How to Start a Charity (from your Bedroom)

Elimu is a DAO set up to provide quality basic education for children everywhere.

How to Start a Charity (from your Bedroom)

In our first article, we explored How to Start a Hedge Fund (from your Bedroom). In this second article of our 'How to...' series, we will explore how Elimu.ai have built a Decentralized Autonomous Organization (DAO) on Aragon, to build a charity without borders or intermediaries to bring educational resources directly to communities in India (read: How to DAO: Answers for Beginners for more information about the technology).

Part 1: Go Open-Source

Elimu started life as one of 11 semi-finalists for the X-Prize Foundation's Global Learning Prize in 2017. The founder, Nya, lives in Northern Europe and has studied computer science with some cryptography and worked as an Android app developer. Using this experience, he developed a Free Open-Source Software platform that used an artificial intelligence (AI) tutor to teach children reading, writing and arithmetic in poor communities without access to formal education.

Elimu didn't win the X-Prize, but one of the requirements of the competition was that the software must be open-source and this is something the project has committed to over the long term. Being open-source enabled Nya to attract developers to the project by labeling the Elimu Github repo as 'Good First Issue', which alerts people looking for open-source work. Other good sources of contributions have been Gitcoin bounties and hackathons, which are opportunities for freelance developers to donate their time and expertise in exchange for experience and the chance of a prize.

(Interlude: Don't Start a Charity...)

At this point in the story, you might be wondering "Do we really need any more charities?" It's a good question. There are currently ~1.5 million registered nonprofits in the US alone, all competing for a dwindling pool of donors. Because of this, the charity sector should be consolidating, rather than multiplying and some of the best advice for aspiring founders is Don't Start a Charity, when helping an existing one would be a better use of scarce resources. Yet, the administrative burden on NGOs and nonprofits is so high (it can take up to three years to establish a charity in some countries) that without any competitive pressure, they are unlikely to forfeit their sunk costs or bear the additional costs of merging with another organization. Wholesale reform of the charity sector is highly unlikely, but projects like Elimu (and Unicef's Cryptofund) are exploring a new way of funding social-impact projects that can grow independently and deserves to be given a chance to succeed. That new way is to apply the market forces, crowd-wisdom and efficiency of crypto to non-profit organizations in the same way as for-profits, such that the most effective charities can flourish, while the unsuccessful ones are defunded and not allowed to become a drain on the rest.

"In fact, this is the main reason why we chose to use Aragon; We did try to register the organization in the traditional way, but all we ended up with was paying thousands of dollars in legal fees for preparing all the required documents, and then they told us we might have to wait 6 months for a response after submitting them. At that point it just got more and more obvious that we don't need anyone's permission to start an Internet-native organization, and we certainly don't need to waste time and resources on bureaucracy that should rather be invested into actual value creation for the beneficiaries." - Nya

Part 2: Manage your Organization

For these reasons of efficiency and reduced administration, Elimu operates entirely as a DAO, having launched their $ELIMU governance token this July and without any legal wrapper such as an LLC. 10% of the token supply was distributed to early contributors and every year another 10% will be distributed to monthly contributors on an ad-hoc basis according to Nya's assessment of the value they have added. This will continue until 2030 - which happens to be the deadline for the United Nations' Sustainable Development Goals - at which point the project will be almost entirely in contributors' hands. Ownership of the token allows holders to participate in the governance processes of the DAO, such as suggesting or voting on proposals.

Most daily communication with developers and content creators is conducted on Slack and everything is peer reviewed by the community before going live. Like most software projects, Github is used for pull requests and all contributions are recorded on a spreadsheet to govern the distribution of tokens.

Until recently, Aragon Client was used to pay contributors and for voting but since fees on Ethereum have increased, Elimu will explore the use of Aragon Govern for scheduling transactions and Aragon Voice for voting.

Fees notwithstanding, it is still magnitudes easier to set up a charity as a DAO. Compared to the labored process and countless forms required by national Charity Commissions, a DAO can be up and running in 10 simple steps:

  1. Obtain some $ETH. Note: you will need at least 0.2 $ETH to set up an Aragon DAO.
  2. Send your $ETH to your Web3 wallet.
  3. Navigate to Aragon and connect your Web3 wallet.
  4. Click on 'Create an organization'.
  5. Select the template you wish to use and click 'Use this template'.
  6. Choose a name for your organization. Click 'Next'.
  7. Set your thresholds for votes and vote duration. Click 'Next'.
  8. Choose a token name and symbol. Add some wallet addresses to issue the tokens to. Click 'Next'.
  9. Review the settings and 'Launch your Organization'.
  10. Sign the transaction on your Web3 wallet to execute the operation.

Part 3: Grow your Organization

So far, around 40 people have contributed to the project, with 4-5 regular contributors. In 2021, the team have been focussing on building out the software and next year hope to begin distributing tablets with the preloaded software in India, followed by the Philippines. They keep costs low by using readily available open-source lessons and videos and adapting them to their AI platform.

An exciting next step for the software might be to gamify the platform as Axie Infinity have done with their 'Play to Earn' scheme, which would reward the children with tokens for their progress in learning.

Undoubtedly, the team could have moved faster with more contributors, but, despite the visible success of projects like Wikipedia, behind the scenes, all open-source projects need some kind of external funding. To this end, Elimu ask for donations on their website, which should increase as their visibility grows. They are also looking at partnering with other projects in the space to maximize their resources.

Charity 3.0

Elimu may be a small enterprise, but it is pioneering a new way of funding philanthropy that could eventually disrupt the entire $2tn nonprofit sector. Most crypto projects are professionally audited but that is virtually insignificant compared to the swarm of Twitterati, Redditors and Discord followers who will tear a project apart and withdraw their funds at the slightest hint of impropriety.

In such an environment, inefficient or suspect charities will simply not survive, but the best ones will have access to the most liquid capital on Earth, while setting higher standards for transparency and accountability. This is where DAOs come in: to be trusted in the crypto space, a charity must have a credible governance layer. Good-will and trust are fine to bootstrap a project, but to grow and be sustainable over the long-term, all crypto organizations need the secure treasury, community oversight and transparent audit trail of a DAO.

We're so excited to learn about Elimu at this early stage: small for now, but vanguards of a revolution.

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