Idea Categorisation Analysis
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One categorisation

Considerations for using one categorisation

Overview

The Cardano proposals categorisation simply means that all proposals are submitted into a single categorisation. Any focus area is invited to be submitted into this all encompassing funding categorisation.
One categorisation

Advantages

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No budget weighting complexity
By not using multiple idea categorisations there would be no budget weighting decision. This advantage is somewhat limited as there is still the merit of other categorisation types such as Small & Early Stage Ideas to help with more experimental ideas and smaller teams in being able to get initial funding. Contributor categorisations also offer a useful recurring incentive structure to help community members work full time to support, maintain and improve the ecosystem. Due to this having a single categorisation for ideas wouldn’t mean that there would be no budget weighting decisions at all in the funding process.
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Effective in challenging funding situations
A single categorisation inviting all forms of idea and will be more flexible to challenging funding situations. Only a subset out of the full range of focus areas need to turn up with quality proposals for the funding to be allocated to impactful initiatives.
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Issues

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Very high difficulty for less popular focus areas
As every single proposal will compete with every other proposal there is a much higher difficulty for less popular focus areas. The popularity and interest in certain focus areas is not evenly distributed. This very high level of competition will make it difficult for funding to be spread across important focus areas and can result in many focus areas being excluded in multiple funding rounds.
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Very high voter decision complexity
Using just one categorisation will mean maximising the amount of options the voters have at the voting stage. This has a large cost in terms of the complexity of the decision being made at this stage. Now proposers need to understand the tradeoffs between proposals about every focus area and which ones to support or not. There is also increased voter paralysis as the voter will need to take into account how they think the rest of the community will vote and how that may be impacted by how they vote due to the greater variance in potential outcomes. It is far easier to get outcomes that weren’t desirable when there are so many different outcomes that can occur in terms of what actually gets funding. The vast variance on the outcome greatly increases the importance and complexity of making well informed decisions on which proposal to vote for. Due to this there would need to be high quality voting infrastructure that uses a number of approaches to help with making it easier to direct funding to supports such a complex decision for voters.
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Higher dRep complexity
If there are no categorisations to group focus areas the impact of dReps could be less effective. If there is a higher amount of voting power with dReps focussed on certain groupings of focus areas than others it wouldn’t matter whether dReps focussing on others area are making good decisions. This is because the dReps with the most voting power will more heavily influence the funding outcome. dReps would face the same popularity contest problem where focus areas are more popular than others. This would mean all dReps could not effectively be as independent in their decision making and would have to come to more mutual agreement with the other dReps. Another factor for a single categorisation and dReps is that then they would need to be concerned with all the focus areas in the ecosystem in a single decision - many dReps may not have the experience or time required to make informed decisions and understand all these areas and comparisons between proposals.
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Summary

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  • Using one categorisation has some advantages in increasing the simplicity by reducing budget weighting complexity and being flexible to situations where a small number or low quality proposals turn up. However this advantage still exists for broad categorisations as although there is some minor complexity to do budget weightings on a small number of categories the actual complexity is limited.
  • The problems of the excessive competition and high difficulty in directing fund is very high for the one categorisation approach. An extremely high complexity is pushed onto the voters and dReps in asking them to be able to rank and compare every single proposal for every single focus area and also take into account how others may vote to try and yield a mutually beneficial result for the ecosystem. There is no protection for important but less popular focus areas using a single categorisation approach meaning you could expect to see many focus areas not receive funding in multiple funding rounds. The issues for a single categorisation approach without any voting infrastructure to support the complexity in the short term far outweigh the advantages the approach offers.
  • There is currently no truly effective voting infrastructure used in the funding process to help direct funding in the Catalyst process. There is already evidence from the funding results in fund 9 to showcase the difficulty the community is having with very large categorisations with a large budget due to the lack of tooling and processes to handle a large amount of proposals effectively. Due to this is makes it less suitable to move directly to using a single categorisation approach. Instead, using a small number of broad categorisations with sensible focus area groupings will provide sufficient simplicity and provide time for the voting infrastructure to be developed. Once more voting infrastructure is built out it will become more clear whether the community is better able to effectively direct funding. If the tooling and processes are effective for directing funding then this will then be a good time to analyse and experiment with what would happen if a single categorisation approach was used.