How to Distribute Grants for "Good Public Goods"
Now, let's talk about the following:
- How grants have been distributed so far
- How grants should be distributed
- Experimental initiatives we are working on
How grants have been distributed so far
When we imagine how grants have been distributed by the government, there has often been a predetermined framework where individuals would explain how their projects are attractive through public solicitations. However, this method relies on a few individuals with decision-making power who may not directly benefit from or use the public goods projects. This approach is vulnerable to hacking and manipulation. Related: It is easy to be hacked if specified How to Decide the Distribution Destination "Together"
To address this, what if the people who use the public goods could indicate how useful they find each public good? However, this becomes more complex, so please bear with me. Simple voting (One person, one vote) does not capture the "intensity of individual preferences" as it only allows for a binary choice of "vote or not vote." To capture individual preferences, an experimental approach called Quadratic Voting has been proposed. - Individuals consume credits to vote.
- When individuals consider something important, they can consume more credits to cast multiple votes, and they can choose not to vote when they are not interested.
- However, the more widely supported an option is, the fewer credits are consumed in total. This ethical justification is based on the idea that "what is supported by many people is good."
Voters receive budgets of "voice credits," which they allocate to different questions on the ballot to signal the intensity of their conviction. Their voice credits convert to "counted votes" according to their square root. So if you put one voice credit on an issue, that is one vote; four credits are two votes; nine credits are three votes, and so on.
- Similar to Quadratic Voting, individuals can cast multiple votes (in the form of donations, representing the intensity of their preferences).
- The government (e.g., Ethereum) accumulates a predetermined amount in a "matching pool" to invest in digital public goods.
- This matching pool becomes the total amount of support for each project (determined through Quadratic Funding).
- The amount of donations and the number of donors determine the amount of grants distributed from the matching pool.
- Individual preferences are indicated by the amount of donations.
- This system is also based on the ethical principle that "what is supported (donated) by many people is good."
- As a result, it is possible for a project to receive $27 for every $1 donated.
Vulnerability of Quadratic Funding
However, Quadratic Funding has its drawbacks, in addition to its advantages. For more details, please refer to How to Attack and Defend Quadratic Funding. One aspect we are particularly concerned about is "collusion."