Investing in Public Goods

While we outlined the process of estimating the impact of existing or newly created public goods, there is certainly a need to have a mechanism which allows investment in the development of public goods. This can be achieved by adding to the existing protocol a Funding Request process that works as follows:

1. A proposer (or team) creates a funding request specifying (a) the proposed public goods project (with a detailed description of the work involved), (b) the expected impact of the project once completed, © timeline, (d) project categories, (e) contributors, (f) influencing sources and their expected share of the project (g) other project-relevant details. Proposer also specifies (h) the requested funding amount and (i) maximum percent contribution of the project that the investor will receive. Additional terms may be stipulated regarding milestones and payments.

2. Funding Request is submitted to a decentralized validation mechanism (that works similarly to the validation process on Estimate posts) along with a validation fee. Validators then estimate the Credibility Score and Expected Impact Score (along with a risk factor) for the project.

3. Investors can then use the input of validators, along with the on-chain track record (Credibility Scores and Impact Scores) of the proposer (or team) and bid on the project by offering to receive an equal or lower percent of the final project.

The project can also be crowdfunded, with investors offering a portion of the requested funding amount (along with a proportioned expected return) and proposers accepting a group of the lowest bids that would total the funding requested.

After accepting the bid, receiving the funding, and completing the project, a Project post is created with the relevant contributors (including the investor(s)) and influencing sources specified along with their respective percent contribution. This is followed by an Estimate post and validation process that will determine the actual impact of the public goods project.

Risk:

Obviously not all projects end up being successful, and it is entirely possible that a project (for example, a scientific research project) fails. Yet, this is the nature of investing — this is true for any venture and public goods projects are no different in that regard. For that reason, investors need to know the risk involved in the projects they’re investing in, and this is what the process outlined above seeks to provide. Once investors can credibly assess the risk involved, the expected return, and evaluate the track record of the individuals involved in the project they can make informed decisions about their investments. This process results in an entirely new business paradigm — investment in public goods.

Effective Altruism:

It’s important to note here that this process works equally well for investments and philanthropists alike. In the latter case the philanthropist can simply specify 0% return in the bid. Philanthropists would still benefit from this mechanism since they would be able to more easily assess how they can maximize their impact through their donations.