How the crypto industry's very own PAC plans to decentralize political funding in 2022

A controversial provision tucked inside the massive infrastructure bill that recently passed the Senate and seems destined to survive in the House has drawn the crypto community’s eyes to Washington, DC. 

A high-profile political fight that has broken out over the language — which gives the Treasury sweeping new authority to classify network participants as brokers — has been a boon for HODLpac, a political action committee trying to bring the ethos of decentralization to campaign funding. 

The organization had been laying low in recent months. But all the new attention helped double the organization’s Twitter following in a matter of weeks, and inspired many new inquiries from donors.

Now, HODLpac has ambitious plans to rebuild its infrastructure for decentralized political funding in time for the 2022 elections.

“GitCoin for Politics”

HODLpac founder Tyler Whirty says what sets the organization apart from other political advocacy groups is that its goal is to use technology to keep the operation grassroots.

“What's still missing from the policy advocacy toolbox — from the crypto advocacy world — is a truly grassroots organization,” he says.

The answer is decentralized networks, says Whirty, who also works for DC-based venture capital firm the Takoma Group and DAO governance-focused startup Boardroom. “We’re basically building GitCoin for politics,” he says. GitCoin is a governance and funding platform for open-source web3 development. 

Whirty hopes that recent momentum can “facilitate HODLpac becoming a DAO” — while noting that certain rules around elections limit how much the group can be decentralized.

HODLpac’s system for governance is a work in progress. In 2020, the organization experimented with community governance to decide which candidates received donations. Those who donated and subscribed to its newsletter, received “HODLvote” tokens.  A few weeks before the election, HODLvote token holders participated in a community ballot that used quadratic voting to decide which candidates received donations. Many of the recipients were members of the Blockchain Caucus.

The process was “admittedly, a bit clunky,” says Whirty. “We had to get a bunch of DC people on Metamask, which was quite the experience, and DAO tooling wasn’t quite as built out as it is now.” He has enlisted a new team of software developers to make a more intuitive interface for HODLpac’s new design.

This new design is focused on giving the crypto community the ability to donate directly to any candidate of their choosing. HODLpac’s traditional PAC funds will act as the quadratic funding matching pool, similar to Gitcoin Grants’ structure. Basically, that money will follow where community votes go, rather than the discretion of HODLpac or Whirty himself.  

The development of off-chain governance and voting systems like Snapshot and Boardroom since HODLpac’s launch has made it easier for more users to participate in future decisions. 

Donors to HODLpac’s matching pool as well as individuals who give directly to candidates through HODLpac will earn a new version of HODLvote tokens on Ethereum mainnet. Like in 2020, these tokens will be used to govern HODLpac; however, this time around, HODLvote token holders will also have control over the parameters of HODLpac’s quadratic funding technology, use of Super PAC funds when available, and some aspects of HODLpac’s operations.

There are DAO practices that HODLpac can’t follow. “Because of FEC compliance obligations, we’re not allowed to keep all of our funds in a Gnosis multisig, for example,” says Whirty. “But we can take inspiration and learn lessons from DAOs.” 

The ultimate product is, consequently, not fully decentralized and uses a mix of Web2 and Web3 tech. But Whirty sees political funding as a ripe area for disruption by decentralized technologies.

“In the United States, we have both the legal structure and a social tradition that allows us to do this type of thing — to donate to candidates and to organize politically. There's a lot of design space here for crypto people to get in and experiment with, you know, applying our technology to civil and political life,” he says.

HODLpac will also accept cryptocurrency donations for the first time — a step it was uncomfortable taking in 2020.

Says Whirty:

“At this point, so many campaigns have done it, the infrastructure is there to do it compliantly. We’re very confident in our ability to do that and stay on the right side of the FEC’s lines.”

Double the PAC

There are two main types of PACs in the United States: traditional PACs and so-called super PACs. HODLpac is registered as a hybrid of the two. 

“It's a traditional PAC and super PAC under the same roof. We have to cordon off funds, but we can make donations directly to candidates. Then we can also raise unlimited amounts and spend those on independent expenditures like a super PAC does,” explains Whirty.

Traditional PACs are allowed only to take in $5,000 from individuals per calendar year and can donate as much as $5,000 directly to a given candidate per election — though they can do so for multiple candidates.  

SuperPACs can legally take in unlimited donations, as long as they are not going directly to candidates or spent in coordination with those candidates. The largest super PACs spent hundreds of millions of dollars in the 2020 elections

HODLpac raised just under $29,000 last year, with another $6,444 coming thus far in 2021 — a non-election year. Last year’s donors included Gemini's Cameron and Tyler Winklevoss, Coinbase’s Brian Armstrong, and Jason Somensatto, who subsequently became the head of LabCFTC.

In 2020, HODLpac didn’t make use of its Super PAC since it didn’t raise enough funds to donate more than $5,000 to any single candidate.