Ethereum co-founder Vitalik Buterin might have a solution to crypto funding problem
Free-riders, that is, people or businesses profiting from the under-provision of public goods is in the crypto ecosystem. As noted in a new paper written by Ethereum founder Vitalik Buterin, Microsoft researcher Glen Weyl and Ph.D. of economics at Harvard, Zoë Hitzig.
According to CoinDesk report, these free-riders pose a serious problem. It’s a problem that even creating a problem outside the crypto market as well. However, in the recent paper the authors mainly focuses on how it harms the blockchain project.
The new paper hints at a financing method supporting a “self-organizing ecosystem of public goods.” The paper titled “Liberal Radicalism: Formal Rules for a Society Neutral among Communities” describes a method which is written in code – allowing groups to allot funds for maintenance of public goods and services without facing the “free-rider” problem.
Reportedly, the mechanism is similar to Quadratic Voting principle – allows participants to vote with cryptocurrency tokens depending on how much they care about the issue. Following the same concept, the new paper shares how communities contribute to public goods – software development, cryptocurrencies and journalism. It works by increasing the funding of projects slow and steadily depending on the number of participants and how much 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,” according to the paper.
Co-author of the paper Hitzig told CoinDesk, “Once we circulate the paper we expect that experimentation will begin in earnest shortly thereafter.” She added, “…tensions are increasingly manifesting in discontent with existing liberal democratic systems and the rise of authoritarian populist alternatives on both the left and right.”
And, the new paper might solve the issues and try to create a more cooperative society. According to the authors, “Under the standard selfish, independent, private values, quasi-linear utility framework, our mechanism leads to the utilitarian optimal provision of a self-organizing ecosystem of public goods.”
The paper also adds that it could have an immediate impact on projects such as Ethereum, Zcash and other projects that relies on non-profits to distribute funding to the development of the network.
However, the mechanism is not ready to deployed or adopted right now. “We are aware that the mechanism may seem esoteric at first, and thus worry about a situation in which LR becomes a nice abstraction that never gets put to work and that only a select few understand,” Hitzig told CoinDesk. However, Hitzig hopes that even though the paper is imperfect, it will be encouraging others to think about the problems at least and maybe even come up with new solutions
She told CoinDesk, “Nothing would thrill us more than to see other collaborations that pose original, alternative visions for solving what we see as the crisis of liberal order.”
Image via Shutterstock
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