Motivation

The world faces unprecedented challenges, from climate change to safe artificial intelligence, that require billions to trillions of dollars of public goods funding. High-upside/high-uncertainty endeavors are often overlooked due to the absence of strong incentives to pursue them in the dominant public goods funding framework of at-cost grants or even a milestone-bounty framework (which directly exposes small contributors to aversive risk levels). Yet these should be pursued when the expected positive value is very high, as it often is. New impact funding mechanisms can address this. One such mechanism is retrospective funding, which rewards projects based on the impact they create after the impact is observable. If projects can reasonably expect such retrospective rewards, they are incentivized to maximize their impact and – together with prospective funders – take risky bets when the expected positive value is high.

In order for Impact Funding Systems (IFSs) to be most effective, they should be interoperable regarding (1) funding mechanisms, (2) funding sources, and (3) evaluations. Quadratic voting, bargaining solutions, DAO-style votes, milestone bounties, and simple unconditional grants all have their strengths, among others. We do not wish to lock in any particular decision-making scheme for funders. Without mechanisms like these, multi-funder coordination on impact funding is prohibitively expensive, leading to suboptimal efficiency in impact capital allocation. Funders should be able to easily collaborate with other funders or to intentionally fund different projects to diversify the funded approaches. Evaluators should be able to evaluate the same impact with different methodologies – potentially with conflicting results, to foster rigor and progress of evaluation methodologies.

Hypercerts create this interoperability by serving as a single, open, shared, decentralized database for impact funding mechanisms. A single hypercert is a semi-fungible token that accounts for work that is supposed to be impactful and whose ownership is fractionizable and transferable (under specific conditions). Hypercerts do not impose any specific funding mechanisms but provide baseline invariant guarantees such that claims will not be forgotten as different mechanisms come into and out of fashion. This is also why hypercerts are especially useful for any retrospective funding mechanisms – funding can be applied to claims of the past.