What Is Funding Categorisation?
Explaining what funding categorisation is and why it is important
A funding categorisation is an incentive structure that allows people to request funding for certain initiatives.
Initiatives are submitted as proposals and will need to match the purpose and scope of the funding categorisation to be accepted and considered for voting.
Funding categorisations can be focussed on funding ideas that someone wants to execute or could be focussed on funding contributors that are looking to work in the ecosystem.
Idea based funding categorisations will group together certain focus areas into the categorisation. Examples focus areas could include DeFi, events or identity tools & software.
Once funding categorisations are defined and being used in a funding round the community would submit proposals into the categorisation that their initiative is relevant for.
At the voting stage the community would compare the proposals submitted in a funding categorisation and then vote on which proposals they want to receive funding.
Funding categorisations are used in each funding round. Funding rounds have a total available budget for incentivising high impact initiatives. Each funding categorisation used in a funding round will have an allocated budget. This budget for the funding categorisation comes out of the total available amount from the funding round. The budgets of all the categorisations combined should equal the total funding available for that funding round.
Funding categorisations determine what incentives exist that the community can participate in to support, grow and improve the ecosystem. Categorisations determine what ideas will be considered for funding and also what types of contributor can be funded.
The categorisations being used determine which focus areas receive access to funding and the exact amount of funding they have access to and which focus areas don’t have any access to funding.
The incentive structures that exist and the access to funding is why funding categorisations are so important. Categorisations determine what areas can be stifled due to a lack of funding and which areas have more funding access that can help them to flourish.
Using effective approaches to funding categorisation means ensuring the most promising and impactful ideas and contributors are able to request and potentially receive funding.
Funding categorisations impact the overall efficiency, simplicity, flexibility, scalability and fairness of the funding process. Categorisations also impact how the community is able to effectively direct funding to high impact initiatives and what level of healthy competition exists due to the categorisations being used.