Democratic Donation Matching

Using a variation of “Liberal Radical” donation matching to empower donors

In a recent paper by Vitalik Buterin, Zoë Hitzig, and E. Glen Weyl, the authors propose a radical new design for crowdfunding. They explain:

Individuals make public goods contributions to projects of value to them. The amount received by the project is (proportional to) the square of the sum of the square roots of contributions received.

This equation can empower small donors to be more motivated in donating to a fundraising campaign, as well as rallying a community around them. It hopefully gives small donors the feeling that their voice matters. Take the example of a similar donation matching process as applied to Campaign Financing:

A peril of capitalist democracy is that billionaire activists may in some cases be at risk of challenging the democratic pillar of “one person, one vote.” An initiative to fix this imbalance can be seen in how New York City matches small contributions to election campaigns, matching 6:1, up to $175. As a result citizens feel more empowered, knowing a community can have a formidable voice no matter the whims of the individual “whale.”

The “Liberal Radical” or LR equation, as proposed by Vitalik, achieves a similar result as New York City’s matching program, and can have applications far beyond campaign financing. Applying this equation can be a way to amplify the economic “votes” of citizens, beyond simply matching the contribution size 1:1 indiscriminately (using traditional donation matching).

This month we plan to experiment with the equation for the purposes of philanthropy. Here’s how it will work:

Current Matching Distribution on Spring

On spring.wetrust.io, we have initiated the first implementation of the LR equation as applied to fundraising for 501(c)3 verified nonprofits.

As opposed to traditional donation matching, the Matching Pool allocation (100 ETH) will be determined by the proportion of individual contributions across Spring, as opposed to sheer donation amount.

For example, if VietSeeds receives contributions in the amount of 100 ETH from only one individual donor, but Rainforest Trust raises 10 ETH in small contributions from three hundred donors, then Rainforest Trust will receive a much higher proportion of the total LR Matching Funds.

In this case, let’s say Rainforest Trust receives ~10% of the 100 ETH Matching Pool from across the projects- meaning 10 ETH in addition to the original 10 ETH total contribution. VietSeeds would still receive the 100 ETH from one wealthy donor, but would not have its contribution amplified by the LR Matching Funds.

In order for perfect LR conditions, you need a strong identity solution. Otherwise people will try to game the system. For now, we are experimenting with Liberal Radical crowdfunding in a non-perfect sybil environment. Inevitably, people may try to game the system to maximize donations for the cause they support. However, unlike adversarial environments such as Campaign Financing & the eternal war of Red vs. Blue, there is a chance that non-perfect Liberal Radical identity may be viable for altruistic purposes. Maybe the Spring LR experiment will prove successful.