GitCoin, "Quadratic Funding", crypto-Web3-DAO etc vs Snowdrift and crowdmatching

I wrote out the following with some editing as I processed the issues around FundOSS and GitCoin and related issues. I still have more to review, but I feel better about my understanding and more reassured that they aren’t doing what we’re aiming to do.

Somewhat a tangent to Thoughts on Open Collective?:

The whole big world of Web3, DAO, cryptocurrency-speculation, NFTs, and related stuff… this has ballooned within the past two years into a new beast. It’s not big enough that it’s reached mainstream media and consciousness. The fact that almost all lay discussion of it is a mix of nonsense and confusion suggests some fundamental problems. I’ve seen skeptics dismiss it all as wasteful garbage with some good but naive intentions. Defenders insist that it’s really that solid and profound but seem utterly incapable of making a coherent, accessible, and convincing argument for their case.

At the very least, the concepts and language we’ve been using for years is prominent in these places in ways that I’ve never seen before. People talking specifically about “public goods”, describing freeriding and coordination issues, developing funding approaches, and even including the issue of democratic governance in it all. At the very least, this growing movement seems to correctly identify a lot of the issues with the status quo.

on “quadratic funding” specifically

This came up with GitCoin and then FundOSS which has connection to Open Collective, and this has similarities to crowdmatching, so I’ve been meaning to review it.

This article has too much homo-economicus and similar economist-math way of presentation, but it’s pretty good otherwise: Mechanisms to Fund Open Source | Matthew Wildrick Thomas and describes that GitCoin is actually not doing regular “quadratic funding” (nor did they invent it). I honestly did not follow all the mathematical formulas really.

Some important quotes:

QF was not designed to solve the problem of funding public goods. It is not a mechanism for optimal fundraising. It was instead designed to [answer]… How can we efficiently allocate resources to public goods given that we have unlimited access to resources? This is not a fundraising problem. It is a voting problem.

That might be too simple. Crowdmatching and QF can be focused on increasing fundraising if they are part of a social-motivation, a pitch as to why they make donating better.

Still, is crowdmatching as we propose it better than QF at increasing fundraising? Probably… The biggest difference is that the pool of funds in QF is given 100% (I think, someone correct me if I’m misunderstanding), only the distribution is in question. By contrast, we propose that crowdmatching can better encourage people to maximize their potential funds to make available because we don’t charge them fully unless the crowd is fully with them. In that sense, each new pledge isn’t just a vote about the direction of the pool, it increases the size of the actual payout to projects by both the new pledge and the matched increase from the rest of the crowd. Both their approach and ours have elements of more-funds-to-project-X when you pledge to project X, but:

For example, when you donate to WebPack, you are taking funds away from all other projects.

This is the KEY distinction IMO. It makes the Quadratic funding more zero-sum. Even though each new patron does grow the pool by their own input, they get no matching at all in terms of amount of funds to public goods. They are merely voting. It’s not as unilateral as the old Flattr approach which amounts to each person having a fixed monthly donation, and then each click to a project is playing a zero-sum game with that donation. But it still emphasizes more zero-sum competition between projects instead of growing-the-pie.

Collusion in QF is particularly easy. If you want to contribute [some amount]​ and have friends who want to contribute nothing, then you can do better by contributing less and dividing your contributions amongst your friends.

For us, this would apply if we did crowd-size goals in crowdmatching. There’s an incentive to reimburse your friends who sign up to grow the crowd rather than just increasing your own pledge. But how much of a problem is that for us? It has issues, but in the end, we want large crowds as long as they are real people and not sock-puppet financial accounts. If we do dollar-goal crowdmatching, this issue goes away because we’d match dollar-for-dollar and there’s no mechanism for collusion with people who won’t donate real extra money.

a general issue with this mechanism. People who like both popular and unpopular projects have an incentive to divert resources to the unpopular ones. This is a classic voting issue and is exactly the sort of behavior that quadratic voting mechanisms (link added) were designed to prevent.

Conclusions for now

Having thought through this (and noting the harder-to-process complexity), I’m more reassured that Quadratic Funding “Democratic Funding” is not crowdmatching as we mean it and does not solve the public goods issue the way we insist is needed. It focuses on which public goods get funded, not pushing more funds into public goods and away from club goods. It seems to be thriving almost entirely because of the cryptocurrency-speculation bubble.

That said, it’s amazing and important that this movement has explicit discussion and intentions around democracy, public goods, and other ethical values. Rhetorically, this movement seems allied in many ways, and there’s a lot of deep thinking and engagement with these issues going on there. And because of those intentions, the crypto-bubble is pushing some real resources in some positive directions even as it is mostly an echo-chamber and has elements of scams and wasteful energy use.

I added a summary of the Democratic Funding approach at Snowdrift Wiki - Other Crowdfunding / Fundraising Services and made updates (but didn’t yet close) the related issue update our review of GitCoin and FundOSS (#241) · Issues · Snowdrift.coop / snowdrift · GitLab

The rest of this Web3/DAO stuff

I haven’t gotten into it. #9: Decentralised Tech & the Future of Organising - by Richard D. Bartlett - What I’m paying attention to as posted by @brodavi in On the fundamental tensions around money and its place in society - #5 by brodavi is probably the best run-down, but since I’ve heard about DAOs and so on in the same context as NFTs, I’m highly skeptical of it all.

I worked to look into this more. Added mention of https://giveth.io/ and https://commonsstack.org/ to Snowdrift Wiki - Other Crowdfunding / Fundraising Services

Commons Stack again talks remarkably like us. They talk about holistic approaches to dealing with democratic fundraising and the issues of freeriding. I still couldn’t really grasp the concepts even trying to read a good bit. They talk explicitly about Elinor Ostrom and “commons” issues a lot, which are not the same as public goods, and they seem to miss the distinction. Their explanations of the problems are all stuff I know already. Their explanation of their solutions I don’t follow upon initial readings.

I might be just not getting it yet, but this seems to me like a more-extreme version of what people might have experienced when I was trying to explain the early (no longer planned) shares-based formula for crowdmatching. There might be sense in it, but if people can’t understand a system, they can’t really use and trust it. But all this stuff feels different than past random esoteric writings because the crypto values are imbuing this stuff with all this money of sorts.

Feels weird to note two things: (A) there seems to be a really growing number of people talking directly about the public goods funding issues in ways that actually get the diagnosis right (which is a big difference from past years), and (B) I suspect almost all of them are exclusively interested in crypto-currency-based solutions (so talking to them about what we’re doing will either have them just dismiss us for not being crypto-based or inspire them to make our sort of crowdmatching within an Eth app or something).