WEB3 community structures allow donors to collaborate for increased impact without losing control.`

```
By voting on donation outcomes, the donor community
exercises crowd wisdom. In the chosen WEB3 governance
design it is possible for the entire donor community to see
the outcome of the vote in a “test or informal vote”. Once
every donor sees how all other donors assess the given
project, they can jointly change their minds during the
“formal vote” in which their respective reputation tokens
are at stake. Typically, in this form of decentralized
governance, all decisions are made with unanimity.
```

● **`Legal Separation`** `- WEB3 community engagements facilitate unique legal solutions that ensure tax recognition in the chosen 501c3 and legal separation and limited liability for the donor community. In this legal structure, donor WEB3 communities are not directly represented in the 501c3 for tax reasons but can still exercise significant influence over the donations by showing their considerations and voting outcomes as it pertains to impact teams that may or`

```
may not qualify for donations.
```

● **`Primary and Secondary Markets`** `– WEB3 impact certificate listings enable WEB3 donor community reinvestment of commercial upside of innovation through the resale of impact certificates in a secondary market. The primary market of donor investments into impact certificates provides for firm commitment underwriting of impact certificates. This ensures market certainty and team success. In the secondary market, donor WEB3 communities can resell the impact certificates with the upside of secondary market pricing structures and open market supply and demand.`

● **`Project due diligence`** `- incoming impact projects are subjected to a rigorous sequence of due diligence measures entailing core competencies of the applying team expertise and participatory decision making. While different measures can be used to pre-screen impact team applications to filter out non-viable candidates, Impact 3.0 applies WEB3 community software toolsets to empower expert communities with decentralized governance and reputation logic. The upvotes of the expert communities function as a due diligence review that is fully transparent to all constituents, including primary market donors, underwriting donors, and secondary market participants. Such expert community assessment becomes an integral part of the pricing of impact certificate fragments in both the primary and secondary markets.`

● **`Funding effort & impact`** `- Impact certificates allow parts of a grant to be contingent on effort while other parts are contingent on the success and impact verification of the project. This duality of funding effort and impact creates a hybrid form of investments between Impact 1.0 and Impact 2.0. It improves the Impact 1.0 traditional model of “pay for process”, aka. If a project performs certain metrics nominally, it may receive funding. The Impact 3.0 hybrid form of impact investment also improves upon Impact 2.0 by upgrading price competition and pay for performance. It does so by creating a tangible Impact investment market through impact certification.`

● **`Collaboration`** `- Whereas Impact 2.0 incentivized competition and associated enhanced performance for grant money, Impact 3.0 via impact certificates incentivizes a larger engagement for all stakeholders. All stakeholders in the impact certificate model, including impact teams, donors, primary and secondary market participants, and the impact certificate marketplace operator participate in the market and collaborate for a greater outcome for all involved. Impact teams benefit from collaboration because their project gets funded and has secondary market upside and scaling opportunities after impact certificate listing. Donors benefit because they obtain assurances that their donations are fulfilling their purpose and have long-term impact upside and scaling opportunities for future growth. Primary and secondary market participants benefit from`

```
enhanced transparency and certainty in the Impact 3.0
```

```
impact certificate market, as compared with Impact 1.0 and
2.0. The impact certificate marketplace operator benefits
from collaboration as the percentage fees of successful
projects are presumably higher than the fees of projects
that don’t succeed. Setting up collaboration-driven checks
and balances WEB3 approach to impact verification benefits
all constituents long-term.
```

# ● **`Repeatability, enthusiasm, new market entrants`** `- the`

```
collaboration, due diligence, funding logic, and primary
and secondary markets in impact certificates enhance
efficiency in the impact certificate market, allowing it to
scale and prove efficacy to future donors & participants.
The ongoing impact community interaction and measurable
impact outcomes demonstrated through impact certificate
issuance ensure that existing donors stay engaged and new
donors are easier to attract. New donors, excited by
tech-forward Impact 3.0 giving models, will expand
philanthropy resources over time.
```

```
A number of WEB3 startups have attempted to optimize the market
for impact certificates in accordance with the above-illustrated
principles. Many have failed. For example, the Ethereum
community has proposed using protocol-generated revenue and a
results oracle to create a startup-style funding cycle for
public good projects. The results oracle, operating as a DAO,
finances these projects retroactively, rewarding the impact
teams that contributed value. 83 It can distribute rewards to
```

> `83 Optimism & Vitalik Buterin,` _`Retroactive Public Goods Funding`_ `, M EDIUM (Jul. 20, 2021),`

> `https://medium.com/ethereum-optimism/retroactive-public-goods-funding-33c9b7d0 0f0c .`

```
three types of addresses: individual or organizational, fixed
allocation tables, and project tokens representing
contributions. 84 For the first two, funds are sent directly or
via allocation tables. Project tokens introduce a prediction
market concept, allowing the Results Oracle to set a price floor
by purchasing tokens based on the allocated reward and token
supply. 85 The key downside of these types of oracles in DAO
format are decentralized governance attack vectors. In other
wods, even if the core concept of resource distribution works
well enough, the overall projet is typically subject to the
downsides that derive from lack of attack resistance of the
governance design.
```

```
Another WEB3 technology-based optimization attempt for impact
certificates is the implementation of Hypercerts. A Hypercert
“is an interoperable data layer for impact-funding mechanisms.
Each hypercert is an impact claim described by (1) the scope of
work that has been (or will be) performed in a given time period
by a set of specified contributors and (2) the scope of impact
that this work has had (or will have) in another given time
period. In addition, a hypercert has the potential to declare
which rights the owner of the hypercert has, e.g. the right to
publicly display the hypercert.” 86 Hypercerts can function as
NFTs stored on public, verifiable blockchains, ensuring
immutability which amplifies transparency and traceability and
subsequently reduces transaction costs across the entire
system. 87 This would also allow the ability to merge and split
hypercerts along different dimensions which is useful if funders
```

> `84` _`Id.`_

> `85` _`Id.`_

> `86 Holke Brammer,` _`Hypercerts: A New Primitive for Public Goods Funding`_ `, P ROTOCOL`

> `L ABS (Aug. 24, 2022), https://protocol.ai/blog/hypercert-new-primitive/ .`

> `87` _`Id.`_

```
only want to pay for particular aspects of a project, rather
than pay into a general fund for a project. 88 Ultimately,
Hypercerts serve a tri-fold purpose: they establish clear
identifiability by documenting contributors, the scope of work,
and timeframes involved, enabling multiple records of the same
work to identify distinct impacts. 89 These public and immutable
records ensure traceability and permanence, facilitating durable
documentation. 90 Additionally, these digital assets allow
ownership transfer under specific conditions and
```

```
fractionalization, granting various rights to owners related to
retrospective rewards, public display of support, or passive
income from intellectual property. 91 Notably, a hypercert defines
```

```
the work undertaken without specifying the precise impact size,
leaving that evaluation to external assessments of the covered
aspects within the defined timeframe. Like other optimization
attempts, Hypercerts often lack the require verification of
impact inputs in decentralized governance settings that are
attack proof.
```

# **`Collaborative Giving Communities`**

```
WEB3 Communities are the key component of Impact 3.0. Scaling
social impact is made possible through WEB3 community
governance. Several core WEB3 communities are needed for the
scaling of social impact and to upgrade the existing
philanthropic model. Among those communities are the donor
community itself and the contractor community of individuals who
```

> `88` _`Id.`_

> `89` _`Hypercerts: A new primitive for impact funding systems`_ `, H YPERCERTS F OUNDATION`

> `(Feb. 14, 2023),`

> `https://hypercerts.org/docs/assets/files/hypercerts_whitepaper_v0-3e54f05fe135`

> `8373c4f32610dd4fb391.pdf .`

> `90` _`Id.`_

> `91` _`Id.`_

```
work for the donor community and provide expert validation of
impact services to the donor community.
```

```
The donor community in this model will not pool assets and it
will not take custody of donor assets. Instead, the donor
community will make decentralized WEB3 governance decisions on
impact projects seeking funding. While such decisions are
internally binding to the donor community and have a binding
effect on the legal wrapper used by the donor community, as the
case may be, they have no binding legal effect on the 501c3 that
collected the donor assets. While the 501c3 board is not bound
by the decisions of the donor community, in effect it will
adhere to the publicly visible voting and staking outcomes of
the donor community on their chosen blockchain or centralized
database. Not adhering to the choices made by the donor
community risks the 501c3 board and its long-term client base.
```

```
The second key community is the community of experts in a given
field. The expert community is made of individuals who work for
the donor community and provide expert validation of impact
services to the donor community. Given the broad variety of
expertise that may be needed by the donor community to assess
due diligence outcomes to make impact investment decisions, it
is conceivable that the donor community will over time hire many
different expert communities. While centralized service
providers can provide expertise and due diligence inputs,
centralized service providers often lack crowd wisdom inputs and
necessitate agency structures to supervise their work. Such
agency structures can become expensive. Expert communities can
be set up quickly and self-organized through a software suite of
WEB3 governance. Agency structures used in centralized legacy
```

```
system service providers become obsolete. The automation of
expert community creation and self-organization brings down
```

```
costs and creates economies of scale in impact investing.
```

```
The interplay between the expert community and the donor
community is driven by the stalking behavior of the majorities
in the respective communities. For example, when the expert
community considers a project for funding. That decision and
staked upvote by the donor community triggers the associated due
diligence job for a given expert community. Once the evaluation
job is posted on the expert community board. A given member of
the expert community will stake reputation tokens to be chosen
by the expert community to perform the job. Once the job is
finished and posted on the expert community forum, the expert
community evaluates the job and votes on the job. The first vote
is informal, the second vote is formal. This duality of votes
allows for consensus building for each engagement, 92 where the
overwhelming majority of decisions are unanimous.
```

```
The mechanics of WEB3 community decisions in the impact
certificate marketplace design revolve around reputation token
staking. Reputation tokens are non-fungible tokens that are
chain agnostic in design and can be implemented through a
blockchain-connected client across any layer I blockchain. The
use of weighted reputation voting has key advantages over other
WEB2 and WEB3 one-token-one-vote voting mechanisms. It aligns
incentives for donor community members individually and at the
same time calibrates their incentives with the overall
community. Donor community members act for themselves as
individual utility maximizers while at the same acting on behalf
of the interests of their community of donors. This is all
visible in the staking engagements of each donor community
member and the voting outcomes of the entire community.
```

> `92 Calcaterra, Kaal, & Andrei,` _`supra`_ `note 82.`

```
Reputation staking changes the incentive design for Impact
outcomes. Unlike Impact 1.0 and 2.0 where voting decisions were
not part of the design typically, in Impact 3.0, the donor
community makes collective decisions by staking reputation
tokens to define core impact fund mission and goals, to propose
impact targets and bounties, similar to XPRIZE, 93 approve
specific grant applications, and decides organizational
governance questions. This level of public engagement and
for-good public decision-making allows for a level of public
scrutiny and associated public engagement that is unprecedented
in the history of philanthropy.
```

# **`Impact Certificate Marketplace`**

```
The marketplace for impact certificates can be described as a
“much broader for-good carbon credit marketplace.” Whereas in
the traditional carbon credit marketplace the offset offered to
polluters through the acquisition of carbon credits enables
impact outcomes, in the impact certificate marketplace the
definition of “impact” is entirely different and much broader.
Impact 3.0 via the impact certificate marketplace can involve
any kind of impact and for-good engagement that finds validation
via impact certificate listing. Impact 3.0 via impact
certificates is limited by market participants’ choices. If
market participants don’t purchase impact certificates
post-listing, those projects whose impact certificates do not
find purchasers are less likely to proliferate and find
commercial applications long-term.
```

> `93 XPRIZE F OUNDATION , https://www.xprize.org/ (last accessed Jan. 11, 2024).`

```
Impact creation in Impact 3.0 via the impact certificate
marketplace may be more defined by the start of an era of impact
creation and less so as a toolset for impact. In 2024, the
market place for impact certificates has the required WEB3
technology solutions that can help is scale impact 3.0. The
growth trajectory of Impact 3.0 via the impact certificate
marketplace depends on the donor market realization and
appreciation of the efficiencies created by impact certificates.
Other dependencies for the growth of Impact 3.0 include donors’
willingness to try out a new technology-based impact scaling
solution by running parallel trackes in their donative efforts,
overall growth of philanthropy, tech matching beween impact
solutions in impact projects and impact certificate listings,
critical mass of impact certificate listing, standardization of
impact certificates, broadening of funding sources for Impact
3.0, and credential tracking in Impact 3.0. Given these
dependencies, a smaller subset of the philanthropy market will
be attracted to impact certificate markets. It may take five to
ten years for the impact certificate marketplace to fully
establish itself and scale in impact donor circles. Scaling here
also include opening up new donor markets that had previously
not considered impact investments but are attracted to the
impact certificate marketplace because of its Impact 3.0
efficiencies, transparency, and accountability.
```

```
Historical examples of social impact tokens in Impact 3.0, akin
to impact certificates in Impact 3.0, include SolarCoin 94 , a
WEB3-based solar energy incentive; Fishcoin 95 , a WEB3-based data
```

> `94` _`SolarCoin: A Blockchain-Based Solar Energy Incentive`_ `, SolarCoin`

> `https://www.allcryptowhitepapers.com/solarcoin-whitepaper/ (last accessed Jan. 11, 2024).`

> _`95 Fishcoin: A blockchain based data ecosystem for the global seafood industry`_ `, F ISHCOIN , [hyperlink] (last accessed date).`

```
ecosystem for the global seafood industry, Soulbound 96 Tokens,
non-transferable digital identity tokens representing an
individual’s unique identity by incorporating unique traits,
characteristics, or background and may include the person’s
medical history, work records, or other information belonging
solely to that individual. Another project example of Social
Impact Tokens is the “Impact Token Project,” which represents
the nexus of economic theory, blockchain technology/philosophy
and the remarkable research and efforts of Social Good Ecosystem
participants and seeks to bring together an ideal system for
social good. 97 The EG Token 98 offers a direct channel for
passionate donors eager to witness the tangible outcomes of
their contributions. Through donations to the EG Social Impact
wallet, every dollar is meticulously traced via WEB3 technology
until it reaches its intended impact point. Recipients then
document and share these impacts with both the community and a
broader audience. 99 Additionally, the EG community actively
identifies and celebrates volunteers who actively drive positive
change while retail investors trading the EG token allocate 5%
of token fees toward funding social impact initiatives. 100
```

```
The impact certificate marketplace creates several core benefits
for philanthropy in Impact 3.0. First and foremost, the impact
certificate marketplace significantly increases the efficiency
and effectiveness of grant-making by retaining the value of all
the impact work of existing grantor networks while at the same
time upgrading it with a technology platform for impact
```

> `96 Kajol Wadhwani,` _`A Comprehensive Guide to Soulbound Tokens`_ `, S OLU L AB ,` `https://www.solulab.com/soulbound-tokens-guide/ (last accessed Jan. 11, 2024).`

> `97 I MPACT T OKEN P ROJECT , https://www.impacttokens.com/ (last accessed Jan. 11,`

> `(2024).`

> `98 EG T OKEN , https://www.egtoken.io/token (last accessed Jan. 11, 2024).`

> `99` _`Id.`_

> `100` _`Id.`_

```
certificates. Furthermore, the impact certificate marketplace
facilitates the next generation of improved collaborative
grant-giving by integrating the benefits of WEB3 for
representative organizations and elevating the presence and
transparency of impact projects around the globe. Through these
enhanced efficiencies, the impact certificate marketplace boosts
the capacity of donor networks to fundraise and present a more
unified approach. It also builds much-needed bridges between
collaborative grant-giving networks, all of whom can enhance
their grant-giving work through the impact certificate
marketplace. Collaboration of collaborative grant-giving
networks through the impact certificate marketplace, in turn,
enables a learning experience through which Impact 1.0 and 2.0
networks can together with Impact 3.0 networks complement each
other and strengthen joint for-good advocacy and mobilization
approaches. Finally, the impact certificate marketplace enables
upgrades to philanthropy through technology inclusion combined
with collaborative learning for collaborative grant-giving
networks around programmatic and operational inclusion.
```

```
Donor syndicates particularly benefit from the impact
certificate marketplace. First and foremost, donors' individual
agendas are largely removed by engaging through the impact
certificate marketplace. Donors become incentivized to
collaborate through membership in a donor community. The voting
outputs of the donor community enable all individual donors to
voice their preferences and work with the other donor community
members to achieve their joint desirable donation allocations.
The impact certificate marketplace also updates Impact 1.0 and
2.0 fee models through a modern donation allocation model.
Through the joint donor community engagements via the WEB3
voting engine, donor community members cannot fund outlier
```

```
projects because of personal agendas. The donor community’s
collective wisdom, as instantiated through the WEB3 governance
voting outcomes of the community, ensures capital is
continuously optimally allocated.
```

```
Follow-on donors and donor syndicates also benefit from the
impact certificate marketplace. the transparency of the donor
communities' WEB3 voting outcomes supports the secondary market
and for-profit follow-on investments as due diligence support
for seed investments. Once the donor community and expert
community upvoted a given project, the secondary market has deal
access through the impact certificate listing. Projects that
completed the impact certificate listing process have received
multiple levels of due diligence including but not limited to
the following - Donor community upvote for due diligence
qualification - Expert community upvote (due diligence of the
project) - Donor community vote to allocate funding to project
for milestones in the form of underwriting the project’s impact
certificate issuance - donor market purchase of impact
certificate fractions. Follow-on donor syndicates benefit from
the impact certificate marketplace fee model that is competitive
with Impact 1.0 and 2.0 fee models. Deal access for follow-on
donor syndicates is significantly enhanced which lowers the cost
of deal origination significantly. Finally, the wisdom of the
crowd in the respective WEB3 communities of the impact
certificate model upgrades the existing fund allocation model
which was afflicted by uninformed voters, sockpuppets, and other
gamesmanship, voting with nothing at stake, voting with other
people’s money. The marketplace for impact certificates
benefits from access to WEB2 and WEB3 funding sources. WEB2
funding sources are mostly traditional donations and pledges.
WEB3 funding sources are much bigger as they allow the resale of
```

```
impact certificates and equity sales in companies built on the
innovations coming out of the impact certificate listing.
```

# **`Roadmap for Impact 3.0`**

```
As Impact 3.0 evolves, Impact 3.0 market participants are
seizing opportunities and tackling associated challenges across
the impact industry in different market sectors and beyond.
While core components of Impact 3.0, including but not limited
to WEB3 Community toolsets and the impact certificate
marketplace, are pushing the boundaries of existing impact
markets and creating new opportunities for impact investments in
the process, those components alone are the foundation of Impact
3.0 but need support structures. Those support structures are
emerging in lockstep with the Impact 3.0 evolution and include
impact scaling solutions, the standardization of Impact 3.0
impact certificates, and enhancements in Impact 3.0 funding
solutions. Many other opportunities and challenges will emerge
as Impact 3.0 continues to thrive.
```

```
The roadmap for Impact 3.0 necessarily includes addressing open
issues identified by the Impact 3.0 community. Among those
issues are standardization of Impact 3.0 impact investing via
impact certificates and meeting the financing requirements of
the United Nations Sustainable Development Goals (SDGs). 101
Blockchain technology emerges as a promising solution to
overcome these challenges within the impact investing sector. By
transforming non-financial values, like impact, into trackable
digital tokens, known as impact certificates, blockchain
facilitates investments for projects contributing positively to
social and environmental causes aligned with the SDGs. 102 Many
```

> `101 Uzsoki & Guerdat,` _`supra`_ `note 34.`

> `102 Uzsoki & Guerdat,` _`supra`_ `note 34.`

```
current blockchain projects critically lack usage of existing
social impact evidence in design and management, posing future
challenges. 103 If cryptotokens are to be adopted as tools that can
contribute to achieving the SDGs, they must leverage desired
behaviors in an ethical, efficient, and sustainable manner. 104
Impact certificate technology, while emerging, needs to reliably
certify that the certificate was issued by the group or
individual that performed the associated activity and the
certificate needs to be uniquely associated with that activity. 105
In essence, impact certificate purchasers should be willing to
pay the same amount for a valid certificate of XYZ that they
would be willing to pay to support cause XYZ to happen (and keep
the resulting certificate). 106 In other words, in a perfect world
of a functioning impact certificate marketplace, a
philanthropist should be indifferent as to whether spending
money to do a good deed or paying someone else to do it,
provided the philanthropist gets the entire certificate for that
good deed.
```

# **`Scaling Impact 3.0`**

```
Community toolsets in Impact 3.0 verify impact efficiently.
Unlike impact verification in Impact 2.0, including but not
limited to impact screening via competitions, community-based
impact verification in Impact 3.0 allows impact systems to scale
because the verification can be set up instantaneously without
the need to pay centralized organization intermediaries.
```

> `103 Iain Barclay, Michael Cooper, Jakob Hackel & Paul Perrin,` _`Tokenizing`_

> _`Behavior Change: A Pathway for the Sustainable Development Goals`_ `, 4 F RONTIERS IN B LOCKCHAIN (Jan. 2022),`

> `https://doaj.org/article/bf4f69994d1d4633a0dd6e8af9bed507 .`

> `104` _`Id.`_

> `105 Christiano,` _`supra`_ `note 36.`

> `106 Christiano,` _`supra`_ `note 36.`

```
WEB3 community toolsets facilitate an unprecedented level of
impact system enablement at scale. This pertains not just to the
projects, that are listed on the impact certificate platform and
marketplace, and their ability to utilize impact community
toolsets but also to the impact certificate platform and
marketplace itself.
```

```
A key component for impact scaling enabled through Impact 3.0
community governance and the impact certificate marketplace is
philanthropy stakeholder alignment. Stakeholder alignment here
pertains to all stakeholders in Impact 3.0, e.g. funding
sources, donors, primary market impact investors, impact
investors in the secondary market, impact fund operators, impact
intermediaries, industry experts, donor communities, expert
communities, impact projects, and past grantees. Impact 3.0
community governance and impact certificate align impact
stakeholders because they directly benefit each stakeholder
while creating synergies and knock-on effects for all
stakeholders.
```

```
Take, for instance, the donor communities. Impact 3.0 enables
the collaboration of donors in donor communities to tackle grand
challenges that need to be addressed by the donor community in
conjunction with other stakeholders. Impact 3.0 benefits donors
by maximizing measurable impact through donor and expert
community verification of impact projects. Donors participate
in fund allocation and due diligence through collaboration with
expert communities. The collaboration, in turn, enables constant
learning by doing and evolutionary innovations in impact
technology for participatory decision-making.
```

```
Donor support organizations, such as family offices,
foundations, fiscal sponsors, and centralized support
organizations, benefit from Impact 3.0 features. Donor support
organizations benefit because the quantity and quality of their
impact contributions are enhanced, creating economies of scale.
For example, fiscal sponsors who support Impact 3.0 systems can
optimize, automate, and streamline their work processes in a
WEB3 environment. Once automated, many impact-related processes
create knock-on effects on others. For example, WEB3-powered
impact process optimization, including but not limited to WEB3
community governance, facilitates enhancements in impact
measurements which in turn creates economies of scale for
philanthropy overall. As the Impact 3.0 industry grows, donor
support organizations benefit from a growing pipeline of Impact
3.0 deals. Donor support organizations grow with Impact 3.0 by
maintaining and increasing their donor bases and increasing
funding levels. Those benefits are, however, contingent on
Impact 3.0’s ability to attract highly effective fundable
projects.
```

```
High-impact non-profit projects also benefit from the Impact 3.0
design. Impact projects benefit from Impact 3.0 because
fundraising becomes more efficient. Whereas in Impact 1.0 and
2.0, projects had to appeal often to donors directly via
multiple rounds of pitches and long-winded fundraising
processes, in Impact 3.0, once a project applied on the impact
certificate marketplace for impact certificate listing, it is
available for grant funding directly. Intermediation is largely
removed in Impact 3.0, which lowers overall cost. Through the
project application process, Impact 3.0 builds a funding
pipeline for new projects. However, funding is not limited to
project completion. Follow-on funding rounds are likely if a
```

```
project demonstrates impact at the end of the initial funding
round via grant, especially if there are commercial applications
in a given impact project. In comparison with Impact 1.0 and
2.0, where projects often create impact outcomes that are funded
in silos, Impact 3.0 allows for continuous funding throughout
the development process and after. All funding stages are
accompanied by feedback effects through the respective
communities and their involvement in impact certificate fraction
releases. a Projects are also rewarded for incremental steps
```

```
Businesses looking to demonstrate social impact benefit from
Impact 3.0. The transparency of listing impact certificates
provides businesses with direct access to impact project funding
opportunities. Businesses can match their needs with the
specific criteria of projects as listed on impact certificates
and on the background information sheets. Businesses can
increase their brand value through the association with and
investment in impact certificates. Alignment with certified
impact in Impact 3.0 also allows businesses to offset other
non-impact or publicly perceived non-impact business
engagements. For example, the tobacco industry could invest in a
lung cancer impact certificate to offset their contributions to
lung cancer. Moreover, businesses that invest in impact
certificates may expect to attract impact-focused investors and
talent. This ESG market is becoming increasingly important for
businesses worldwide. Businesses that invest in impact
```

```
certificates can protect their social licenses or, for example,
their B-Corp Certification to operate. Finally, the transparency
afforded by impact certificate markets can guide giving to
high-impact, high-potential need areas where the business-driven
impact investment can have the greatest impact.
```

```
Scaling impact is also facilitated by the technology-based
fairness principles, transparency, and accountability of the
WEB3 technology logic upon which the impact certificate
marketplace was built. The smart WEB3 contracts that power the
operations of the impact certificate marketplace prohibit and
make impossible the extension of favors to individual donors.
Unlike Impact 1.0 and 2.0 deals where the highest pledging
impact donor could get special considerations and other favors,
the smart contract of the Impact 3.0 impact certificate
marketplace is tamper-proof and fully transparent on the
blockchain. Accordingly, the impact certificate marketplace does
not influence how impact certificates are funded. Donors who
funded a given project that listed impact certificates cannot
obtain better terms than other donors in the impact certificate
market. The transparency and accountability of WEB3 technologies
upon which the impact certificate marketplace was built create
certainty of outcomes. Certainty, in turn, creates investor
confidence based on which markets in impact certificates can
grow.
```

```
Greenwashing can be significantly curtailed through the impact
certificate marketplace. Because funding only goes to trackable
progress in impact certificates that are fully transparent and
accountable, greenwashing of projects and donors is much more
difficult. The transparency afforded by impact certificate
trading and blockchain storage of associated data makes the
impact certificate marketplace publicly auditable at any time.
Regulators have full access to data at a moment's notice.
Through this transparency any form of nominal but not
substantive impact stories published by impact certificate
purchasers and impact certificate listing projects can be
invalidated instantaneously by any market participant, not just
```

```
insiders as in the WEB2 and legacy equivalents. The public
fallout of greenwashing misstatements is likely to be more
pronounced in the impact certificate marketplace as its entire
logic is built on impact transparency and accountability. The
WEB3 accountability enhancements in the impact certificate
marketplace curtail traditional notions of greenwashing while at
the same time increasing trust in impact projects. The enhanced
greenwashing protections and trust enhancements, in turn, allow
the impact certificate marketplace to support a new
proliferation of impact investing and innovation.
```

# **`Standardizing Impact 3.0`**

```
Standardization of impact certificates is a key challenge for
Impact 3.0. In other words, how can we ensure that impact
certificate trading is coherent and follows pre-established
standards that market participants adhere to? The
standardization of impact certificates will require
precedent-setting. Precedent in this context refers to an
established way of doing business in impact certificates.
Because impact certificates are so new and don’t have an
established way of accommodating different and perhaps adverse
interests, it is important to create best practices that over
time lead to more binding standards. Such best practices of
impact certificate trading can pertain to technology systems
used, the storage of impact certificates, and the pricing logic
for impact certificates, among many other considerations.
```

```
Impact 3.0 has key advantages for impact standardization. Unlike
Impact 1.0 and 2.0, Impact 3.0 has the opportunity to provide
mathematical organically evolving forms of impact standard
```

```
setting. Where standardization in Impact 2.0 required political
compromise and years of lobbying, Impact 3.0 can use new WEB3
forms of standardization via precedent-setting in weighted
directed acyclical graphs. 107 In this system, a smart contract can
become the standard. Once the smart contract is set up as a
template which is then over time used by other market
participants, the fact that the market uses it continuously is
the standard setting. The beauty of this WEB3 system is that it
does not require a centralized lobbying and political compromise
process through elected political leaders. The fact that people
use the established smart contract suffices to set the standard.
And, importantly, unlike Impact 1.0 and 2.0 standardization, in
Impact 3.0, the standard evolves organically. As a new template
smart contract is created because market participants realized
the shortcomings of the existing smart contract template, the
fact that the new template smart contract is used by and between
market participants to, for example, exchange and trade impact
certificates, suffice to change and upgrade the standard. While
some market participants may adhere to the old smart contract
template with the then-existing limitations, other market
participants will move their business to the new smart contract,
which then in fact becomes the new template and standard. Market
power and market participant decision-making are preeminent and
ubiquitous forces in this Impact 3.0 standardization. There is
no need for market participants to explain the limitations of
the old smart contract to lobbyists and politicians with urges
to create the new standard. The market evolves with standards
through the smart contract template evolution in an organic
grassroots process.
```

> `107 Craig Calcaterra & Wulf A. Kaal,` _`Secure Proof of Stake Protocol,`_ `Univ. St. Thomas (Minn.) Legal Stud. Rsch. Paper No. 18-10 (Jan. 18, 2018),` `https://ssrn.com/abstract=3125827 .`

```
Funding Sources Impact 3.0
```

```
Funding sources are important for the Impact 3.0 evolution. It
is conceivable that projects that successfully listed impact
certificates will continue to look for additional funding
sources as the project matures. The initial impact certificate
listing may therefore function as a seed investment for the
project. As the project proves impact through different kinds of
impact measurements pre- and post-impact certificate listing, it
qualifies for follow-on investments. The funding sources for
that follow-on investment are particularly important as they
allow Impact 3.0 to scale. Aside from venture capital follow-on
investments for projects that showed a significant impact on the
impact certificate marketplace, indirect government funding
through tax credits seems of paramount importance.
```

```
Venture capital follow-on investments will benefit projects that
prove impact by listing impact certificates but have larger
capital requirements over time to fulfill their mission. In this
scenario, the impact certificate listing fulfills a due
diligence function for venture capital funds. Through the
projects’ success that is validated through the impact
certificate, the venture capital follow-on investment benefits
from all the project performance data that is generated through
the impact certificate marketplace. Impact projects and venture
capitalist funds benefit equally from the transparency and
impact-verified accountability afforded by the impact
certificate marketplace.
```

```
The government funding side is equally intriguing through tax
credits. If and when governments realize the “for good” that is
created by the impact certificate marketplace, the government
may wish to incentivize the creation of solutions that benefit
humanity. If approved by the government, such projects could
receive tax credits for the solution they create. It is
conceivable that, over time, the recognized and government
funded projects that help solve hunger can offset and supplement
the need for governments to fund social programs. While some
problems in the world cannot be solved without government
engagement, the transparency and accountability afforded by the
WEB3 solution in Impact 3.0 open up the possibility for
governments to trace and engage with for good solutions created
by technology. This public private sector collaboration may help
offset government funding over time and / or help the government
allocate funding to verifiable impact projects and align with
the government agenda.
```

```
Community coordination software in Impact 3.0 enables the
creation and sharing of impact community revenue via government
tax credits. Rather than creating one-off tax credits for
successful projects and their teams, the projects that list
impact certificates can prove community-driven impact over time.
Therefore, the community that organizes around the impact
certificate should be able to apply for and receive tax credits
as a form of revenue stream from the government for the
continuous creation of desirable societal outcomes. The WEB3
community software allows the distribution of government tax
credits to community members pro rata to their merit or
reputation scores.
```

```
Credential Tracking in Impact 3.0
```

```
Credentials and expertise tracking for impact projects and
associated impact project community actors is crucial for Impact
3.0. Expertise tracking in this context refers to Impact 3.0
system features that allow donors and secondary market
participants as well as external follow-on funding sources, such
as venture funds and the government, to track how a given
individual or project performs in impact terms over time. While
impact certificates are one prominent measure for expertise
tracking, impact certificates are mostly a fungible measure of
impact success in economic terms without a direct reference to
the inherent expertise developed by the individual project
community members and the project as a collective. That’s how
WEB3 community software becomes even more relevant. We
previously discussed in this paper how WEB3 community software
can help with the scaling of impact certificate verification and
due diligence functions. There is another important dimension to
WEB3 community software tools and that dimension pertains to
expertise tracking.
```

```
WEB3 reputation systems govern evolving impact communities. As
impact projects list impact certificates and get verified
through expert community upvotes, the impact project team itself
becomes a community that starts with the core team and onboards
experts that support the core impact project. The impact project
team members become founders in the system and start onboarding
new members through a reputation onboarding process. 108 The
underlying reputation governance in WEB3 systems that govern
this community has a broad societal impact 109 as exemplified
```

> `108 Calcaterra, Kaal, & Andrei,` _`supra`_ `note 82.`

> `109 C RAIG C ALCATERRA & W ULF K AAL , D ECENTRALIZATION : T ECHNOLOGY ' S I MPACT ON O RGANIZATIONAL AND`

> `S OCIETAL S TRUCTURE (2021).`

```
through the application to impact communities. The reputation
score of each impact community member measures the expertise
developed by the community member over time. Such scores are
attack-resistant and evolve organically. 110
```

```
The decentralized governance of impact communities through
reputation scoring creates scaling efficiencies for Impact 3.0.
As impact projects become trackable expertise WEB3 communities,
the expertise tracking via reputation tokens enables evolving
Impact 3.0 funding sources to evaluate the evolving
effectiveness of impact teams through individual members’
reputation scores and the aggregation of impact community
members’ scores. Especially important in this context is the
government's examination of disparate evolving impact community
expertises. Once a project has listed its impact certificates
and become a WEB3 community, the scores of each community member
can be aggregated and compared with other projects in the same
impact market. Even without the comparison to other projects,
the government can track the expertise in a given “for good”
category and allocate tax credits for the scores the community
generates. Such tax credits can then be distributed as a form of
dollar revenue to the community members pro rata to their
respective members’ reputation scores. 111
```

```
Importantly, the individual reputation scores created by the
```

```
impact community also create a source of identity for each
community member. 112 Identity in WEB3 governance logic needs to be
distinguished from identity concepts that revolve around the
proof of physical existence via biometrics or email etc.
verifications and KYC systems. WEB3 governance identity revolves
```

> `110 Calcaterra, Kaal, & Andrei,` _`supra`_ `note 82.`

> `111 Calcaterra, Kaal, & Andrei,` _`supra`_ `note 82.`

> `112 Craig Calcaterra & Wulf Kaal,` _`Self Sovereign Identity`_ `, W ULF K AAL (May 25,`

> `2020), https://wulfkaal.com/2020/05/25/self-sovereign-identity/ .`

```
around the creation of reputation merit scores in WEB3
communities. These scores are calculated in an immutable and
attack-resistant manner. Therefore, the scores can be aggregated
for an individual who is a member of many different communities.
The aggregated score creates a constantly evolving identity
score in WEB3 systems that can be compared with a credit score.
In other words, the score identifies how well the person or AI
does in a given set of communities. The score functions to open
doors and allows contributions to certain smart contract
templates and work communities similar to a credit score.
```

```
Expertise delineation follows certain basic principles in the
Impact 3.0 WEB3 governance model. To summarize, let’s take for
instance an impact community that has listed a successful impact
certificate for carbon sequestration. Each ton of carbon that
has been removed from the earth is verified by an expert
community that earns its reputation score for purposes of
expertise tracking. Conversely, the carbon sequestration impact
project itself creates its community carbon score. That score
measures how good the community is at removing carbon from the
earth. The score is calculated through the following metrics: A
given project member will perform a job for the community, the
```

```
work product is submitted to the community forum for forum
discussions, and at the end of the forum discussion the
community votes on the member’s work product which functions as
a community audit of the work product. Once the audit vote is
```

```
final, the incoming fee that is associated with the job
performed by the community via audit is then distributed to all
members of the community pro rata to their respective updated
reputation score. The calculations to update the reputation
scores weigh the member’s contribution who performed the job on
behalf of the community higher than the members of the community
```

```
who merely audited the work product by discussing it in the
forum and voting on it. Through the voting logic, impact
community members are incentivized to work for themselves while
at the same time working to benefit the community overall.
Ideologically, this dynamic community-based governance system
has the potential to create a reputation economy and forms of
decentralized commerce that transcend notions of capitalism and
socialism which have afflicted the human race since their
inception.
```

# `Conclusion`

```
The article has demonstrated how Impact 3.0 through emerging
community technology facilitates the evolution of the impact
certificate market. Whereas WEB2 technology limits the
applications and uses of impact certificates, WEB3 technology
enables an ever-expanding variety of social entrepreneurs,
impact activists, donors, and impact investors to collaborate.
In particular, emerging WEB3 technology allows impact
certificates to expand the market for carbon credits beyond the
current emphasis on carbon emissions. Through the impact
certificate market evolution in combination with WEB3 smart
contract technology components, Impact 3.0 can create impact
solutions and controls for the world to see and experience in
unparalleled ways.
```