Broad vs Specific Categorisations
Comparing funding categorisation based on the specificity of the categorisation
Categorisation can be either broad and have a large amount of ideas and innovation that can fit into the categorisation or be more specific and focus on more specific ideas and innovation.
No categories - Funding is distributed through a single categorisation. Proposals compete with every other proposal. This is the most broad form of categorisation.
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Broad categories - Funding is allocated between a small number of broad categories with a budget weighting applied to each of them. Examples categories include Products & Integrations, Governance & Identity and Development & Infrastructure.
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Specific categories - Funding is allocated between a large number of specific categories that would need more specific smaller budget weightings applied to each of them. Example categorisations could include AI & machine learning, transportation or DeFi.
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Very specific categories - Funding is allocated between a larger number of very specific categorisations where a much smaller budget weighting is applied to each of them. Example categories could be Japan local events, DeFi in Botswana or IoT for agriculture farming.
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Factors to consider

  • Budget weighting complexity - What complexity is there for deciding budgets that should be applied to each of the funding categorisations? How difficult is it or how long will it take to produce a well informed outcome?
  • Proposal visibility - How easy is it for proposals to be seen? Is higher proposal numbers and competition causing lower visibility?
  • Directing funding - How effective is the categorisation for directing funding to certain areas?
  • Proposer effort - How much effort is required by the proposer who will submit proposals into the categorisations that are used?
  • Voter effort - How much effort is required by the voter to understand the categorisation and vote on how they are used?
  • Proposal assessor effort - How much effort is required by the proposal assessors who will assess the categorisations?
  • Category team effort - How much effort is required by the category teams who suggest the categorisations?
  • Governance complexity - How much complexity is there to govern this approach for funding categorisation
  • Level of competition - What is the impact of the categorisation approach on competition? High competition can be good for selecting the best proposed ideas and innovation from a wider proposal pool but comes at the cost of making it more challenging for smaller teams. Lower competition for categorisation has the benefit of helping spread the competition difficulty that will help smaller teams but comes at the cost of an increased chance of funding innovation that is lower quality due to less competition.
  • Adverse funding situations - How does the categorisation approach handle situations where only a few proposals turn up for the categorisation or the proposals that turn up are of low quality? What happens when proposals for areas that are lower priority are a higher quality than the proposals that are focussing on areas the community considers higher priority?
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No categories

Advantages
  • No budget weighting complexity - All funding is available in one process meaning no categorisation complexity is present in each funding round.
  • No proposer effort - Proposers would not need to consider multiple categorisations and would just submit proposals in a single place.
  • No voter effort - Voters would not need to vote on categorisation changes or budget weightings.
  • No proposal assessor effort - No assessments would be needed on categorisations.
  • No category team effort - No categorisations need to be created.
  • Low governance complexity - This categorisation is the most simple to govern as no decisions would be needed around justification of weightings, no data or insights need to be collected to justify one decision over another.
  • Very effective in adverse funding situations - No categorisations means there is much lower risks in adverse funding situations as every focus area can submit proposals. This means that only one focus area needs to provide proposals of a sufficient quality or a handful of proposers in different areas and the voter can respond to that precise situation accordingly. This approach does not handle the situation for when zero proposals present themselves or when all the submitted proposals are of a low quality. In that situation no categorisation approach would solve this problem and instead would need to be solved outside this process such as through increasing proposer outreach.
Issues
  • Very low proposal visibility - With just one category it becomes hard for individual proposals to stand out against all other proposal teams. This results in a high need for better tagging, sorting and filtering and community curated lists for small proposals to get better visibility.
  • No precision for directing funding - No effort is made to steer funding into a certain area for the wider ecosystem. This could result in more popular areas repeatedly receiving more funding than is desired. However voters in this scenario still have full control to determine where funding is allocated. Better voting infrastructure would likely be needed to allow better precision with this categorisation approach.
  • Very high competition - The good part of high competition is that it can help the best projects rise to the top and receive funding. However using no categorisations would also means that smaller teams would need to compete with every single larger team in the ecosystem against every form of idea and innovation. Competition in this environment would be at its highest. The community would want to check on the impacts of this approach in terms of competition and who receives funding to determine whether the categorisation approach is net beneficial for the ecosystem.
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Broad categories

Advantages
  • Low budget weighting complexity - Usage of only a few categories keeps the complexity of budget weighting decisions low due to voters only needing to determine a budget for a small number of large categorisations.
  • Low governance effort - Governance efforts only need to focus on the budget weighting between a small number of categories meaning less precision is needed over having a higher amount of specific categories.
  • Low proposer effort - Proposers would only need to look at a few categorisations before they need to decide where to submit their proposal.
  • Low voter effort - Voters would only have a small number of categorisations to compare and apply budget weightings to when voting.
  • Low proposal assessor effort - Only a small to moderate amount of time will be needed to assess the smaller number of broad categorisations.
  • Low category team effort - Only a small number of categorisations would be created and justified. There is al a more limited amount of ways that broad categorisation can be achieved. This means that broad categorisation helps to lead to recurring categorisation that doesn't need to be defined every funding round. Less effort is required to create and maintain broad categorisations.
  • Good competition - The smaller the amount of categorisations there are the more competition there is between proposers. Broad categorisation is good for healthy competition but then also helps to keep some of the different areas more separated so a more popular area doesn't overwhelm proposals in focus areas that are very different. One way in which competition could be restricted with broad categories if this is an issue is to consider the usage of a separate categorisation such as nurturing ideas & teams.
  • Effective in adverse funding situations - Broad categories are effective in adverse situations. Situations where few or low quality proposals turn up for a given focus area are a reduced issue when there are multiple competing focus areas in the same categorisation. Broad categorisation only requires a subset of the focus areas to present impactful proposals meaning the categorisation approach is more flexible for adverse funding situations.
Issues
  • Lower precision for directing funding - Directing funding to more precise areas within the category could be difficult as more types of proposals would be competing under the same categorisation. However ultimately the most effective way to direct funding is through voting. The community can effectively promote the most important areas with an independent goal & objective setting process. Voters ultimately determine how funding should be directed by deciding which proposals to vote on.
  • Lower proposal visibility - Having only a few broad categories could make it hard for some proposals to stand out against larger more established teams. There could be a need for some form of tagging and community curated lists to help aid in visibility for smaller teams.
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Specific categories

Advantages
  • Good proposal visibility - Proposals would generally be surrounded only be similar proposals when using more specific categorisations. This can make it easier to get clear proposal visibility for proposals in that specific area.
  • Higher precision for directing funding - Using more specific categories makes it easier to allocate funding to more precise areas in the ecosystem.
Issues
  • High budget weighting complexity - Every extra specific category makes it more complex to determine the budget weighting that should be allocated to each area in the ecosystem.
  • Higher proposer effort - Proposers must compare a large amount of categorisations before they can submit a proposal.
  • Higher voter effort - Voters must compare a large amount of categorisations and the budget weightings being applied before voting.
  • Higher proposal assessor effort - Assessors would require more time to go through a larger amount of categorisations.
  • Higher category team effort - More category teams would be needed to define specific categorisations and justify their importance over a larger amount of total categorisations.
  • Higher governance complexity - The more specific categorisation becomes the more complex governance is on providing justifications towards the budgets weightings that are applied to each categorisation and for voters to be able to interpret the implications of increasing or decreasing funding access to certain focus areas.
  • Lower competition - Increasing the amount of categories means there is less competition between each of the proposals in a given category. This increases the chance that categorisations will need to handle a weaker group of ideas and innovation which can lead to worse outcomes.
  • Not effective in adverse funding situations - Specific categorisations are far riskier in adverse funding situations as the more specific categorisations you have the higher chance there is that one of those focus areas has a situation where a low number or quality of proposals are submitted. In this event the specific categorisations would not be flexible to voters in allowing them to direct the funding to other areas due to the specific categorisation approach being used.

Resolving issues for specific categories

Reducing budget weighting complexity
It is difficult to decide how much funding should be directed to specific categories. The more categorisations there are the harder this prediction becomes in determining what a good budget weighting should be. To attempt to resolve this issue there would need to be a thorough process to gather a sufficient amount of data and justification to support decisions on which area requires more funding over other areas. The more specificity added to the categorisation the more complex and thorough a governance process is needed to effectively decide on final budget weighting allocations. This problem is very complex to solve as funding categorisations and their budget weightings mix priorities from the community with predictions that are set ahead of time for the next funding round on what proposals will be submitted. The more specific the categorisations are that which get used the lower the flexibility the community has to redirect funding to different proposals based on what actually happens in terms of proposal submissions. What the community wants to happen in terms of the proposals that get submitted and what actually happens can end up being very different!

Summary

  • Specificity adds significant budget weighting complexity - The more categories that get added to the funding round process the more complex it becomes to determine a sensible budget to allocate to each category.
  • Easier to solve proposal visibility and directing funding issues - Addressing the problems of low proposal visibility and difficulty directing funding have been documented more fully separately. Better tagging, proposal standards, priority voting through an independent goal & objective setting process, curated lists and gathering community feedback are all be potentially effective ways to organise and distribute information to the community that help resolve issues around proposal visibility and improving how funding is directed when using broad categorisations.
  • Broader categorisation takes far less effort and governance - Less information, governance and tools are needed for more broad categorisation as fewer categories mean there's less effort needed to determine a suitable budget for each of those categories.
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Outline
Factors to consider
No categories
Broad categories
Specific categories
Resolving issues for specific categories
Summary