Idea vs Contributor Proposals

A comparison of idea and contributor proposal based funding along with a summary on which approach may often lead to better outcomes for improving the Catalyst ecosystem.

Factors to consider

The following are some important factors to consider for an approach used to incentivise the community to support and improve the Catalyst or Cardano ecosystems.

• Impactful - A key outcome for any funding approach will be that it leads to the best outcomes and creates high impact for the ecosystem.

• Cost effective - The funding approach should be cost effective. There should be minimum admin overheads for those seeking funding. Less time wasted, costs or admin overhead means proposers can spend more time executing. A cost effective approach also means helping with preventing duplication and reducing wasted resource allocation to low impact tasks.

• Timely - Funding should be provided to those that need it in a timely manner using governance methods that include the right amount of stakeholders to make that decision for the given budget size requested.

• Concise requirements - A funding approach should support being be sufficiently concise in requesting the right amount of information from the proposer based on the project and amount of funding requested. For smaller projects a smaller governance process and simpler amount of information is likely more suited. For larger projects a better understanding of the milestones, success outcomes, budget and auditability of the proposal should be provided.

Idea proposal funding

The process consists of individuals or teams creating proposals that detail out a solution to a defined problem. A proposal will include what they are trying to achieve, a roadmap, budget, team, success metrics and how they will make sure it is auditable. To date Project Catalyst has so far solely used idea proposal based funding.

Advantages

• Clarity - Ideas offer full clarity to the whole community on the exact solution that will be implemented. This approach is great for community members who are highly involved and want to interact, collaborate and help govern which ideas should be funded.

• Detailed plan - Ideas provide a way for teams to provide a detailed plan for how something will be achieved and why it is being implemented.

• Fully researched - Ideas can provide as much research as needed to justify why a solution is the correct approach. This approach is great for community members who are highly involved and want to understand the full background behind the idea.

Issues

Weak alignment

• Misaligned financial incentives - Proposal teams have a financial incentive to defend the ideas they create. Idea based funding for individuals often means determining whether they can work full time in the ecosystem or not. This financial incentive attaches teams to the ideas they have been funded for and can prevent proposal teams moving towards stronger solution ideas if they emerged as they have been already funded for something different. Funding similar ideas is also an issue as this will often mean duplicated efforts and wasted resources.

• Misaligned collaboration incentives - If proposers help other proposal teams when they have existing funded proposals to complete they risk not completing them and potentially missing out on future funding rounds. There is no direct incentive to collaborate with other similar proposals. If ideas are similar to other proposal teams then they can also easily choose to compete instead of collaborate.

• Diverging processes and implementation approaches - Proposal teams making solutions for the core ecosystem currently have no incentive to standardise the implementation approaches and converge on their processes and execution. In terms of technical implementation this lack of incentive can lead to multiple different frontend and backend frameworks, databases or protocols being used. This would make the ecosystem more complex to contribute towards and result in slowing down innovation speed.

• Emotional based implications - Detailing out an idea in a proposal takes a moderate amount of time and investment. Proposal teams will have a closer attachment to an idea the more they've worked on it and even more so when proposals determine whether they are going to receive funding or not. Abandoning an idea can feel like a loss when success and funding is tied to proposal ideas rather than the impact of being a skilled contributor. Proposals focussed on ideas promote the importance of ideas in being able to get funding over collaborating on what the actual best solution might be. Similar proposal ideas also have increased emotional implications as providing feedback to the other team is more complex when those proposals are directly tied to whether each proposal team will receive funding.

Less flexibility

• Solution flexibility - People are more confined to the ideas they get funded for as that becomes their obligation to the community. This is instead of them having flexibility to focus on the highest impact solution at a given moment. A simple example could be in Catalyst where a proposal submission tool doesn't need much work for improvement however there is a lot of work to do on a proposal assessment tool. A proposal team funded for the proposal tool have no incentive to abandon their own project in the short term to help where help may most be needed.

• Changing ecosystem requirements - The ecosystem can change very rapidly which makes idea based funding a risk due to it being focussed on solutions to a problems selected by the proposer. This is instead of having a team that could be flexible to changing requirements that can adjust or abandon tools and processes that are no longer relevant. Any time an idea focussed team decides to work on a new ecosystem area they would need to justify it to the community if they were using existing funding that was meant to be used on a different idea. This slows their speed and ability to adapt to ecosystem changes.

• Increased difficulty in pivoting - When an idea is funded the proposal team have been funded to implement a specified solution. If the proposal team determines later their initial proposal is not a good approach the team will need to justify changing their focus to the community. These implications take time to plan and communicate.

Knowledge gaps

• Proposer - Smaller proposal teams focussing on a single solution have an increased likelihood of being unaware of other ecosystem problems if they are not collaborating and communicating with the other teams involved. As well as this by having separated teams they may not have the same depth of ecosystem awareness to suggest all the potential solutions nor choose and execute the best solution from them. Issues around effective problem sensing, problem prioritisation, solution research and solution selection become increasingly likely without sufficient collaboration and synergy between the teams in the ecosystem.

• Proposal assessor - An assessor is not incentivised to research, analyse and be up to date with the problems of the ecosystem and the potential solutions that could resolve them. Without this incentive it becomes likely that a proposal assessor doesn't have enough information to fully review what the impact of a proposal could be without sufficient information and time to reflect on it. The result is a limited assessment quality from the majority of proposal assessors due to the practicalities of not being able to cover the depth of information required.

• Voter - The majority of voters won't be as involved as much the full time contributors of the ecosystem nor will they likely have the time to understand all the problems and potential solutions to make a fully informed opinion on which proposals are most high impact. Voters that fully trust community advisor assessments fall into the same knowledge gap issues that exist for community advisors.

Slower execution speed

• Proposal writing - For most small to medium changes within the core ecosystem a proposal would need to be created to fund the execution. For many proposals adding milestones, KPI and audit processes may be adding too much information for what might be a simple or small change. Proposal writing that requires this much depth of information increases complexity and reduces execution speed.

• Slow governance process - Ecosystem contributors have to wait for the governance process to finish for them to be funded to complete tasks. The ecosystem requires rapid iteration and the proposal process can hinder execution speed.

Complexity

• Budget inaccuracies - It is difficult to predict exactly how long it will take for a team to execute an idea. The complexity is further increased by adding in the need for budgeting tax or the process of measuring success with KPIs. Trying to predict these budgets with any exactness adds complexity which could be avoided by paying contributors a salary budget.

• Scattered funding - Each idea receives funding for its execution which leads to complexity as community members must calculate what they should be paid from an increasing amount of different funded ideas with the range of different people they are working with.

• Increased tax implications - Funding an idea means that a group of people who represent some form of entity will get paid before the contributors are. This leads to tax considerations where in many countries this may be considered an initial taxable event (e.g. corporation or sales tax) that should be applied before funding is then passed down onto contributors.

• Detailed proposal requirements - Proposals must add detailed proposal information such as a roadmap, KPIs and similar details which adds complexity to the process especially in scenarios where work may not benefit from this depth of information.

Contributor proposal funding

Contributing funding would consist of individuals creating proposals that outline their professional background, contributions to the ecosystem and how they intend to support the ecosystem. The community would determine which contributors get selected to be funded and work for the protocol.

Advantages

Flexibility

• Solution flexibility - Contributors can move instantly between different solutions in the ecosystem that have either higher demands or would create more impact.

• Ecosystem changes - If the requirements of the ecosystem changes the contributors can make sudden changes to the tools or processes to accommodate them. Contributors aren't tied to solutions for funding meaning they can focus on the most pressing requirements.

• Working preferences - Contributors have the objective of providing the most impact they can within the ecosystem. For many contributors this could mean the use of a single skill they enjoy the most across the entire ecosystem where as other contributors may want to apply multiple skills within a single area. Contributors have more flexibility to work exactly as they want.

Aligned incentives

• Align implementation approaches - A group of contributors voting on implementation approaches instead of small team will help push implementations towards consistency rather than divergence. This results in easier integration between all tools and processes and any onboarding of future contributors.

• High impact tasks - By funding contributors instead of proposals the contributors are able to identify high impact tasks that are not currently compensated. For example a high impact task could be to provide more feedback to proposals who submit a proposal before any assessment stage to help produce a higher quality set of proposals in each funding round. Funding contributors to maximise impact means they have an incentive to find high impact tasks that most benefit the ecosystem.

Maximised collaboration

• Better ecosystem collaboration - By funding contributors the focus is directed towards maximising the impact of their contributions rather than backing one or a small number of ideas. Contributors are incentivised to involve themselves in any of the ecosystem services where they would provide the most value. This approach means contributors share their most impactful knowledge and skills across the ecosystem in a way that motivates them the most but also provides the most value.

• Aligning proposal teams - Contributors with an objective to maximise impact have an incentive to help bring proposal teams together and look for ways they could collaborate or reduce duplicated efforts. Contributors become a glue that brings together the ecosystem.

• Introduction to project teams - Contributors can get introduced and work with existing project teams outside the ecosystem whilst providing support. This interaction can lead to finding people who would be a good fit to join and support those proposals. This involvement helps team building for projects outside of Catalyst with either friends they know or even themselves once they finish a term working as a Catalyst contributor.

Simplicity

• Simple objective - Contributors have the objective to provide the most impact possible meaning they can focus on any work that maintains, supports and improves the ecosystem.

• Less distractions - Impactful contributors in the ecosystem can be best utilised by doing what they do best rather than needing to create proposals and market them to get funding. By funding individuals in the ecosystem the community can benefit from the contributors being able to focus undistracted on whatever is most impactful.

• Simple tax implications - Funding individual contributors allows them to class that as personal income or through their own personal business entity. This simplifies the tax implications and saves them time that they can use to focus on creating impact.

Better community support

• Effective community support - Funded contributors would be able to become a better nucleus of support for the community and help with answering questions and technical issues as they become increasingly familiar with the entire ecosystem.

• Supporting proposals - Contributors are incentivised to support Catalyst focussed proposals and help where possible. This encourages innovation outside the team and maximises impact through collaboration and support.

• Increased education - More full time contributors helps with education on the entire ecosystem due to more involvement. Increased awareness and experience leads to creating better support and education resources for the community.

Issues

• Clarity - There is a risk of a lack of clarity on exactly what the contributors would be working on which makes it more difficult to gage whether contributors will be able to maximise impact effectively for the ecosystem.

• Team synergy - There is a risk that contributors paid for by the treasury don't have a high synergy when working with each other. Contributors may prefer different processes or approaches to other contributors which may lead to decision complexity or potential conflicts.

• Selecting candidates - Voters are likely to have low familiarity with the candidates they are voting for to become contributors. A idea is easier to understand from a high level over trying to work out the potential impact of individual contributors. Ranking candidates without sufficient information would also present a challenge to voters.

Summary

• Idea based funding has a number of issues for maintaining and improving the Catalyst ecosystem. The process is not flexible, adds complexity, misaligns community member incentives, has slower execution speed and can cause knowledge gaps amongst stakeholders due to the competitive environment that competing idea based proposals create.

• The contributors approach brings simplicity where people who want to work on improving the Catalyst ecosystem can do so without the need to constantly write proposals. Contributors working full time in the ecosystem get a faster accumulation of knowledge which will support a faster iterative feedback loop and produce a better understanding on ways to push the ecosystem forward.

• Funding contributors provides a better approach to maximises alignment and collaboration when building out the Catalyst ecosystem whilst also still giving maximum flexibility for contributors. Contributors will provide the highest possible impact by moving easily between high impact tasks within the ecosystem.

• The issues for using contributors over ideas can also be resolved with the usage of open and thorough product development workflows and also usage of a contributor treasury to help more effectively manage funding. These issues and opportunities are covered in contributor future improvements.