Gitcoin’s Owocki says crypto can regenerate the world. Just don’t call him Starry-Eyed

DENVER – It’s easy these days to be a crypto cynic. From the Terra blockchain crash to the collapse of hedge fund Three Arrows Capital and the bust of the FTX exchange, industry leaders seem to have a knack for disappointing investors.

After a year of fraud and disaster, ETHDenver, the biggest gathering of the year for the Ethereum ecosystem, ended its four-day run last week in Colorado.

The conference came amid a Securities and Exchange Commission crackdown on crypto companies. Under the leadership of SEC Chairman Gary Gensler, regulators have more often suggested that many cryptocurrencies may be unregistered securities, with bitcoin perhaps the only exception.

But according to Kevin Owocki, the Gitcoin co-founder who now leads a fledgling Web3 venture studio called supermodular, Gensler is dead wrong. Although Owocki’s take on securities law is not based on any formal legal training, it is born out of a crypto-optimism that fits right in at ETHDenver, where other bright-eyed crypto-optimists gathered to espouse the virtues of blockchain technology.

Long at the core of Ethereum’s social impact movement has been Gitcoin – a fundraising collective of sorts that allocates grants to community-oriented projects and infrastructure. Recently, Gitcoin has opened up its fundraising tools for use by other crypto communities looking to raise funds.

Owocki is a programmer by profession and training; according to his LinkedIn profile, he earned a bachelor’s degree in computer science from the University of Delaware, where his interests included ultimate frisbee. He’s been in the Ethereum community since its early days, founding Gitcoin in 2017 as a way to use blockchain primitives like smart contracts and decentralized autonomous organizations (DAOs) to solve what he calls “human coordination failure.”

Owocki’s goal with Gitcoin, and now super-modular, is to “engineer a movement of capital and talent and attention from degenerative product projects like pump-and-dumps and Ponzi schemes to regenerative projects,” he told CoinDesk.

“I’m kind of thinking about the way I frame it: How do we rotate capital and attention and talent and resources from degenerative projects, which are ‘numbers go down,’ to regenerative projects,” Owocki explained. “The rain is ‘numbers go up’, positive sum bets.” In other words, it’s about creating projects that add value instead of extracting or converting value.

While Gitcoin has pulled in over $70 million to fund “regenerative” social impact projects, Owocki admits there’s a lot of work to be done before crypto can be considered positive for society.

“The title of my [ETHDenver] talk is “How crypto can regenerate the world,” Owocki said, putting special emphasis on the word “can.”

“Nothing grinds my gears more than when I get to sit on a panel called ‘How Crypto Regenerates the World.’ Not yet. Look at the damage that has been caused by SBF and Do Kwon.”

In an interview with CoinDesk, Owocki delivered a breathless explanation spanning evolutionary science, economics and legal theory. This will eventually circle back to the topic of securities regulation.

At one point, he pulled up a chart on his laptop showing his projection of where crypto is likely to be headed (not good), and where it could realistically go if his point of view were to win (good).

As for why Gensler and the SEC shouldn’t be too alarmed, Owocki says that crypto has the potential to solve exactly the problems that securities laws — in his view — were designed to solve.

According to the Gitcoin founder, when stripped down to “first principles,” the SEC exists to solve the principal-agent problem.

Without getting too silly, the principal-agent problem occurs when the person at the top of a company, project, or organization (the principal) delegates control to someone, such as an employee or customer (the agent). When the incentives between these two parties are misaligned—as Owokcki says happens when there are information asymmetries—you can run into problems.

To illustrate where this can go wrong, Owocki gave the example of Sam Bankman-Fried. “FTX and Sam Bankman-Fried knew he could make more money by giving money to Alameda from customers,” Owocki explained. “If that material, non-public information, had been distributed to the retail industry, he wouldn’t have been able to do that.”

According to Owocki, blockchain-based tools such as DAOs and transparent chain finance can add a new level of transparency to organizations, thereby solving the principal-agent problem. (Had FTX been organized as a DAO, in other words, Owocki claims, it would not have been able to become insolvent.)

As convinced as Owocki is of his crypto-as-a-commodity thesis, it’s hard to imagine a software engineer’s arguments about securities laws will hold water with regulators intent on taming a fraud-ridden crypto industry.

Owocki – like crypto at large – acknowledges that he still has a lot to prove when it comes to putting abstract ideals into practice.

A press release announcing his super-modular project highlighted three major investments: buildbox, Gitcoin Grants Stack, and hypercerts — all aimed at raising money or building crypto infrastructure. Most of the highest-grossing Gitcoin endowments have been crypto-infrastructure projects.

Scaling blockchains and funding things that fund things is all well and good, but it is a bit difficult to understand how such applications will affect the world outside of blockchains.

Owocki and Gitcoin have funded more concrete projects in the past. They have helped drive experiments in Universal Basic Income (UBI), for example.

But carbon credits—a use case fraught with controversy—are the real-world application most associated with the burgeoning regenerative finance, or “ReFi” movement.

The idea of ​​trading carbon and allowing companies to buy credits to “offset” their carbon footprint has, according to some activists and researchers, actually harmed the environment more than it has helped over the years by allowing companies to engage in “greenwashing.”

Tokenized carbon credits were seen in some crypto circles as a way to bring liquidity and transparency to an inefficient, shady carbon market. But early ReFi experiments with tokenized carbon credits, such as Klima DAO, have faced criticism for making some problems with the carbon credit system even worse. “There’s baggage with that utility box, and it slows down the movement,” Owocki admits.

Owocki insists that the crypto-for-good movement — regardless of its early failures — is evolving in a positive direction.

“We’re not just starry-eyed, tie-dye, Grateful Dead optimists” argued Owocki. “I’m not a grad student who’s in academia planning this — this actually works in the world.”