Designing Refund Bonus Schemes for Provision Point Mechanism in Civic Crowdfunding

TL;DR

This paper introduces three new refund bonus schemes for civic crowdfunding that effectively prevent free-riding and race conditions, are computationally feasible, and ensure project funding at equilibrium.

Contribution

It identifies essential properties for refund schemes, proves their sufficiency, and proposes three novel mechanisms, with PPRG being the most cost-effective for smart contract implementation.

Findings

PPRG is the most cost-effective scheme for smart contracts.

Under certain conditions, PPRG guarantees project funding at equilibrium.

The proposed schemes satisfy Contribution and Time Monotonicity, preventing free-riding and race conditions.

Abstract

Civic crowdfunding (CC) is a popular medium for raising funds for civic projects from interested agents. With Blockchains gaining traction, we can implement CC in a reliable, transparent, and secure manner with smart contracts (SCs). The fundamental challenge in CC is free-riding. PPR, the proposal by Zubrickas [23] of giving refund bonus to the contributors, in the case of the project not getting provisioned, has attractive properties. However, as observed by Chandra et al. [7], PPR faces a challenge wherein the agents defer their contribution until the deadline. We define this delaying of contributions as a race condition. To address this, their proposal, PPS, considers the temporal aspects of a contribution. However, PPS is computationally complex, expensive to implement as an SC, and it being sophisticated, it is difficult to explain to a layperson. In this work, our goal is to identify all essential properties a refund bonus scheme must satisfy in order to curb free-riding while avoiding the race condition. We prove Contribution Monotonicity and Time Monotonicity are sufficient conditions for this. We propose three elegant refund bonus schemes satisfying these two conditions leading to three novel mechanisms for CC - PPRG, PPRE, and PPRP. We show that PPRG is the most cost-effective mechanism when deployed as an SC. We show that under certain modest assumptions on valuations of the agents, in PPRG, the project is funded at equilibrium.