In normal capitalism, things are funded because they make a profit (like selling cars or bread). But some things are valuable to everyone yet hard to sell for a profit (like clean air, open-source software, or free education). These are called Public Goods. Quadratic Funding is a mathematical way to fund these public goods by prioritizing what the community wants, not just what rich people want.
Link to the next concept: But how do you decide what the community wants? You look at the Number of Contributors, not just the amount of money.
Quadratic Funding doesn't just rely on donations. It uses a Matching Pool.
Link to the next concept: The formula is the magic part. It uses Square Roots to magnify small donations.
The formula calculates funding based on the square of the sum of the square roots of contributions. In plain English: More people = More matching money.
Let's look at the example from the text:
Even though both projects raised the same amount ($1,000), Project B gets 10x more matching money because it has more supporters.
Link to the next concept: This creates a unique incentive structure where your $1 donation is worth way more than $1.
Because the math favors more people, the first few dollars you donate trigger massive rewards from the matching pool.