Inclusive categorisation means allowing all forms of idea and innovation to be submitted and considered in a funding round.
Exclusive categorisation means certain ideas and innovation are not able to be submitted.
Exclusive funding categorisation causes a number of problems. Problems that are unnecessary and avoidable if better categorisation approaches are used.
Check out our analysis on the differences between inclusive and exclusive categorisations.
Exclusive funding categorisation stifles innovation as it prevents certain ideas and innovation from being submitted. This means they are not able to considered for any further funding to continue their work.
There’s no better way to badly stifle innovation than fully excluding certain focus areas and giving the proposers no chance whatsoever to be considered!
Complex governance decisions
Funding categorisation that is exclusive under the challenge setting model is currently voted on every funding round. Giving voters a number of options and combinations of categorisations that can lead to exclusive rounds of funding increases the complexity of their governance decision.
Reducing voter options and flexibility
Funding categorisation is predictive of what will be submitted as it is set before it’s used.
Excluding focus areas in a funding round means the voters will receive less options at the time of voting. This is because only included focus areas can submit proposals meaning there will be a smaller subset of potential ideas submitted.
If proposals for the included focus area don’t turn up or are of low quality the voter is less able to redirect their vote to higher quality proposals that could have come from different focus areas.
Also if the voters preference change on where funding should be directed then they are unable to do so as the categorisation is already set and being used!
Reducing healthy competition
There is a fixed amount of funding available each round. If you exclude ideas from a funding round this means spreading the same amount of funding between a smaller number of ideas. This reduces the competition between the remaining ideas as they have access to more funding.
This also removes any chance of healthy competition between the ideas that are excluded.
A massive issue with excluding ideas is it means accepting the preference that the worst idea that is funded for the focus areas that are included is a better option than the absolute best idea from the focus areas that have been excluded.
Exclusive categorisation leaves less room for the voter to change their vote based on what actually happens in terms of proposals submitted.
Excluding certain focus areas is not necessary
If the community has certain preferences where funding should be allocated they always can direct funding towards that proposal through the use of their vote.
The majority of the community who wanted to have a funding categorisation focussing on DeFi is the exact same majority of the community who would vote on DeFi proposals when they are submitted.
Using inclusive categorisation means accepting the fact that what the community wants to happen collectively may not actually happen at the precise time they want it too. In those events the community benefits from having options to decide from for where to allocate funding most effectively.
Inclusive categorisation allows the voters to pick the exact same proposals they would have chosen if an exclusive categorisation approach was used.
Inclusive categorisation is useful when there could be a lack of DeFi proposals submitted, or they were of a low quality, or when the community preferences at the time of voting changes. In these events the community is able to redirect their votes to the most promising and impactful proposals submitted.
Inclusive categorisation opens up the door for exciting ideas that no one, or at least the majority of the community, was thinking about. The community can still have the same preference of directing funding to a certain group of ideas but now they get the added benefit of being able to consider and react to situations where that preference changes.
A better alternative - Funding categories
Funding categories offers an alternative approach to doing funding categorisation that is an effective alternative to challenge settings.
Funding categories invite all forms of idea and innovation and also introduce a contributor funding model to support and improve the ecosystem.
There is a fund 10 challenge setting proposal you can vote on to support a full fund trial of funding categories - Funding Categories Full Fund
The most effective way you can ensure that fund 10 is an inclusive funding round is to upvote the funding categories full fund proposal!