One more effort to fix the quadratic mechanism

[jcarbonnell]

Summary

The current implementation of the quadratic funding mechanism might serve the opposite of its goal.

Motivation

Quadratic mechanisms aim to reduce inequalities while giving a chance to smaller projects to stand out in front of bigger ones. It is also meant to accelerate the deployment of ideas generating the most support while making it useless for the most powerful groups or individuals to influence this process thanks to an in-design influence-proof mechanism.

E.g. Suppose you can buy and allocate an infinite number of votes to a project you like, and each time you allocate 1 vote, the quadratic rule applies to the next vote. You’ll pay 1 for your first vote, 2 for your second vote, 4 for your third vote, and 16 for your fourth vote. In the end, you have spent 23 credits to vote 4 times. This quadratic mechanism is meant to prevent wealthy individuals or organizations from buying out the election.

In the case of Potlock, it looks at the contrary like a handful of socially powerful projects (projects with an established community) will be able to outperform smaller projects on their capacity to gather individual donors and dispossess them from their chance to get a grant. Furthermore, the current rules seem to favor established projects with an existing community, making it challenging for newer projects to compete due to the sybil resistance requirements.

Description

It’s fair enough that the pot isn’t split into equal shares between all participating projects, and ranking projects on their capacity to gather support is a good strategy for Potlock to grow by onboarding users from each participant's supporters. But in any case, it is fair that a handful of projects take the whole pot. At the ecosystem level, it is not strategic either to reduce the pool of funded projects to a handful of "winners take all". This will create frustration and crash promising projects in their nest.

The allocated funds to each project could be weighted according to their supporters, with a threshold. So collecting 100 supporters makes you the winner of the pot, and thus the project with the most funds allocated, but it wouldn't make you more of a winner with 150 supporters, resulting in your project killing all the competitors' chance for receiving a resource from the same pot.

Concretely speaking, these are a few propositions to fix the current quadratic mechanism:

• A sliding scale could be introduced, where the percentage of funds allocated to a project decreases as the number of projects funded increases. This would ensure a more equitable distribution of funds across a diverse range of projects.
• A sliding threshold could be introduced for each pot, where a project with the higher supporters (e.g. 100) would receive the maximum allocation, but having more supporters (e.g., 150) would not result in a disproportionately higher allocation. This approach aims to prevent a single project from dominating the pot and stifling the chances of other projects receiving resources.

Additional Information

The following screenshot illustrate the above described issue:

• the 1st (forefront) gets 5000N for 50N collected. It's a highly profitable allocation (*100 profit)
• the 8th (devbot) gets 4N for 13N collected. It's a privation of 69% of its collected funds.