If you've been hearing a lot about quadratic funding but have been too lazy to figure out what it is and why it matters, you are definitely not alone. The world of decentralized governance and public goods is vast and confusing. This article will help you out with the basics (but we can't promise that you'll walk away with more answers than questions).
The first thing you need to understand is the idea of a matching pool, which is pretty much exactly what it sounds like. It's a pool of money collected from what are called matching partners - companies or individuals that have (for whatever reason) decided to support public goods projects.
<aside> ❓ If you're wondering what public goods are, don't be embarrassed. Public goods are services accessible by all citizens, such as education or access to drinking water. They are also non-rivalrous, which is a fancy way of saying that you accessing a public good (e.g., by going to school) does not decrease accessibility for other members of your community. Learn more here.
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So let's say we want to raise money to improve education (a public good!) in rural areas. Many supportive individuals donate varying amounts of money to the cause (aka crowdfunding), and money from our matching pool is used to match those individual contributions. The matching is where things get a little complicated - it's not so simple as one individual's $10 donation being matched by $10 from our matching pool.
Remember the quadratic part of quadratic funding? The quadratic funding formula takes the square of the sum of the square roots of these contributions to determine how much money should be taken from the matching pool. Here it is, in all it's complicated mathematical glory:
$$ v_i^p((\Sigma_j\sqrt(c_j^p)^2)-c_i^p $$
We won't be explaining exactly this equation works here - if you do want to get into the nitty-gritty, we suggest checking out some of Vitalik Buterin's (one of the brilliant minds behind quadratic funding) work here.
All you need to know is that the more contributions are given, the higher the matched amount, regardless of the size of the contributions. This is the what makes quadratic funding so powerful - it creates a strong incentive for individuals to support public services with little donations. And that shifts where the power is - simply put, quadratic funding gives more weight to a bunch of ordinary citizens giving a couple of bucks than it does to one billionaire's hefty donation.
This is great from a democratic standpoint - the more people affected by a public goods problem, the more people will donate, which means the matching formula will spit out a higher matching amount, leading to more funding to fix that problem. Nice, right?
Of course, quadratic funding isn't perfect - but we'll get into that another time. We wouldn't want your brain to explode.