New research by Ethereum creator Vitalik Buterin, Microsoft researcher Glen Weyl, and Harvard economist Zoë Hitzig, could lead to better crowdfunding mechanisms for the commons.

Ethereum creator Vitalik Buterin, Microsoft researcher Glen Weyl, and Harvard economist Zoë Hitzig, have authored a paper titled "Liberal Radicalism: Formal Rules for a Society Neutral among Communities," which could lead to better crowdfunding mechanisms for the commons.

CoinDesk notes that the paper is inspired by the recently published book "Radical Markets," co-authored by Weil and Eric Posner, a law professor at the University of Chicago Law School. The authors argue that "we are where we are because we did not embrace market principles with enough rigor, allowing for an unhealthy concentration of property and power in the hands of a few monopolists," notes a Wired review of "Radical Markets," which also mentions Buterin.

Buterin praised the book in April, before publication, and expressed hope in the potential of radical markets "to solve the key defining challenges of the twenty first century: promoting beneficial scientific progress, developing informational public goods, reducing global wealth inequality, and the big meta-problem behind fake news, government-driven and corporate-driven social media censorship, and regulation of cryptocurrency products." Buterin concluded:

"All in all, I highly recommend Radical Markets (and by the way I also recommend Eliezer Yudkowsky’s Inadequate Equilibria) to anyone interested in these kinds of issues, and look forward to seeing the discussion that the book generates."

Buterin is now actively participating in the discussion. In May, Buterin and Weyl co-authored an essay titled "Liberation Through Radical Decentralization," confidently concluding that

"[Some] combination of blockchain and Radical Markets technologies can make an important contribution to breaking up the most oppressive forms of corporate, government and technical power and building towards a more free, open and cooperative world in the 21st century."

COST and quadratic voting

In "Radical Markets," Posner and Weyl address, with a refreshing approach that goes beyond the tired "left" and "right" labels, some real problems of today's society. For example, resources aren't allocated optimally (think of a plot of land that is kept unused and unproductive for long-term speculation). Also, democracy can degenerate into a dictatorship of an unthinking majority.

Posner and Weyl propose solutions to these two problems, namely COST (common ownership self-assessed tax) and quadratic voting. COST is a combination of common and private ownership. In the example above, the current owner chooses the value of the land, and pays taxes based on the self-assessed value of the land, but must sell the land to the first buyer who agrees to pay the self-assessed value of the land.

Quadratic voting allows voters to save votes for issues they really care about. For example, a voter can skip some consultations and vote multiple times in other consultations. But the cost of multiple voting grows as the square of the number of votes. In the example, the voter must skip three consultations to pay four "voice credits" for the right to vote twice in a fourth consultations. Three votes would cost nine voice credits, and so forth.

Quadratic voting could be implemented in a democratic society by giving everyone a fixed number of voice credits per year. Opt-in organizations could implement quadratic voting by selling voice credits, in which case the cost of joining would grow with the square of the number of votes purchased.

In "Radical Markets," Posner and Weyl argue that COST and quadratic voting could provide viable solutions to real social problems. In particular, they argue that quadratic voting can achieve near-optimal common good. It's worth noting that both COST and quadratic voting could be implemented with high automation through blockchain-based smart contracts.

I don't think Posner and Weyl have found the magic bullet - I don't think here are magic bullets for social problems - but I think the solutions proposed in "Radical Markets" should be tried and evaluated, starting of course with application cases less critical than land ownership/taxation and political elections.

Crowdfunding public goods with liberal radicalism

In the new paper, Buterin and his co-authors propose a "liberal radicalism" crowdfunding scheme inspired by quadratic voting. In the proposed scheme, all members of a community can contribute to funding  community projects. The funding that a project receives is proportional to the square of the sum of the square roots of contributions received.

This crowdfunding mechanism has interesting properties, similar to those of quadratic voting. In particular, it encourages consolidation of related projects and discourages fragmentation: With the same individual contributions, one consolidated project will receive more funds than two separate projects.

The mechanism rewards projects that receive many small contributions rather than a few large ones. If all contributions are equal, the funding received by a project grows with the square of the number of supporters.

These seem good features for a community funding system for public goods, and the authors discuss possible applications in campaign finance, open source software communities, news media finance, municipal projects and public works. It will be interesting to see how the first field applications of liberal radicalism will work.

A practical implementation problem is that liberal radicalism requires watertight solutions to assign unique identities to the participants, otherwise the system can be easily gamed. "Whether these difficulties can be overcome is an interesting question that experimentation and technological advances for identity solutions will reveal," note the authors.

Image from Pixabay.

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Crypto Insider Editor Giulio Prisco is a writer specialized in science, technology and business. He is persuaded that crypto has the potential to bring disruptive positive changes to the internet and society at large.

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