WTF Is QF: Funding Public Goods in the 21st Century

Transcript

[Music] okay welcome to edcon 2020. um thank you all for showing up uh given the circumstances um there's a lot going on um hopefully this talk will be really useful for people that have not really followed what bitcoin is up to with quadratic funding for those of you who are already familiar with what we're doing um i apologize in advance some of this might be a bit redundant um but hopefully this will be a good starting explainer for people that aren't really aware of the concept

or sort of the history of it so what is quadratic funding um first and foremost quadratic funding is economics it is a paper that was written by vitalik and zoe hitsegan and glenn whale and you know vitalik kind of came at this from the etherium perspective well glenn whale came at it from the radical exchange perspective and they both kind of brought i think very different but complementary ideas to this um you know italic more on the mechanism design side and then blend more on the formal economic side and i think that like between them they were really able to come up with an interesting idea for funding public goods that's really what the paper is trying to

trying to talk about in large part and the idea of course that they came up with was quadratic funding and the formula that they sort of chose initially which we've sort of iterated on with italic health since then is this one here and what this says is that you want to take the square of the sum of square roots of contributions and you want to match those to some sort of like group of individual contributions and the reason this is so important is because you don't really have a one-to-one dollar-based matching system instead you have the ability for individual donors to actually signal their interest in a project and

potentially by getting more people engaged in that project increase the matching amount and increase the amount that's available for that project so it's almost and i think you know we'll get to this a bit later a more democratic way to actually fund public goods and that's the key insight is that it is an optimal like economically optimal but also democratic way to fund public goods and more than that more practically it's a way to distribute a matching tool to set projects it's a way to get 50 matching for a one dollar donation and you know as a result it's about incentives we're trying to figure out how do we get people to build things and fund things that are in their long-term interest or in the

community's long-term interest but not necessarily in their own immediate interest right and you can kind of imagine this in standard economic terms there's this heuristic function or like utility function and people are really good at optimizing their immediate needs and immediate wants and that's what this function here represents they're not as good at optimizing these longer term needs and wants so how do we get them to actually make those trade-offs how do we get them to think about the actual intersection between these and think about the long-term landscape and the way that we feel that sort of quadratic funding helps with this is by really making sure that people think about the kind of outsized benefit

they could have in funding public goods and we want people to really think about this in the context of having a say in public good funding and why you know why should i participate in this sort of process well because you actually will have real impact on where this goes and who gets funded and you actually feel like you're invested in a sense so when we talk about public goods though what do we what do we mean right so there's a lot of confusion about this um and i think the biggest piece of confusion comes from club goods so something like a you know um and actually have parks here twice but like there are private parks and there are public parks

but like there's for example like individual private groups cinemas uh you know things like satellite tv these are things that an individual person or group can block you out of if it's owned by a company if it's owned by an individual they can decide they don't want you to be part of those um but public goods are not excludable that you cannot actually prevent someone from being involved in you know breathing clean air or using roads and bridges um so long as they are like public in in sort of the true sense right i mean

the the key here to note is that there are like public and private versions of a lot of these things but the other thing to know by the way is that like there's this idea of things being scarce or things being sort of open so there's no such you know shortage of clean air um at least in certain parts of the world if you are in that part of the world you have access to clean air it's not quite the same with fish or with timber or with coal or natural gas those are things that are of course possible to run out of at a given point in time so ultimately when you can run out of things when you can overuse things you run into the strategy of the commons which we see with pollution we see with declining or degrading infrastructure

and we see with kind of the rise of what a lot of people are calling like surveillance capitalism where people don't have control over their data or how they manage their funds for how they manage any kind of real like digital good and that to me is one of the problems that i think we're doing a really good job in particular in solving um so the question is how do we get more of these how do we get more of these things that we all benefit from and that really matter to us but that aren't in our like short-term interest to focus on and that can potentially be i guess like easily overlooked or um kind of overrun if we're not careful um and so i think in this way quadratic

funding is prescient like the public goods funding problem in general is a much broader problem than we realize and the idea that you know quadratic funding presents is really compelling because people are actually it's one of the few things out there that really talks about how can we without a centralized body get people to participate in this process and to be really engaged in actually you know their long-term communities and their long-term interests and so you know historically we haven't been very good at this right i mean like you go back all the way to like hunter-gatherer tribes we're very much focused on our immediate needs or immediate surroundings with agriculture we started to

understand a bit better you know what was needed um to at least that like kind of a yearly basis build our communities and build our resources and then in the industrial age we sort of decided decided this makes sense to do a scale which of course had a lot of externalities associated with it and in the information age i don't think we really realized what those externalities are yet and we're just sort of coming to terms with the fact that data has these sorts of pernicious effects in the same sort of you know maybe maybe slightly different format um relative to say oil and so we think ethereum is a coordination machine that can actually really help us with this process um apologies for the

background noise uh just given the area i'm in but i think ethereum really can be a major part of this like solution and i think quadratic funding in the ethereum context can be in particular one of the things that drives this overall idea forward and in some ways the idea is more important than an individual implementation that the point is that we need people to actually care about long-term funding and long-term sustainability public goods and that requires a lot of public discussion about these things so we can imagine sort of crypto itself in web 3 as a city and we can imagine that we have our own infrastructure we have our own data we have our own communities

um we have our own local sort of businesses that we work with and support and these things need to be sustained in some way too but the difference between crypto cities and sort of like web 2 digital infrastructure is that we actually have like currencies we have our own local community currencies that we can use to actually fund these these goods and those are generated and powered by our communities they're not powered by external factors that are beyond our control and so i think that's a really key difference between where we are now and why this is so relevant to where we are today quadratic funding works because we actually have control over the underlying kind of tools and like currencies that

we're using in that process itself that's something that didn't happen 20 years ago it wasn't even really possible 20 years ago without a centralized body to manage that and so it's happening now it's something we're working on very actively and it's something that we've been really proud of in terms of the overall impact in the community so a few projects that we funded to date include weakened ethereum shout out evan van ness tornado cash and radical exchange which of course was one of the organizations that really started this movement and you know radical exchange in particular i think is an amazing organization that everyone should sort of try to support um that's just my own personal belief and pitch

um i think there's a lot of features that we have to add here but one of the ones i like in particular is the dye matching so you have the ability to actually locate you know or like pinpoint how much am i actually going to be able to give to this project in total out of the matching pool i'm part of this we do need to probably optimize these matching amounts to some extent they're a bit um at times especially earlier in the rounds like imprecise but i think they're a really good way to give you a picture of what the actual value and like long-term impact of quadratic funding is so how do we get to this like you know end game where quadratic funding powers the world it's iteration and data we

need more data about how people are attacking the system we need more data about how people are funding businesses and we need to grow the number of contributions so that there's more signal in each individual round and so in round one we raised 38 000 in round two we raised 56 000 and now in round six we raised over 227 thousand with over 10 000 contributions during what was effectively a bear market and so i've been really excited about you know this driving completion of git coin's broader mission which is to grow and sustain open source software and that to me starts in web3 so really fundamentally we want people to work for the open

internet um i want people to work for the open internet and i think that quadratic funding is a way for us to get people there so if you have questions or comments about how we're doing this um please reach out um either scott getcoin.com or founders at google.com we would love to answer any questions about this for anyone who's already involved hit us up we're going to be doing another round in september and we would love to have you involved either as matching partners or if your project needs funding have you involved in the round itself so really i just want to say again thanks to the community for supporting us in this um we hope that quadratic

funding can really be a core part of solving these public goods funding problems and we hope to see you in round seven in