Comparing Funding Categorisation Types
Comparing different funding categorisation types that can be used when distributing treasury funding to incentivise impactful ecosystem initiatives
Last updated
Comparing different funding categorisation types that can be used when distributing treasury funding to incentivise impactful ecosystem initiatives
Last updated
Idea, contributor, task and community funding categorisations each offer a different approach to handle and distribute treasury funding. Each categorisation type are effective for different purposes and can each help to achieve different outcomes. The advantages and issues for each categorisation based on a range of factors are worth considering when determining when to use each type of categorisation.
Complexity to create categorisation - How hard is it to create each type of categorisation? What processes need defining that will be used by the categorisation to operate effectively?
Adaptability and flexibility - How flexible is the categorisation type in handling a range of different situations such as a diversity of ideas on how to achieve a certain outcome? How flexible is the proposer in being able to reallocate their effort and resources to other areas when the environment or requirements quickly change?
Number of participants - How many people could participate in the categorisation based on the incentives available and processes used by the categorisation?
Difficulty in effectively directing funding - How easy and effective is the categorisation for precisely directing funding?
Potential to scale - How capable is the categorisation in handling a large number of participants? How much funding could the categorisation support?
Difficulty in preventing bad actors - How difficult is it to deter or prevent bad actors from gaming or attacking the categorisation and any processes adopted?
Complexity in categorisation moderation and governance - For those moderating and governing the categorisation how complex is it to do so based on how it gets used? How does that change when the ecosystem evolves? What processes or information need to be maintained and updated over time?
Complexity of usage for voters - How difficult is it to use the type of categorisation in practice for voters? What do voters need to do to effectively participate in the voting process and how complex is it for them to do so effectively? How easy is it to compare proposers or audit any results of the categorisation?
Complexity for proposer participation - How easy is it to participate in the categorisation as a proposer? How much effort is needed to submit a proposal and to report on when they have executed what was expected from the proposer?
Idea categorisations allow the community to propose a range of different ideas for the rest of the community to consider. Ideas could range from being about improving existing infrastructure or processes, supporting the ecosystem in some way, trying to introduce a completely novel new solution or that cover any other relevant ecosystem area. Ideas could be small or large in budget, they could also be fairly small in scope such as community get togethers, education resources or writing news articles or they could alternatively be more complex in scope such as for technical research, protocol development or creating internationally scalable social, finance or governance applications.
Example categorisation - Products & Integrations
The Products & Integrations category is an example of an idea based categorisation. The category invites any ideas that are building solutions on Cardano whether that’s a completely new product or an integration of an existing solution so it can be used by the Cardano community.
Advantages
Fairly adaptable and flexible - When the ecosystems environment or requirements change the communities proposers are able to respond to this by submitting new ideas into these categorisations. This adaptability is useful mainly for new ideas as existing proposers who were funded would still need to execute their previously submitted and funded ideas. The flexibility to redirect resources and effort therefore is not immediate. However idea categorisations can still be fairly quick in responding to changing environments. Once funded for an idea a proposer has some ability to pivot their idea as necessary however if the change is too significant it would mean moving away from the original intentions of the proposal - which was what the community voted for. Due to this there is only a low to moderate amount of flexibility in how easily an existing funded proposer can redirect effort and resources from one idea to another. The main flexibility in this categorisation type exists due to the fact new ideas can be proposed and can address any problem or opportunity that emerges.
Very large number of proposer participants - Idea categorisations could handle a very large number of idea proposals being submitted. The voting infrastructure will need to be effective for searching, ranking, filtering and sorting proposals so that it is easier for voters to effectively decide on how to vote. The community also benefits from being able to share and express which priorities they believe are the most important at that precise time in the ecosystem. Any number of participants could be funded and be working on their own ideas independently which is why many participants can be supported by this type of categorisation. The main area of friction preventing the categorisation being able to support a high number of proposer participants would be that the auditing process would need to be effective enough in ensuring funded proposals are being executed as intended.
High potential to scale - Providing the right voting infrastructure is developed, along with the right auditing processes that have suitable checks and balances, idea categorisations can effectively scale both in the number of participants and the amount of funding it can handle.
Issues
High complexity to create categorisation - Once any idea categorisations are defined the process requires the right infrastructure for voters to find and compare proposals when the community votes on the range of submitted ideas. There is also a need for some way to assess these proposals so they meet some basic quality thresholds and the communities time is not wasted. Finally there is a need to audit that the ideas that are funded get executed. Auditing has a high complexity as each idea and what they deliver is often very different to others which makes this process time consuming to verify.
High complexity in effectively directing funding - Comparing ideas is difficult as the diversity in what they are trying to deliver and what potential outcomes they have can be very different. This results in a large variance in the potential impact that each initiative could produce and makes it difficult for voters to be well informed on deciding which ideas to fund.
High difficulty in preventing bad actors - Malicious actors could exist with fake or low quality proposals and other actors could exist trying to game any incentivised assessment or auditing processes that exist. If the proposal is rewarded based off checking delivered milestones then this can be one approach to ensure proposers are delivering as intended at different stages. Some identity or reputation processes could also help in preventing bad actors earlier on in the process. These systems will need to be sufficiently effective in preventing actors repeating similar attempts repeatedly in the future to extract funding. Due to the diversity of ideas that could be submitted and funded it can also be difficult to easily identify those with malicious intent at the proposal assessment stage. Another area of complexity is it could also be difficult to prevent some proposers copying other projects work and claiming it was their own in an attempt to extract out funding from the process.
High complexity in categorisation moderation and governance - Governance and moderation effort is needed to ensure proposals do not have malicious intent. Proposers will need to complete any verification steps required such as proof of life identity checks, have their proposals assessed and progress audited against the proposals deliverables. As each idea and their deliverables can be very different there is high complexity in assessing and auditing each proposal. Idea categorisations are more moderation and governance intensive due to this large variance in ideas and the need for effective auditing.
High complexity of usage for voters - Voters need to be able compare the proposals and teams involved in each of the ideas to make well informed decisions. It will be difficult to understand the actual trade offs between very different ideas and trying to determine which idea would produce more impact. Voters will also struggle when they need to participate in any complex auditing process decisions such as trying to determine when a funded proposal should stop getting anymore funds due to not executing what they stated they would. Tools and processes will be needed for voters to use to simplify how proposals can be best compared against one another and also for doing any auditing processes efficiently.
High complexity for proposer participation - Proposers need to spend a moderate amount of time writing a well articulated proposal if they want to increase their chances of success when proposing in any idea categorisations. Proposals will need to break down exactly what they intend to do and how they will do it ahead of time. As the amount of ideas submitted can be vast they will also benefit from marketing their proposal which will cost them further time. If the proposal is funded then the proposers would also need to document and report on the execution of their proposal. Proposers may also need to specify and respond to which community priorities they are trying to address with their proposal.
Summary
Idea categorisations are effective for experimenting and finding novel ideas to explore and trial in the ecosystem. Idea categorisations can be effective for supporting ideas of any level of complexity if there is enough budget to support the initiative.
There is much more moderation and governance effort with idea categorisations as each idea has it’s own unique outcomes that it could be trying to deliver. This makes idea categorisations more time consuming to assess and audit as the community will need to look at whether those ideas are feasible and can actually achieve what they plan to do.
Idea categorisations have more of a time commitment for people to participate and write an effective proposal for their idea. Each type of idea will need a suitable process to sufficiently determine whether idea is feasible and sensible. The community will be trying to identify which of the submitted ideas has the highest chance of delivering high impact for the ecosystem.
Contributor categorisations are suitable for incentivising people to work in an ecosystem. Contributors could help perform tasks, generate or execute ideas or help with any other work that supports, maintains or improves systems and processes within an ecosystem. A contributor categorisation model is highly flexible in handling fast changing environments or requirements. Contributors could be incentivised to help with a collection of simple tasks or they could be handling more deep and complex work.
Example categorisation - Catalyst Contributors
Catalyst contributors is a contributor based categorisation that is focussed on helping elect people who want to work full time and contribute to the Catalyst ecosystem. A cohort would have elected contributors that have a diversity of skills so that the cohort is functional in being able to share some of the responsibility of supporting, maintaining and improving the Catalyst ecosystem.
Advantages
Low complexity to create categorisation - Contributor categorisations need to define what ecosystem the contributors would be focussed on and what areas the contributors could work on. There would also need to be a process for contributors to report periodic work logs to the community so their contributions can be checked and audited.
Very adaptable and flexible - Contributors are flexible to suddenly changing environments as they can easily change what they are working on to support areas that need the most support. Contributors could be helping with what would deliver the most impact for that ecosystem which could be creating or executing ideas or performing tasks that help to support or maintain the ecosystem.
Moderately low complexity in effectively directing funding - Funding would always be directed towards the purpose of supporting the ecosystem the contributor categorisation is created for. As an example Catalyst contributors would spend their time supporting, maintaining and improving anything to do with the Catalyst ecosystem. The main complexity for voters is determining which candidates are best suited to be elected to work in this ecosystem. The exact details of how contributors will spend their time would be up to the contributor to determine. However the community would ultimately influence these priorities when the community provides feedback about the ecosystem.
Low to moderate difficulty in preventing bad actors - Bad actors could still get elected in the process that were difficult to spot in the proposal process or that managed to deceive the community about their background or credentials. As contributors would regularly interact with each other there is a higher probability that bad actors get identified fairly quickly and that it would be difficult for them to get reelected. Bad actors that are simply trying to get away with not executing what they are suppose to be doing will also likely be identified fairly quickly providing a reporting process is being used to audit their work and resolve any issues that exist.
Low complexity for proposer participation - Contributors would spend a relatively low amount of time creating proposals as they only need to cover information about themselves with their background, skill set and any existing contributions. If elected contributors could be paid weekly or monthly and then log the work they are doing to report it for the community to audit.
Issues
Moderate number of proposer participants - Contributor categorisations with some simple processes and working structures in place could handle a moderately large number of contributors. Contributor categorisations could either invite participants to work full time or part time depending on the needs of the ecosystem. Complexity in coordination and communication would increase as the number of contributors increases so there will be a limit in the number of participants the categorisation should accept to keep the categorisation operationally effective.
Moderate potential to scale - With the right checks and balances and a reporting process for contributors the categorisation could scale to handle a moderately high number of contributors. There will be a limit in the number of contributors that could be elected at a given moment as at a certain point adding more people will not make it faster to achieve the desired outcomes. There also may be difficulty in achieving anything too large with scaling contributor categorisations due to the increased collaboration and communication costs when there are too many people actively working on similar areas.
Moderate complexity in categorisation moderation and governance - Contributors need to have some basic working structures and processes set up for them to work together effectively. These processes and structures will change over time as the ecosystem changes or as best practices change for each of the areas of work involved. Contributors will likely self govern those improvements and changes and come to any agreements needed on how to operate most effectively. The complexity is far lower when a contributor categorisation is small as there will be less complex coordination or communication required. This provides reasoning to start small and only steadily grow a contributor categorisation once it’s clear it can handle more people.
Moderate complexity of usage for voters - Deciding between contributors is not an easy task for the voters unless they know the people personally or if they know enough about their background and contributions in the ecosystem. The more objective facts there are about the candidates the easier it will be for voters to make informed decisions.
Summary
Contributor categorisations are ideal for bringing together a group of people to focus on a certain ecosystem and helping with any work that helps to support, maintain or improve that ecosystem. A contributor categorisation needs to be clear about the ecosystem it is supposed to support and add any details of what areas of work contributors would be expected to help with. Once elected the goal of any contributor is to focus on delivering impact against the mission set out for that particular ecosystem.
Contributors can be given the flexibility to self determine how they most effectively should work, collaborate and communicate whilst being a contributor for an ecosystem. Contributors could spend time doing deep work or alternatively help with a large range of simple tasks. A cohort of contributors is an effective categorisation approach to cover a range of different responsibilities and tasks that need doing as part of helping an ecosystem operate effectively.
Tasks categorisations help with creating incentives for people to perform well defined tasks. They are especially useful for repetitive tasks that need to be done periodically and repeatedly. Tasks could range from simple one step processes to be completed - such as making an incentive for voting. Or they could be for more complex tasks like assessing proposals. Task categorisations benefit from being well scoped and easy to understand so that they are able to achieve the exact outcomes that they have been designed for.
Example categorisation - Proposal assessment
The proposal assessment process is an example of a task based categorisation. The rules in which people can participate are defined along with a set of guidelines on how participants should make assessments against proposals. For those that perform this task their assessments are then reviewed by another task based categorisation that focusses on assessment reviews. For the assessments which follow the guidelines the assessors will be compensated for their work.
Advantages
Very high number of proposer participants - Well defined tasks are able to invite a very large number of people to participate when this is a desired outcome. Simple tasks that are easy to understand and execute will especially be able to attract a larger amount of participants. Giving rewards for voting is an example of a simple task categorisation that can have a very high number of participants.
Very low difficulty in effectively directing funding - Tasks are created to incentivise people to create specific outcomes be executing those tasks. Tasks create specific outcomes and due to to this funding is always directed to precisely try and generate these desired outcomes by participants performing defined tasks.
High potential to scale - The more simple and well defined the task is the easier it will be to scale the categorisation and invite as many participants as required. The difficulty in scaling task categorisations could emerge around areas where aspects such as sybil resistance is needed or due to the need to effectively audit the work being performed by participants. In these situations even more effort is needed to create effective processes and checks and balances in the creation of those task categorisations.
Low complexity of usage for voters - Proposers being accepted to participate in a task based categorisation may not need any interaction with the wider community for approval. For instance the voting rewards task categorisation can be automated to reward those that participate in the task. None of the community need to be involved in deciding who can be included. Instead the reward can be completely automated based on verifiable information on chain which shows who voted. This means the incentive reward for the task can be automated for those that participate. More complex tasks may require voting selection by the community on who should be accepted to participate and others may need the work to be audited in some capacity. In these events the voters would need to determine which candidates are most suitable to perform the defined task. As the task should be well defined this should help to limit the decision complexity when comparing voting options.
Very low complexity for proposer participation - Anyone who has the correct skill set and capacity to perform a task will be able to do so providing they also meet any other requirements and policies of the task categorisation. The proposer may not need to write a proposal or provide any information to participate which means tasks could have very low complexity to participate. If information is required the process should be well documented and guided by the categorisation guidelines.
Low to moderate complexity in categorisation moderation and governance - For simple tasks, like the voter rewards task categorisation example, there would be very little to moderate or govern when the task can be automated in rewarding the participants. For more complex tasks deliverables could be produced that don’t have a simple yes or no outcome on whether they’ve performed the task. In these situations more effort would be needed to moderate and audit the work of participants. Constantly refining and improving the processes and definitions of a task categorisation will help to reduce overall moderation and governance complexity.
Issues
High complexity to create categorisation - Task categorisations rely on the task being well defined and articulating what is expected from participants. Tasks benefit from being built on solid foundations in terms of understanding what is required for that task to be done effectively, what is acceptable and not acceptable in terms of the outcomes, what problems could occur and any policies included to address any edge cases. For simple tasks this can be less of an issue however for more complex tasks like proposal assessment more effort is needed to correctly define and create the task categorisation. Complex tasks may struggle to yield the desired outcome if the creation of the task categorisation has not been well researched, analysed and properly understood in terms of what it needs to achieve and how it should be performed, maintained and audited.
Not very adaptable and flexible - Task categorisations are created to produce very specific outcomes. This makes them less flexible to handling many different situations or fast changing environments. If the categorisation becomes less relevant in the future due to a changing ecosystem it may need to be updated or abandoned.
Moderate difficulty in preventing bad actors - If a task categorisation invites a large number of participants to perform the task for an incentive there is an increased risk of having bad actors amongst those participants. The bigger the incentive or the easier the task the more thought will be needed around any checks and balances to help prevent or deter bad actors from trying to game the system or act maliciously.
Summary
A lot of the complexity for task categorisations is spent on fully understanding the task itself and then designing and setting up the categorisation and any processes it requires to function optimally. The incentive mechanisms and processes need to be well understood to yield the desired outcome and to help prevent the task from being easily gamed or cheated.
If the task categorisations are well designed and the right incentives and checks and balances are in place then this type of categorisation can be highly effective for scaling to a very large number of participants.
Tasks categorisations can often have the lowest barrier to entry for helping people to participate. The lower the barrier to entry in terms of skill or effort required the more easy it is for people to participate. Due to the incentive involved in the performing the task there will be more thought that is needed on deterring and preventing bad actors if it is easy to participate.
Community categorisations direct funding towards communities of people that are trying to achieve a certain mission. Community categorisations are an effective way to group together similar funding categorisations under a single categorisation grouping when they were all focussed on supporting the same community mission. A community categorisation type can be seen as a form of nesting communities within larger communities that helps to make funding distribution easier as the wider community continues to grow. Community categorisations help extract funding distribution decisions to a higher level and make budget decisions more simple. The complexity of how communities distribute funding between different initiatives is then handled by the community itself with anyone who wants to participate in that community.
Example categorisation - Project Catalyst
Project Catalyst is a good example of a potential candidate to become a community categorisation. Catalyst already has a number of funding categorisations that are for the Catalyst ecosystem. This includes the tasks categorisations around voter rewards, proposal assessments and assessments reviews. There is also the consideration of contributor categorisations such as Catalyst Contributors which would could also be placed inside a single Project Catalyst community categorisation. If a Catalyst community categorisation existed then the wider community would decide how much funding to allocate to Catalyst as a whole so that it can be supported, maintained and improved as a whole. The funding distributed to that the Project Catalyst community could then be distributed using similar idea, contributor or task based contributions within that community itself. The community can even use the exact same tools and processes as the main treasury distribution process. Anyone who wants to participate in the governance of any funding categorisations used within the community categorisation would be able to do so.
Advantages
Very adaptable and flexible - Community categorisations will define their own categorisations and approaches to distribute funding as voted for by the community members involved.
High number of proposer participants - Any number of participants would be able to participate in any of the funding categorisations that are used within the community categorisation itself.
Low to moderate complexity of usage for voters - Community categorisations can be effective for grouping together similar funding categorisations under a single community categorisation. This gives the voters better optionality of deciding how they want to participate in the funding process. Voters would have lower complexity to do budget weighting decisions between a smaller number of main categorisations. Voters who want to participate in voting in the community categorisation funding distribution would be able to do so based on their own preference.
Issues
Very high complexity to create categorisation - Funding being directed to a community would mean all of the infrastructure and processes would be need to exist for that funding to be effectively managed and distributed by that community. Until Project Catalyst is more automated and open source at the base level with the right functionality being made available it could be difficult for this categorisation to work in the short term. The right tools, processes and checks and balances will be needed for this type of categorisation to be feasible. Communities are still able to get funding through idea categorisations providing they are being used.
High difficulty in effectively directing funding - The community would have fully optionality over how the funding is distributed across any categorisations they define and use in the community. This means the difficulty in directing funding will be high as any funding categorisations could be used and each will need to be created and justified.
High potential to scale - Community categorisations allow for voters to make simpler budget weighting decisions at a higher level for supporting recurring community initiatives. For the Project Catalyst example this could mean voters have the choice to just participate in voting on how much funding they think is needed to support, maintain and improve the Catalyst process as a whole and then can focus their attention elsewhere. For other voters they may want to be involved in how funding is distributed within the Catalyst community categorisation itself. This abstraction of letting the wider community do a simpler budget weighting vote at a higher level gives them more optionality to decide how they spend their time. Voters would have the choice on how much they want to participate in each community. This approach of grouping concerns together into communities can help with making treasury funding distribution far more scalable.
High complexity in categorisation moderation and governance - The community will need to define any categorisations it uses to distribute the funding that the community is allocated. The budget weightings for those categorisations will also need to be decided and moderated by the community. Finally each of the categorisations used within the community will also need to be moderated and governed.
Considerations for the other factors
Ranging complexity for proposer participation - The complexity for proposers would be based on what funding categorisations the community used to distribute any funding within the community itself.
Ranging difficulties in preventing bad actors - The difficulty of preventing bad actors will be influenced by which idea, task or contributor based categorisations get defined and used in the community when distributing funding. Those categorisations within the community will need to consider what the right checks and balances are to reduce the potential impact of bad actors.
Summary
Community categorisations are great for grouping together categorisations focussed on a similar outcome being placed under a single community grouping. This can help abstract away the complexity from the wider community for those that can’t or don’t want to participate in every aspect of each community. A community categorisation can help treasury funding systems scale when recurring and important communities emerge that benefit from having their own categorisation to operate more independently. Community categorisations could be seen in a similar light to how nation state governments use “education”, “health” or “infrastructure” as important categorisations that a country uses to set certain budgets for each year. This abstraction of complexity makes it easier for those governing the high level funding distribution to better decide how funding could be distributed between these larger but well defined communities that each have a recurring value and purpose.
When sub communities form under a larger community the members of the wider community will be able to decide how much they want to participate in each of any of those sub communities. For ones they don’t want to participate in personally they would benefit from community categorisations if they only want to vote on what budget to allocate to those communities as a whole rather than any numerous categorisations that may be relevant to the community itself. With community categorisations those voters would be able to choose whether to participate or not in the internal funding distribution decisions in each sub community that has a community categorisation.
Community categorisations are naturally complex as they require a nesting of similar tools and processes used at the base level of the treasury distribution system. These are needed to govern and manage the funds safely and effectively. They also would likely need to have the right tools for handling the idea, contributor and task categorisation types within their community.
