Social Impact Project and NGO FAQs

The following FAQs have been jointly created by Launchnodes and GiveDirectly

Questions about Impact Staking

1. What is impact staking?

Impact staking involves using ETH staking returns to fund social impact causes in data-rich contexts (e.g. climate, inequality, infrastructure, etc.).

2. How does Ethereum staking work?

Ethereum staking is the process by which Ethereum holders lock up a certain amount of their ETH to support the network's security and operations. In return, donors earn rewards in the form of additional ETH. If a donor has at least 32 ETH, they can run their own validator node and stake directly. If they have less than that, they can still participate through services like Lido Impact Staking, which allow you to stake smaller amounts of ETH/stETH/wstETH, LIS also allows you to donate a proportion of your staking return.

3. How does impact staking benefit e.g. GiveDirectly?

Impact staking benefits GiveDirectly by letting people who stake ETH/stETH/wstETH donate a portion of their staking rewards to support direct cash transfers.

Here's how it works:

1. Staking Rewards: When someone stakes their ETH/stETH/wstETH, they earn rewards over time.

2. Donating Rewards: Instead of keeping all the rewards, the staker keeps their principal and can choose to donate to donate a percentage of their staking returns to GiveDirectly.

3. Long-Term Support: Because the staker keeps their original investment and only donates the rewards, the support for GiveDirectly can continue over a longer period compared to a one-time donation.

4. Are there any minimum requirements for staking?

Lido Impact Staking allows you to stake as little as 0.1 ETH/stETH/wstETH and point some percentage of the rewards to GiveDirectly. Stakers can select the amount of rewards they would like to donate from 1-100%.

5. What are the technical requirements for having a LIS listing?

Technical requirements:

1. Ethereum Wallet: You need an Ethereum wallet that can receive impact staking returns in the form of stETH/wstETH.

2. Application: You must complete an application to have your social impact project listed. This application ensures that your project meets all the necessary criteria and includes all required details.

3. Public Information: The information you provide in your application will be publicly available as part of your listing.

6. What is the long-term vision for the impact staking initiative, and how does our NGO fit into this vision?

The long-term vision for impact staking is to create a financial tool that funds social impact for the long term in data rich contexts. We believe that Ethereum will become an important general-purpose technology and staking will become an important sustainable financial tool that allows donors to support social impact work for the long term by not having to give away their principal capital or losing custody of it. By participating in this initiative, GiveDirectly is testing and advancing this innovative approach to attract new funding sources and strengthen support for direct cash transfers, using staking to create a lasting impact.

Questions about Participation and Requirements

1. How can organizations get listed in the social impact marketplace?

Organizations can get listed on the Social Impact Marketplace by applying online.

2. What criteria are used to evaluate organizations for listing?

The following LIS marketplace form lists out all the requirements that applicants need to conform by: https://7lftpmcph2j.typeform.com/to/lytD1NJu.

3. What types of projects are eligible for funding through impact staking?

Any project that meets the LIS marketplace requirements can list on social impact Marketplace. The impact staking and Lido staking community will support projects that clearly demonstrate an effective use of staking returns that drive social impact. This means projects and programs need to be designed with an understanding of how Ethereum staking returns work and that will be demonstrated in the financial model that they build and will be available for all impact stakers to view as part of your listing. The financial model needs to reflect how impact will be delivered despite the volatility of the price of ethereum and must assume that the price of ethereum will fall but social impact can still be delivered through the receiving of staking returns. Connect with Launchnodes to discover how your project can start receiving funds through impact staking. The team is available to answer any questions you have about eligibility criteria. Book a call!

4. What kind of projects will the funds support?

Lido Impact Staking is designed to fund projects that are fighting climate change reducing inequality and building infrastructure to make the world a better place

5. What kind of reporting will our Social impact project need to provide?

Lido impact staking does not require any specific monitoring and evaluation. Rather, it requires existing monitoring and evaluation data to be made public as part of the listing in the social impact Marketplace to encourage existing donors to maintain their support and for new donors to pledge additional staking returns to your project. If the impact of your project is not measurable, evidence-based and compelling, it is unlikely that it will be supported by impact stakers.

6. Can our social impact project partner with other organizations for joint projects?

Yes

Questions about Donations and Impact

1. Can donors track the impact of their contributions?

Yes, donors can track the impact through data provided by the social impact project listed in the Social Impact Marketplace. Additionally, LIS has a macro dashboard that shows how all staking returns are being used and the overall impact created by LIS.

In the future, LIS will offer a dashboard where individual donors can see the impact of their contributions. This will include a summary of all the causes they support and how their staking returns contribute to each cause.

2. How are staking returns converted into donations?

Once your project has been successfully onboarded onto the social impact marketplace, you will be asked to provide an Ethereum address. This address will be included in a smart contract enabled by Launchnodes, ensuring that any staking returns donated to the project are received directly by the project. Launchnodes does not have custody of any donated funds. Once the project receives the funds, they can convert stETH/wsETH into ETH. Alternatively, if they need the staking returns in ETH before funds are sent to their wallet, Launchnodes or third-party services can facilitate the conversion. However, it is preferred that the project or organization handles the conversion of stETH/wstETH into fiat currency themselves, as this increases the efficiency of donated funds in driving social impact.

Contact Launchnodes if you would like to understand more about converting your impact staking donations from stETH/wstTH to ETH or if you have any questions relating to this conversion.

3. Are there any fees associated with impact staking?

4. How does Lido Impact Staking ensure transparency and accountability in the distribution and use of staking returns?

The LIS smart contracts developed are public and can be viewed for each social impact project on the social impact marketplace. Donors can transparently see the projects they are supporting and the amount they are contributing through staking returns. Likewise, each project can track how much each donor is contributing to their cause and monitor daily earnings. All transactions and earnings are publicly accessible on Etherscan, where anyone can view the data by entering a donor's wallet address or the smart contract address.

5. Are donations tax-deductible?

Donations on LIS and Impact staking are tax deductible. See legal opinion here.

Tax considerations for US-residents: Donors can potentially deduct the value of their staking rewards donated to a charity, but they must ensure the charity is recognized as a tax-exempt organization to qualify for deductions.

Impact Stakers can generate a report on LIS that provides details on each cause they have supported and the total amount donated over a specified period. This report can be used to calculate the total donations made during that time and determine any tax deductions applicable to those donations.

6. What is the timeline for delivering funds to an NGO?

Once a social impact project goes live on LIS, it will receive daily staking returns donated to it, provided the project can accept stETH/wstETH directly. If the project requires third-party conversion, donations can be organized on a monthly or weekly basis, depending on the third party selected for converting stETH/wstETH to ETH and the associated costs.

Questions about Risks and Security

1. How secure is a donor’s staked Ethereum?

Lido operates with a network of professional validators who are responsible for confirming transactions and securing the Ethereum network. These validators are vetted and monitored to ensure their reliability and performance. Additionally, Lido utilizes a multi-signature wallet and a decentralized protocol to safeguard the stETH tokens, which represent the staked ETH.

To further enhance security, Lido implements smart contract audits and regular security reviews to identify and address potential vulnerabilities. The protocol also includes safety measures such as slashing protection, which reduces the risk of loss due to validator misbehaviour. Overall, Lido’s security infrastructure aims to provide a reliable and secure environment for staking Ethereum while maintaining transparency and minimizing risks for users. LIS is built using Lido staking infrastructure and processes, providing security and scale.

2. What are the potential risks associated with impact staking for our NGO, and how can we mitigate them?

The primary risk for projects driving social impact using Ethereum staking returns is a significant drop in the price of Ethereum, which could substantially reduce the funds a project or organization receives, thereby diminishing the potential social impact. If an organization or project is receiving substantial amounts of stETH/wstETH and converting it to Ethereum, hedging strategies are available. Please contact the Lido Impact Staking team to discuss and collaborate with our third-party ecosystem in developing a risk management approach to handling Ethereum.

3. What happens if the staking service provider experiences technical difficulties or financial instability?

Lido staking is resilient both technically and financially due to several key factors...

Technical Resilience:

• Distributed Validator Network: Lido relies on a diverse network of professional validators, which helps ensure stability and security. These validators are spread across different operators, reducing the risk of centralized failures.

• Smart Contract Audits: Lido's smart contracts undergo rigorous audits by reputable security firms to identify and mitigate potential vulnerabilities.

• Slashing Protection: Lido includes mechanisms to protect against the risk of validator misbehavior, where penalties (slashing) are minimized to protect staked assets.

Financial Resilience:

• Liquid Staking Tokens: By issuing stETH/wstETH, Lido provides liquidity for staked ETH, allowing users to trade or utilize their staked assets in other DeFi applications while still earning staking rewards.

• Insurance Funds: Lido maintains an insurance fund to cover potential losses from smart contract failures or validator issues, adding an extra layer of financial protection.

• Hedging Strategies: For projects receiving significant amounts of stETH/wstETH, Lido offers access to hedging strategies to manage the volatility of Ethereum prices and stabilize financial outcomes.

These features combine to create a robust staking environment that supports both technical stability and financial security.

6. How can our NGO ensure compliance with local and international regulations while participating?

Lido Impact Staking assumes that projects and organizations receiving funds will manage their own compliance and regulatory requirements, typically through their legal and compliance teams. For specific guidance on regulatory issues or jurisdictional concerns related to your project or organization, please contact the LIS team and we can support specific questions or issues you may have.