Aurora, discover and fund real impact
September 19, 2017
This is an early and evolving work in progress of the project specification.
It is a rare fact to consider that in today’s world of incredible technology and optimism that a surprising number of Non Profit Organizations (NPOs), specifically concentrated in the health care area, have a charity efficiency level of approximately a C+. On average, for every $100 donated only $60-70 is actually applied towards the cause or mission which the organization is rallied around. What’s more, it is not uncommon to find evidence of excessive expenses on fund raising and marketing as a opposed to research or cause moving initiatives, indicating that some organizations might have poor incentive to remain aligned with concrete impact and value creation . Given that NPOs are continuing to solicit more and more funds, the necessity of an accountability and audibility mechanism for charities is clearly growing.
Firstly, it is important to consider why an asymmetry in donor expectations and true impact exists today. At current, it may be a case of the classic monopoly on public opinion when it comes to charities. Many individuals are deeply affected by cancer or high profile ailments in their lives, and in some cases can blindly donate to such initiatives, even though track records have not demonstrated outstanding success in managing funds or creating impact. Unfortunately, this creates a winner takes all distribution with only a small amount of remaining funds being dispersed to truly effective altruistic organizations. Moreover, such a distribution of funds creates a vicious cycle, where winners raise more money to produce less impact, and erode the trust of the public on the NPO sector, thereby decreasing total funds and suffocating tail-end impactful charities.
Fig. Winner Take All In Charity
This raises the question of our ability to create a proper incentive infrastructure for funding NPOs, as well as a reputation or ranking system for highlighting organizations who truly deliver impactful human results. It may come across as taboo to criticize organizations whose sole mission for the betterment of humanity. However, industries, organizations or concepts which are considered taboo to question offer signals of potentially fertile ground for innovation and new ideas.
This work introduces a project concept called The Aurora Project, a decentralized charity discovery and funding DApp focused on incentivizing charity efficiency and impact using smart contracts.
Aurora on The Blockchain
With the advancement of the Ethereum Project, decentralization applications (DApps) are becoming more prominent and usable in the blockchain ecosystem. Aurora builds upon the decentralized infrastructure with a concept called a performance fund (PF). Funders can time-lock donations into an Aurora PF, that will not release donations until designated beneficiaries meet a specified target goal. In the case of charities for example, such performance funds act to incentivize the continuous improvement and impact of an organization in order to gain access to new capital. It also creates a ad hoc reputation system for ranking what charities are responsible and truly effective with the capital received.
Performance Funds (PFs)
Performance Funds (PFs) are the basis of how funding is accomplished in Aurora. A basic fund contract has four components:
- A Beneficiary
- Performance achievements
- Time Lock
Fig. Decentralized Autonomous Comittee
Funders are a set of Ethereum accounts who pledge variable amount of ether into an escrow account governed by PF. Funders can include individuals, institutions or anonymous groups who are interested in the cause supported by a particular charity. Funders who pledge towards a particular PF, receive voting rights to participate in the governing of a particular fund as an decentralized autonomous committee (DACt). The purpose of a DACt is to both verify charity claims and assess performance against the set achievements.
A PF has a single verified beneficiary, and in the case of Aurora this is a charity. This beneficiary is the party that attempts to pursue and complete performance achievements, and is the recipient of the locked funds in the event that:
1) Contractural clauses are automatically met by contract, or
2) The DACt deem requirements have been met based on a 55% consensus
To become verified as a charity, an entity must submit their official documents to be hosted for auditing, signing and verification purposes by funding stake holders.
The third component of an PF is a set of performance achievements. These contract conditions are used to lock donated funds into the escrow account and prevent beneficiary redemption until achievements have been met or at least 55% of the funding committee agree clauses have been met.
Achievements are met by charities reporting and submitting documents for public audit and viewing purposes related to proving accomplishment.
Performance achievements can and should vary depending on the charity, but must satisfy a handful of conditions in order to be included in a PF (See Achievements)
The final condition for an PF is the time lock which is the duration that donations are held in escrow before being refunded to funders.
This time lock serves as pressure for the beneficiary as well as finality for the funders. Beneficiaries must execute and deliver on the performance achievements within the given time or funds will be lost. On the other hand, the lock prevents promiscuous funders from donating and withdrawing potentially compromising charity efforts.
Funders may withdraw their funds early from the escrow account at a cost of 50% of their total holdings. The resulting refunding revokes the withdrawing funder’s voting authority with regards to the PF, and transfers the left-over funds among remaining contributors.
Given the complexity and vast difference between charities and the causes they support it is difficult to ascribe a general performance achievement or set of achievements for all PFs.
Instead Aurora uses a framework for designing achievements that satisfy a number of conditions including:
Given the contractural nature of the PF, achievements are defined as clauses which must be decidable in a binary fashion.
In order for the Aurora contract to make a decision to release funds it must be able to assess reported statistics against contract agreements and make a yes or no decision.
Therefore it is paramount that all achievements have an distinct numeric goal that is set on contract creation.
The achievements must be measurable in order to accurately bring context, accountability and decidability to the reporting system. The difference between measurability and quantifiability is that measurability aims to bring a certain context to the fund.
For example consider the Canadian Blood Services organization whose impact ranges from supplying blood in surgical operations to life threatening conditions to name a few examples. A measurable property for such an organization might be
Arguably measurability is the most complex challenge given the varying ways of reporting impact. While there have been many attempts to create a generalized scoring system to measure Altruistic impact such as Social Return on Investment, these methods generally only account for the monetary impact of charities.
Monetary measurability can be a unsatisfactory property to use when attempting to determine the values beyond monetary equivilence. For example, the impact of improving a families’ quality of life through the donation of a home or shelter. Obviously, this case has true altrusitic character but it’s impacts aren’t readily reached by dollar based figures.
To prevent all or nothing conditions thereby deterring charities from using the platform, achievements must be considered “payable”.
Payability refers to the quality of achievement being granular enough to be codified into a bounty, which is paid immediately on confirmation and proof of accomplishment.
Payable achievements incentivize charities to participate in PFs as they are guaranteed at least some fraction of the reserve if their participation results in accomplishment of some but not all achievements.
Payability is split evenly between all achievements by default, but is modifiable if a 55% consensus exists among funders to modify the payout ratios.
Registration and Fund Verification
A fund can be created by an initial group of 3+ funders who wish to form an Aurora DACt for a specific charity and PF. Funders can be an initial bootstrapped group from a specific charity or completely anonymous. Regardless of who executes the initial creation process, a PF must gain verified status before any funds can flow into the contract.
A fund is verified when the proposed beneficiary address of a PF is confirmed as owned by the charity in question through on registration into the Aurora ecosystem. Charity or other NPOs must upload their official documents and sign a transaction time stamping them with the private key of the public beneficiary address. Upon this event occurring, the fund becomes verified and active, but the DACt can agree to temporarily suspend status should 55% decide they require more documentation.
Once verified a PF is publicly listed on the Aurora portal and can begin receiving donations and additional support from other funders.