LONDON (Bywire News) - Cheats never prosper, they say, and that’s an ethos that Pomelo has been keen to live by. Ever since its inception, this innovative funding mechanism has been targeted by those who try to game the system in order to reap the dividends. At the end of each season, therefore, their team works to identify suspicious bids. As a result of this, some bids have seen their funding drop, while those who did play by the rules will have seen their totals increase.
This season, just over $150,000 has been added to fair-paying grants, demonstrating that those who seek to break the rules are only hurting themselves.
Bad actors on Pomelo
Pomelo uses an innovative quadratic funding mechanism in which totals are boosted depending on the number of donors rather than simply the amount raised. It benefits those proposals which attract many people rather than those which appeal to a small number who might have deep pockets. It’s fairer, more democratic, and rewards those who are genuinely fulfilling the aims of Pomelo by providing services which the community values.
Unfortunately, this approach also creates opportunities for those who would wish to exploit the system by using multiple donations to artificially inflate the number of people contributing. Among the more common tactics are:
Quid quo pro: The rules forbid any project offering payment or other benefits in return for contributions. For example, a company may offer exclusive benefits or even bribes to persuade people to contribute to their grant. They may even promise to match contributions on other bids in return for a bit of quid quo pro in the other direction.
If the team finds clear evidence of a bribe, they will remove the proposal. When things are more unclear, they may reach out to the community for feedback about whether or not they believe rules have been broken.
Collusion: Several participants can work together to coordinate many different bids which essentially come from the same person or organisation. In effect, they would be contributing the same amount but making it appear that the money comes from multiple sources. When the team identifies this, they may collapse all these donations into a single donor which will reduce the amount of money they receive from the matching pool. In more extreme cases they may disqualify the proposal altogether.
Sybil attacks: An entity creates multiple Pomelo accounts to make multiple donations and gain a larger share of the matching pool. Nine grants have been disqualified this season, down from 11 last time.
To weed these out, therefore, Pomelo conducts a detailed analysis of grants before distributing the final matching pool. In addition, they also name and shame those who have been found to break the rules.
In total six grants were disqualified for collusion and Sybil attacks. Of those three were created by a single author who had also been penalised in season one:
The other three have been disqualified for the same reason but will be allowed to return in the future.
Disqualification for fake grants and Sybil
Three other grants were created by the same owner and show patterns of Sybil attacks originating from the fraudulent accounts. Their bids have been disqualified but they are allowed to return to Pomelo for future seasons:
On top of these, they removed a number of donations which violated the rules. This included those in which fraudulent donations are made to a variety of grants to make them seem legitimate. Nine grants had their allocation reduced by 84% or more, while five grants had their allocation reduced by between 37% and 79%.
The flip side of this is that those grants which did play by their rules received a higher proportion of the matching cool. In total, due to disqualifications and collapsed donations $155,112 was redistributed to fair playing grants.
That Pomelo continues to be targeted by fraudsters will, to some, undermine trust in the funding mechanisms. Quadratic funding would seem to provide a clear temptation to bad players. The work done to seek out bad players, and expose them, is critical to making sure the majority who play by the rules aren’t harmed by those who don’t.
Indeed, once again, Pomelo has shown that the risks of trying to cheat your way to success far outweigh any gains you might hope to see.
(Writing by Tom Cropper, editing by Klaudia Fior)