There's a Problem With Crypto Funding – And Vitalik Just Might Have a Solution

[Zurcemozz]

There are free-riders in the cryptocurrency ecosystem.

At least, that's the contention of a new paper, shared with CoinDesk on Monday, written by ethereum founder Vitalik Buterin, Microsoft researcher Glen Weyl and Ph.D. of economics at Harvard, Zoë Hitzig.

And free-riders pose a problem.

Described in the paper, free-riders are people or businesses that profit from the under-provision of public goods. And, on top of that, "the more people [these public goods] benefit the more they will be under-provided." It's an issue that plagues development even outside the cryptocurrency space, but the authors are – at least – initially focused on how the idea creates harmful incentives for the funding of blockchain projects.

Whereas currently, crypto #DevelopmentTeam s rely largely on donations, the altruistic whims of their creators, and ICOs — the paper details a new financing method to support a "self-organizing ecosystem of public goods."

Titled "Liberal Radicalism: Formal Rules for a Society Neutral among Communities," the method described – a system written in code – seeks to allow groups to allocate funds for the maintenance of public goods and services without becoming vulnerable to the "free-rider" problem.

The mechanism is similar in principle to Quadratic Voting, a form of stake-based voting championed by Weyl in a recent booked, "Radical Markets."

While Quadratic Voting allows participants to vote with crypto tokens according to how much they care about an issue, Liberal Radicalism (LR) expands the same concept to how communities contribute to public goods, such as software development, cryptocurrencies and journalism.

And it works by increasing the funding of projects incrementally depending on the number of participants and the degree to which they care about the issue at hand.

"Individuals make public goods' contributions to projects of value to them. The amount received by the project is (proportional to) the square of the sum of the square roots of contributions received," the paper states.

And while the authors have ambitions for the technology that are far-reaching (including applying the code to municipal projects and campaign financing) cryptocurrency communities, with their open-minded attitudes towards experimentation, are a "particularly appropriate" testing ground for the technology.

Speaking to CoinDesk, co-author of the paper Hitzig said that interest is already building between many different groups. That currently includes about "a half dozen" cryptocurrency communities looking to potentially implement the technology, as well as "other innovators and philanthropists."

As such, Hitzig told CoinDesk:

Readmore : https://www.coindesk.com/theres-a-problem-with-crypto-funding-and-vitalik-might-have-a-solution/