Cardano's Project Catalyst Explained

The Cardano development roadmap is currently in the Basho phase; during this stage of the development journey, the focus is on improving the scaling of the network. Once this has been completed, we’ll move into the Voltaire phase of development that will focus on governance with an emphasis on decentralization.
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While we have not entered this stage of development there are unique projects supported by the Cardano Foundation that already support the goal of decentralisation. The most public of these is Project Catalyst.

The official Project Catalyst website, which is community-run, explains the initiative as a series of experiments which seek to generate the highest levels of community innovation. Catalyst is bringing on-chain governance to the Cardano blockchain by allowing the community to self-determine priorities for growth.

How this plays out is through a series of Catalyst Funds that are launched every few months. The funds aim to allow the community to allocate capital to projects they believe have value for the Cardano ecosystem. The funds for this has historically come from the Cardano treasury, but now Cardano projects can run their own funds focused on a specific challenge, alongside the money from the Cardano Foundation. Regardless of where the funds come from the allocation is determined by the community.

Very broadly the process sees projects submit a proposal, which is then reviewed by volunteers from the community and any questions can be asked to the team proposing. After a period of Q&A and potential revisions, the proposal is voted on. Voting is weighted based on the number of ADA tokens held. The fund will pay out based on how many votes were received and if there is still a budget to fully fund your request. So for example if the fund was $100 000 and the first project requested $80 000 they would receive all their funds. If the second-placed project needed $30 000, they would receive no funding as there isn’t enough left in the budget after the $80 000 deduction to fully fund them. Assuming the third and fourth-placed projects requested $15 000 and $5 000 respectively they would then both be funded by exhausting the total allocated capital and closing off that fund.

Those who help with the assessment and those who vote all receive some compensation for their involvement, further encouraging participation.

I’m not aware of any similar community-driven distribution of treasury funds in Blockchain and so I feel this is a unique Cardano offering and for those who value decentralisation is a positive for the protocol.

As a Flagship community, member Project Catalyst is an interesting initiative to follow as it often highlights very early-stage projects who are at the pre-funding stage but have generated enough community support to win the vote. A powerful combo for those looking for early-stage projects with potentially higher upside.

In addition to early-stage projects, you do often get more established projects asking for funding to solve a particular community challenge and here again you can get a good insight into what the project is planning to work on. If you back the project to solve the challenge and they do get the funding then this is a good indication that they now have the money to build something of value for the community, which when launched should be positive for the project.

Fund 9 of the Catalyst Project recently closed. If you’d like to see a complete overview of projects that received funding per category you can see the official report here. While of course receiving Catalyst funding does help to get a project started and is a bullish indicator, it does not guarantee the project’s success so further research is needed before investing any funds in a Catalyst winner.

In the interest of full disclosure - with Empowa, the project I am directly involved in, we received our first funding during Fund 5 of Project Catalyst. In total, we received $60 000 in funding. To see what we did with these funds, click here.

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