Quadratic Voting & Funding
To combat the influence of the wealth of a voter, quadratic voting and based on that quadratic funding were introduced. Both methods work a bit different but try to make it difficult or extra proportional expensive to influence the vote or funding with pure wealth. The difference between both methods lies in the use case, as will be explained below.
Quadratic Voting
In quadratic voting, voters can pay for additional votes. This gives them the ability to express their interest in this matter. The cost for each additional vote increases quadratically, making it hard to obtain a large number of votes.
Ci = Ni^2
Ci: cost to the votes for voter i
Ni: number of votes of voter i
Example
| Vote | Cost per voter |
| 1 | 1 |
| 2 | 4 |
| 3 | 9 |
| 4 | 16 |
| 5 | 25 |
Quadratic Voting can be used in democratic institutions, in corporate governance, and blockchain-enabled collective decision-making. A form of quadratic voting was used in the democratic Caucus of the Colorado State House of Representatives. (https://www.radicalxchange.org/media/blog/quadratic-voting-in-colorado-2020/)
Quadratic Funding
With quadratic funding the focus is more on the funding of projects most commonly open source or public goods projects. Quadratic funding consists of three parts a funding pool that is provided by a donor, the projects that want a portion of that funding pool and the contributors that want to support one or more projects. With quadratic funding the amount received by a project is proportional to the square of the sum of the square roots of contributions received by the contributors.
Example
| $10,000 Funding Pool | |||
|---|---|---|---|
| Project | A | B | C |
| Funding received | $500 | $500 | $500 |
| Nr. of Contributors | 10 ($50 each) | 2 ($250 each) | 5 ($100 each) |
| Matched Funds | $5882.35 | $1176.47 | $2941.18 |
| % of received Funds | 1176.47% | 235.29% | 588.24% |
| Total Funding | $6382.35 | $1676.47 | $3441.18 |
We can see with quadratic funding that the project with the most contributors has received the biggest share of the funding pool, despite all projects received the same amount in funding. This shows it is more important that more people fund a project than a few with larger sums.
Quadratic funding is currently mainly used by Gitcoin. Gitcoin (https://www.gitcoin.co/) is a platform designed to foster the development of meaningful, open-source projects and better align the interests of donors and developers.
Issues
The fundamental issue remains – the voting power depends on the wealth of the voter but both methods make it considerably more difficult or expensive to take influence for the wealthy. Besides that, it is important to identify each voter to calculate the cost of the votes correctly and avoid Sybil attacks. A very wealthy voter could pay other voters who favor his candidate or project to buy additional votes.
