Regenerative economics

The advent of blockchain-based smart contracts, bolstered by their success in spinning off new forms of financial and social organization mechanisms, sparked interest in applying the new technology to creating new funding mechanisms, solving coordination failures, and redirecting some of the great wealth generated in the crypto space toward public goods. These efforts brought much innovation and excitement to the otherwise stagnant field of public goods funding. Some of the most notable progress has been made in developing network effects to boost crowdfunding of public goods, decentralizing and democratizing funding decision-making, and creating potential investment funnels in public goods based on retroactive funding.

Quadratic Funding:

QF is an application of quadratic voting that is designed to optimize the distribution of matching funds according to the preferences of the community. This is achieved by giving more weight to the number of people who support a cause over the total monetary amount going toward the cause. By democratizing the fund matching process QF incentivizes small donors to participate in the process and get an outsized influence over which projects get more funding. Meanwhile, large donors get social capital for funding the projects that the community wants to support.

Retroactive Funding:

Since it’s much easier to determine the impact of a public good after the fact instead of predicting expected impact, the idea of RF is to guarantee funding for successful public goods projects retroactively β€” once the impact is already assessed. By guaranteeing funding, an organization can create a market for VCs and individuals to invest in public goods based on their expected impact (instead of expected profitability).

Impact Certificates:

While both Quadratic Funding and Retroactive Funding require an external source of funding that can later create network effects around public goods funding, impact certificates attempt to create a market for public goods through speculation on the expected value of an NFT representing the impact of a public good. At the time of writing, this mechanism is still in early stages of development, and questions remain regarding the demand for such certificates (and whether market forces will drive investment based on actual impact, instead of distorting that market) but it shows how far the thinking in the field of regenerative economics has advanced compared to traditional funding models.

Our paper builds on some of the successes in the field, while offering a model for a self-sustaining, decentralized funding of public goods β€” at scale.

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