Quadratic Funding under Limited Matching Funds: Evidence from Gitcoin

36 Pages Posted: 12 Jan 2021 Last revised: 10 Mar 2021

See all articles by Ricardo Pasquini

Ricardo Pasquini

Universidad Austral - Facultad de Ciencias Empresariales; Universidad Torcuato Di Tella - School of Government

Date Written: September 30, 2020

Abstract

In this paper I examine some of the properties of the mechanism proposed by Buterin, Hitzig, and Weyl (2019) for public goods financing, under a limited pool of matching funds. I explore questions to understand under which conditions social efficiency will most likely be compromised, such as for example, what determines the size of the optimal pool of matching funds. I also investigate incentives for strategic behavior in contribution giving. Then, using data collected from Gitcoin Grants, a platform where the mechanism is currently implemented, I present stylized facts on the behavior of contributors and analyze the extent of the proposed propositions. Among other findings, I document a tendency of small contributions by backers, scattered among multiple projects, attributable in some extent to strategic behavior. Such contributions stimulate a rapid increase in target quadratic funding matching requirements, and the funding constraint is reached very early in the rounds. I also provide evidence consistent with the idea that contributors internalize the funding constraint restriction and reduce their contributions during the financing round.

Keywords: quadratic funding, cryptocurrency communities, public goods, market design, decentralized finance

JEL Classification: D47, D61, D71, H41

Suggested Citation

Pasquini, Ricardo, Quadratic Funding under Limited Matching Funds: Evidence from Gitcoin (September 30, 2020). Available at SSRN: https://ssrn.com/abstract=3702318 or http://dx.doi.org/10.2139/ssrn.3702318

Ricardo Pasquini (Contact Author)

Universidad Austral - Facultad de Ciencias Empresariales ( email )

Mariano Acosta s/n y Ruta Nac 8
Pilar, Buenos Aires, B1629WWA
Argentina

Universidad Torcuato Di Tella - School of Government ( email )

C1428ATG Buenos Aires
Argentina

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