I’ve been thinking about the proposed funding structure for this year’s Service Provider Program and have some thoughts about the allocation method. Currently, if I understand it correctly, the proposals can include both a basic scope (the minimum needed) and an extended scope (the ideal request), and funding is allocated from a single pool, such as $3.6M. Funds are allocated by working down the ranked list until the funds run out. My concern is that this approach might favor a few high-budget providers and leave smaller projects unfunded.
One idea is to split the total budget into two separate pools. For instance, using the $3.6M option, we might have:
- A Large Grants Pool (say, $2.4M) for providers requesting between $300K and $1.2M
- A Small Grants Pool (say, $1.2M) for providers asking for between $100K and $400K
With this two-pool model, providers submit a single requested amount and can even apply to both pools, but winning in the larger pool would disqualify them from the other.
Below are two mock examples to illustrate the differences.
Method 1: Single-Pool, Two-Tier Request
Imagine we have service providers with the following proposals for a $3.6M budget.
| Rank | Service Provider | Basic Scope (Min) | Extended Scope (Ideal) | Remaining Budget |
|---|---|---|---|---|
| 1 | Provider A | $800,000 | $1,000,000 | $2,600,000 |
| 2 | Provider B | $600,000 | $800,000 | $1,800,000 |
| 3 | Provider F | $350,000 | $400,000 | $1,400,000 |
| 4 | Provider D | $500,000 | $650,000 | $750,000 |
| 5 | Provider C | $600,000 | $900,000 | $150,000 |
| 6 | Provider E | $300,000 | $500,000 | $150,000 |
| 7 | Provider G | $400,000 | $500,000 | $150,000 |
Method 2: Two-Pool Allocation
In the two-pool system, providers submit a single requested amount for the pool or pools of their choice. We separate proposals by scale so that larger requests go into the Large Grants Pool and smaller ones into the Small Grants Pool. Providers can apply to both pools, though winning in the larger pool disqualifies them from the other.
Let’s assume the $3.6M is divided into $2.4M for the Large Pool and $1.2M for the Small Pool.
Large Pool Allocation
Pool size: $2.4M
Proposal size: $300k to $1.2M
| Rank | Service Provider | Requested Amount | Remaining Budget |
|---|---|---|---|
| 1 | Provider A | $1,000,000 | $1,400,000 |
| 2 | Provider B | $800,000 | $600,000 |
| 3 | Provider K | $600,000 | $0 |
| 4 | Provider D | $500,000 | $0 |
Small Pool Allocation
Pool size: $1.2M
Proposal size: $100k to $400k
| Rank | Service Provider | Requested Amount | Remaining Budget |
|---|---|---|---|
| 1 | Provider F | $400,000 | $800,000 |
| 2 | Provider E | $300,000 | $500,000 |
| 3 | Provider G | $400,000 | $100,000 |
| 4 | Provider N | $350,000 | $100,000 |
| 5 | Provider O | $100,000 | $0 |
| 6 | Provider P | $350,000 | $0 |
Conclusion: Comparing Successful Grants
Under the Single-Pool method, the successful grants are:
Single Grants Pool (Total $3.6M):
• Provider A – $1,000,000
• Provider B – $800,000
• Provider F – $400,000
• Provider D – $650,000
• Provider C – $600,000 ← lower requested amount was received
Total awarded: $3,450,000 (with $150,000 unallocated).
Under the Two-Pool method, the winners in each pool are:
Large Grants Pool (Total $2.4M):
• Provider A – $1,000,000
• Provider B – $800,000
• Provider K – $600,000
Small Grants Pool (Total $1.2M):
• Provider F – $400,000
• Provider E – $300,000
• Provider G – $400,000
• Provider O – $100,000
Total awarded: $2,400,000 (Large Pool) + $1,200,000 (Small Pool) = $3,600,000, fully allocated.
This breakdown shows a key difference. The Single-Pool approach concentrates funds among the top overall proposals, which tend to be the larger ones, while smaller projects remain unfunded. In contrast, the Two-Pool method creates two separate competitions, one for large-scale projects and one for smaller-scale projects. It is also possible to allocate any unused funds from the larger pool to the smaller pool, making it very likely that all funds will be used.
I have heard that one of the goals of the 2025 Service Provider Program is to make it more focused with fewer teams. However, it is possible that what we need for 2025 is not fewer teams, but more focused teams. The Two-Pool system allows highly focused teams to concentrate on strategic areas.
Some areas that might be well suited to the smaller pool are:
- Ecosystem Support and Events
- DAO Tooling
- Application-Level Tooling
- DWeb
Some areas that might be well suited to the larger pool are:
- Core Infrastructure
- ENS Innovation
- User Onboarding at Scale
In the end, the design of the funding mechanism should be driven by the goals of the program. Do we want fewer, larger teams, or do we want a greater number of highly focused teams?
My personal opinion is that the Two-Pool funding system is better because it encourages new teams to enter the ENS ecosystem by asking for smaller amounts of money while also allowing more developed teams, who have taken on real responsibilities, to be adequately funded.
It also allows delegates to express their preference in funding project budgets. For example, if a team applies to both pools, a delegate can support them for one funding amount but not the other.
The Two-Pool system is also easier to understand and propose for teams. Every proposal has a single budget. Smaller proposals compete with other smaller proposals, and larger proposals compete with larger ones.