Quadratic Funding = Wisdom of the Crowds

Quadratic Funding is the mechanism we use to decide how matching funds should be distributed. It’s been called the “mathematically optimal way to fund an ecosystem in a democratic way.”

You’re here because you care. You know that it’s possible for humanity to build a brighter, more beautiful future – and you’re ready and willing to help make it happen.

But where do you begin? How do you ensure that your time, energy, money, and attention are going to the right places, at the right times? And that your efforts are having the right impact?

We each have a unique perspective that is shaped by our own histories, our dispositions and the stories we tell about them – our unique insights. 

When it’s time to make momentous decisions as a group, we each have signal. 

But how do we know who to pay attention to? In short, we don’t. This is because we all possess a piece of a giant jigsaw puzzle of effective decision-making. 

Gitcoin Grants uses collective decision-making, what some call “wisdom of the crowds” to help communities to allocate funds. Thus, by giving your money to grantees via Gitcoin, you’re supporting a distributed collective intelligence mechanism to distribute resources to the projects that the community supports as a whole.

The Power of Quadratic Funding

Every quarter Gitcoin’s Matching Partners (larger donors) donate a pool of approximately $3M, and Gitcoin deploys those funds based on the results of a crowdfunding campaign by use of a QF formula.

Quadratic Funding optimizes for the preferences of “the poor and the many” and not “the rich and the few.” This means that if a project is getting support from more individual contributors, they will be getting a bigger portion of the matching pool.

As a donor, you can give as little as $1 to a project. This support can then be multiplied into tens or hundreds of dollars, allowing you to have a huge impact on the projects you want to serve.

Creating a Dense Map of Signal

One of the incredible things about Gitcoin grants is that every time we donate we are creating a dense map of community-derived signal. This diagram shows the hundreds of thousands of contributions from a single grants round, where each node is a user or a grant, and each edge is a transaction.

See the full evolution of public goods funding at Gitcoin here.

As a donor, you form part of the ecosystem with each move you make. As an example, many longtime Gitcoin Grants funders don’t stop with their donation – they share their cart publicly after checking out in order to help others to discover the projects they are supporting. 

By sharing their donation with others, they send a signal that they’re bullish on the future of humanity and eager to play a role in having a positive impact. 

Beyond the Donation

Being part of this map of signal also can bring some neat perks. There is an entire web3 ecosystem building mechanisms to increase the impact of our grants rounds, allowing donors to gain rewards if they themselves choose to enter into the map of signal.

For example, following Gitcoin Grants Round 14, Lens Protocol created a claim, where if you contributed to the Gitcoin Matching Pool on Mainnet, then you are eligible to mint a Lens profile. Similarly, anyone who has donated to Gitcoin Grants is eligible for an Optimism airdrop, where they stated that “Gitcoin donors have chosen to behave in positive-sum ways by funding public goods.” 

If you’ve come this far, it’s clear that you still care about the bright future that Gitcoin Grants is building for humanity. And by donating, you form part of that future. 

What Comes Next?

Gitcoin has delivered over $65 million in funding for open source and adjacent public goods in the past 3 years, but we’re just getting started. For those who haven’t yet had the chance to donate, we’d love to welcome you to the community. You can give anytime, but the best time is when donations are matched during our grants rounds each September, December, March, and June. 

We can’t thank you enough for your support and look forward to working with you to fund the shared needs of our communities in the coming months and years!

If you’d like to get involved, to help your wisdom and your monetary energy have the greatest impact, get involved in Gitcoin Grants and learn more about our latest impact.

– Team Gitcoin

Thank you to Eric, Mathilda, Armando and Sean for their efforts in co-creating this article.