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

Posted on Sep 4, 2018

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

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 profitfrom 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.

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. 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.

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.