Speech: Vitalik Buterin, co-founder of Ethereum
Source: iNetworkSociety
This article is based on Vitalik Butlin’s recordings of the 5th Annual Internet Society Annual Conference "Practical Wisdom Network" theme 1 "Introduction to the market" and "Question of the World: Dialogue on the World View" Forum 6 "Crisis and Turnaround" The speech video and the on-site discussion of the meeting are organized. The original topic is "Ethereum Community Governance and Gitcoin Quadratic Funding". Author Vitalik Butlin is the founder of Ethereum.
Community has always been inseparable from public goods, especially online communities. Nonetheless, raising funds for these public goods is a political problem: who will choose the projects to fund? How to judge the quality of these choices? In this regard, the innovative mechanism of "quadratic fundraising" can make the process of funding public goods both democratic and in line with market laws. This mechanism is also mostly applicable to various types of online communities. Although we still face many problems in the implementation of the plan, at least in the past year and a half, the "quadratic fundraising" experiment conducted by Ethereum through the Gitcoin funding platform has shown very optimistic results. This time, under the Ethereum ecosystem, I will talk about our gains on the results of the quadratic fundraising experiment.
Today I want to talk about second-party fundraising, a new mechanism for raising funds for public products. In the next speech, I will introduce to you what the quadratic fundraising is doing, what do I think about it, and what we have gained from applying the quadratic fundraising in the Ethereum blockchain ecosystem.
Just imagine, when you have a pool of funds and want to allocate some of the funds to public products that need to be funded, you may not have a clear business model to implement this idea, and you are not sure which specific project is worth supporting. At this time, you It will be necessary to decide how to allocate the funds on hand based on public opinion. The second-party fundraising is to "match" funds for the project to obtain a certain amount of donations and subsidies. It is based on a very special calculation formula, that is, for a given project, first take the square root of each donation amount it receives, add these square roots, and finally take the square of the addition result to output, that is, the project matched Of the total funding.
Diagram of Quadratic Fundraising Operation Mechanism
The big square in the figure represents the sum of square roots, that is, all the funding that the project should receive, and the difference between the big and small squares is subsidized by the subsidy pool. When you do not have enough funds to support all projects, you can calculate the subsidies required for each project according to the formula, and then consider the investment according to your existing funds. For example, when your money is only enough to pay 1/4 of the subsidy to the project, you will pay the 1/4 of the subsidy.
But why calculate project funds with this formula? Why not just quintuple each donation? In fact, the "quadratic" fundraising has two benefits: First, the more people participating in the donation, the better the matching effect; second, the small donations will be well matched.
According to the matching mechanism of quadratic fundraising, when there is more than one participant, the total funding amount consisting of square roots is much larger by simply adding up the amount of each volume, that is, the more "public" items you get, the more funding you can get. many. As shown in the figure above, the area of the small square is 4 when the side length is 1. Then, the area of the square will become 4 squared, which is 16. If there are n people who donate US$1 for a project, the total funds received by the project is n², that is, the total number of words obtained by the project has increased by n times. When the number of project beneficiaries does not change to n, each participant will get 1/n of the total value of the public project. At this time, the quadratic fundraising mechanism will greatly increase the per capita income of the beneficiaries of the project. This helps alleviate the negative effects of the tragedy of the commons.
In addition, quadratic fundraising can also make small donations receive greater attention. As shown in the figure, each small square will match a relatively large square. The larger the smaller square matches the larger the larger square. From the perspective of the ratio, we will find that the smaller the square, the larger the area ratio of the corresponding large square. This shows that the smaller donations in quadratic fundraising will be enlarged by a higher proportion. This largely avoids the scene of "the rich dominating everything"-after all, the match obtained from a $1 donation may be greater than the match obtained from a $10,000 donation.
The reason for using quadratic fundraising in Ethereum is that the Ethereum community has a large number of public products that need to be funded (in fact, all online communities have public products that need to be funded. After all, the real space and cyberspace One of the biggest differences is that there may be more public goods than private goods in cyberspace). In cyberspace, any open source code, written and published articles, and forum posts are public products. Both now and in the future, they will be read a lot. The Ethereum community is no exception-there is a lot of software to be written, a lot of research to be done, a lot of documents to be compiled, and there are many public products such as education, law, translation, etc. to be funded.
However, the current way the Ethereum Foundation allocates funds to public products is more centralized. Although the foundation is allocating its annual budget of 30 million US dollars as fairly as possible, such as seeking cooperation with other organizations, or encouraging people with financial support to maintain their independence, etc.; it is still being used by a small group Controlled. People often complain and wonder why the Ethereum Foundation would rather spend $5 million on "zero-knowledge proof" research instead of supporting projects that cost less and are considered valuable but not valued by the foundation. To this end, we are trying to find a fund-raising and decision-making method that is more diversified, democratic, open and inclusive. Quadratic fundraising is the solution we are experimenting with.
Gitcoin is a quadratic fundraising experiment conducted by the Ethereum community, and it originated from GitHub. Initially, the platform will provide rewards for those who write code for new projects. Now, this reward category has been integrated into the Ethereum blockchain ecosystem to support the operation of various public products. In the past year and a half, our quadratic fundraising experiment has completed seven rounds. Most of the subsidies come from the Ethereum Foundation, and some come from "Consensys" and personal donations. In the recent seventh round of fundraising, some DeFi (decentralized finance) projects have also made donations. The following is our experience gained in these rounds of fundraising. Let us first look at the results of the third round of experiments.
Results of the third round of quadratic fundraising experiments
In my opinion, the third round of fundraising has reached a very high level of application. The white numbers in the figure are the donations received by the top-ranked projects in the third round of fundraising, and the green numbers are the total funding they matched. As shown in the figure, "EthHub1" received US$4,797 from 131 donors and matched the amount of US$16,000. You may be wondering why these projects have more than a hundred donors, but the matching amount is only twice or four times the original donation amount instead of one hundred times? This is because some donations come from the same person. In order to minimize the risk of cheating, we revised the formula in the third fundraising. The revised formula is used for "bounded quadratic fundraising", that is, when a large number of donations come from the same person, the matching share will be reduced. For example, although the "Lighthouse" project has a large number of donors, because the matching amount is divided by a number that is at least ten, the final matching amount formed by this project through subsidies is less than the matching amount calculated by the formula.
Results of the fourth round of quadratic fundraising experiments
In the fourth round of experiments, we tried to divide the projects into two categories: "technology" and "media". Technical projects can solve transaction privacy issues. Among them, "DAppNode" allows users to run nodes more easily; "Uniswap" is a very well-known decentralized exchange; "Sablier" is a payment system that can meet payment subscription needs2. Media projects include "EthHub", the media "the Week In Ethereum News" that collects Ethereum-related news, and the Twitter account "@antiprosynth".
Although there are many good projects under these two categories, media projects caused a lot of controversy at the beginning of the fourth round of fundraising. Opponents of media accounts often think that becoming a Twitter celebrity is not a real job and is not worthy of compensation. After all, tweeting on Twitter is something that everyone can do for free. They will say: "I have a Twitter account, and I have also posted some Ethereum-related content, and the subsidized account is nothing more than forwarding Ethereum-related news, posting support for Ethereum, and refuting some from The voices of other large communities opposed to Ethereum are nothing more." Account supporters will say: “This is a person who has supported Ethereum for two years, and he was only rewarded this time.” After all, collect as much information as possible to ensure that they are provided with a timely understanding of the situation. This view is very time-consuming and labor-intensive.
In addition, it is also controversial that although technical projects are generally beneficial, media projects are potentially harmful. Some people think that the potential danger of some media projects is to make Ethereum look messy, and it may also provoke disputes between dissidents. But no matter what people think about a specific case, from a higher level, such controversy reflects the lack of a way for people to express the view that "a project has negative value" in quadratic fundraising. For example, in the above situation, 10 people think that media projects are mostly positive value, and 10 people think that they are mostly negative. So while quadratic fundraising allows the former to make donations, the latter cannot do anything. This will result in a project that incurs opposition will eventually be subsidized-even if we don't know whether these projects will generate value in the real world or will cause public outrage.
Therefore, in the fifth round of fundraising, we conducted a "negative donation" experiment, that is, people can not only donate money to a certain project, but also transfer donations received from a certain project to other projects. But the final effect of this experiment is not ideal-very few people really "negative donations", after all, it is still a bit disturbing to "be bad guys" with real names. Although "negative donations" were not used in the sixth and seventh rounds of fundraising due to unsatisfactory test results, we do not rule out the possibility of trying other similar mechanisms in the future. Perhaps next time we will allow anonymous donations so that people will not know who is making positive donations and who is making negative donations.
Nowadays, some controversial media projects have still received funding, but they have received less subsidies than before. The projects that receive the most subsidies through the quadratic fundraising mechanism are usually widely recognized projects that have a significant positive impact on the Ethereum ecosystem. Although the previously controversial situation has improved today, the above-mentioned problems may still arise in the future, and we will remain vigilant about this.
In addition, we also found the problem of "income stability" in the fifth round of fundraising. Although we hope that the income from the quadratic fundraising can not only become people's spare time income, but also become people's professional income-allowing people to become quadratic freelancers; but in fact, as a salary, a certain project is raised in different ways. The amount of funds received in the funding round is not stable enough. For this reason, we tried to automatically transfer certain donations from the previous round to the next in the sixth round of fundraising, but unfortunately this adjustment did not have much impact on the final result. In short, "income stability" is also one of our continuing concerns.
The fifth round of fundraising also revealed the problems of "collusion" and "false accounts". Based on the working principle of quadratic fundraising, the match obtained by a user who distributes donations among 50 fake accounts is much greater than the match obtained by an honest user; and if a user creates 50 fake accounts and pays others to do Donate by yourself, then the funds matched by the project will eventually return to his pocket-this is the "conspiracy" involving fraud. In order to prevent and solve these problems, we improved part of the user interface in the sixth round of fundraising to reduce the difficulty of contributing to the project, and increased the difficulty of making fake accounts through the mobile verification mechanism. In the seventh round of experiments, we added the second layer of protocol payment, using "Zk-Rollup" to reduce transaction costs and perform decentralized identity verification. In addition, we have also enabled "BrightID", a social network-based decentralized mechanism, to prove that certain accounts correspond to specific people.
In the past three months, many decentralized financial projects have also participated in the seventh round of fundraising matching, and have received a lot of attention and funding. The following are the top 10 projects that received the most funds in the seventh round of fundraising. They include Bankless, Week in Ethereum News, RadicalxChange Foundation, decentralized financial tutorial projects Ethereum Magicians, Zero Knowledge Podcast3, and my favorite ETH Meme And @antiprosynth. In general, projects with large workloads and projects with more matches will be more attractive.
Results of the seventh round of quadratic fundraising experiments
The largest donation received in the seventh round of experiments came from "BalanceLabs", followed by high donations from " Synthetix Optimism", " ChainLink ", and "Learn". In addition, some investment funds and individuals also made donations. This shows that the quadratic fundraising mechanism is becoming more and more important, more and more projects are willing to participate in matching, and a large number of users actively participate in donations.
Speaking of conclusions, I think quadratic fundraising is practical; it does have the potential to benefit the future. Not only is it extremely efficient in project fund allocation (without the need for the Ethereum Foundation to allocate funds by itself), it also creates a civilized and open community participation culture. It provides a channel for people to express their opinions, so that people can talk about things they think are valuable in the Ethereum ecosystem. This is beneficial but not harmful to creating a beautiful ecosystem with a cooperative atmosphere.
But this mechanism also has room for improvement. As I mentioned, it needs more channels for people to easily identify high-quality projects and allow more agency authorization; its security performance also needs to be improved. In addition, the projects that currently receive the most funds from the quadratic fundraising mechanism usually only come from the United States and Europe; for projects in Asia and Africa, it is difficult to obtain donations through quadratic fundraising. Therefore, making fundraising results more inclusive and expanding the distribution of fundraising results is also our direction.
It should be noted that the implementation of quadratic fundraising in any new community will take several rounds of effort to make it work better. In the Ethereum community, at least four to five rounds of fundraising have allowed us to truly understand the mechanism of quadratic fundraising. Therefore, if the first round of the experiment does not go well, please don't be discouraged, because the experiment requires perseverance. Currently, the "Gitcoin Grants" team is trying to apply quadratic fundraising to other scenarios. They have conducted an "urban stimulus" experiment, applying quadratic fundraising to some local companies in Denver and Colorado-results looks good. I'm sure that if the experiment is carried out every three months for two or three years, the effect will be better.
In general, the quadratic fundraising mechanism is still being improved. We are accumulating implementation experience in each round of experiments, trying to understand how to implement it correctly-especially in terms of "what projects should be donated", "how to participate" and "how the community should regulate". I look forward to quadratic fundraising to continue to play its role in the future and even be widely used. I also hope that over time, the second-party fundraising can be incubated by the Ethereum ecosystem and even surpass Ethereum in value.
thank you all.