Donations

Donations from an ecosystems community members

Donations mean that community members would be voluntarily giving their own assets to help fund the different initiatives that could benefit the ecosystem. Donations could be handled in a few ways. Donations could be sent to a central pot that helps to pay for different initiatives that is then decided by the community or the people who donate the assets could send their donations directly to the contributors who they want to support. Ecosystems such as Bitcoin currently adopt a donation based approach which means the ecosystem relies on the social layer of the network for donations that can help to fund any development initiatives that maintain and improve the network.

Low short term income potential (Score - 2)

Donations from community members or from projects building in the ecosystem would be needed to fund any ongoing network and infrastructure development efforts. For new and smaller ecosystems that have a low number of launched projects this could mean there are a limited number of people who will be involved and willing to donate their own assets to support ecosystem initiatives. Limited funding in the short term could result in a much higher risk that development efforts could stagnate due to being underfunded. If the surrounding environment suddenly changes or new requirements emerge there is a concern that the biggest problems and opportunities might not get addressed due to a potential lack of funding for compensating the necessary contribution effort.

Low long term income potential (Score - 2)

Relying on donations over the long term is a risky proposition for the sustainability of a global network. The passionate early adopters of the technology could eventually become outnumbered by regular users that might be far less willing to send their own assets to support the network. Other ecosystems that adopt other more reliable income approaches beyond donations could have a serious advantage over the networks that rely heavily on the limited amount of income that they are able to generate through donations. Relying on donations means fully relying on the community to self organise and donate their coins to support any important development efforts in the ecosystem. Adopted by itself, this approach could meaningfully increase the overall effort and complexity involved in maintaining and improving the ecosystem over the long term.

Very high incentive complexities (Score - 1)

Community participation and ongoing effort would be needed to convince people to donate to the treasury as this would be an entirely optional contribution. Income achieved with a donation based approach can increase the complexities around the lack of fairness about who is paying for the ecosystems maintenance and improvement and who isn’t. Donations make it easy to have a free-rider problem.

Community members could donate much less or much more than others. Community members would have little incentive to donate to the network unless they want to or if they feel they depend on its success. This would likely not be the case if they are able to easily migrate to other ecosystems that already exist.

Another incentive complexity that could emerge is if wealthy individuals in the ecosystem donate far more than others towards supporting the ecosystem's network development efforts. These donations could give these individuals a large amount of influence over the network. Contributors have the incentive to ensure they continue to get paid, and this incentive could mean development efforts that lead to changes that are more beneficial for the people donating than the other users in the ecosystem.

Moderate malicious actor risks (Score - 3)

Malicious actors could benefit from situations where most people are not donating towards the ecosystem's treasury. If this is the case then the people that do donate could have a large influence over how the network is maintained and improved as contributors might fully rely on these donations. This could create an attack vector for malicious actors to try and push through changes that benefit them more than they benefit the other members of the ecosystem. Relying on donations as a form of treasury income could result in an increasing amount of influence from wealthy individuals that are able to more easily make larger and more regular donations.

Very low transaction deadweight loss (Score - 5)

Donations would not cause any deadweight loss as they are an optional contribution. People would only donate if they want to and they would decide the amount they want to contribute themselves. This income approach shouldn’t have much impact on the overall number of transactions.

Total score = 13 / 25