1/ Introducing @_futarchy—the first futarchy on Ethereum.
Markets know better than the usual experts, and it is time for companies to use markets to make decisions.
Markets know better than the usual experts, and it is time for companies to use markets to make decisions.
2/ Prediction markets may have existed for centuries in the form of betting markets, but now have gained deeper liquidity and institutional adoption.
They have proven over and over again to provide estimates that outsmart specialists.
But they are not the endgame for market-based information.
They have proven over and over again to provide estimates that outsmart specialists.
But they are not the endgame for market-based information.
3/ Rather than just estimating probabilities, we can also use markets to estimate the impact of events and decisions.
Will the company share go up if the CEO is fired by the board?
Will GDP rise if this candidate is elected?
Markets can answer these questions!
Will the company share go up if the CEO is fired by the board?
Will GDP rise if this candidate is elected?
Markets can answer these questions!
4/ Meet
We're building a decentralized platform to enable the use of decision markets to make binding or advisory calls to maximize shareholder value.
Futarchy is a solution for different domains: from established DAOs to early projects and startupsfutarchy.fi
We're building a decentralized platform to enable the use of decision markets to make binding or advisory calls to maximize shareholder value.
Futarchy is a solution for different domains: from established DAOs to early projects and startupsfutarchy.fi
5/ What is the biggest challenge in DAOs?
Unaligned incentives between insiders (founders, early and large investors) and outside investors/contributors.
With majority voting, insiders basically make all decisions, and outsiders have no protections.
Unaligned incentives between insiders (founders, early and large investors) and outside investors/contributors.
With majority voting, insiders basically make all decisions, and outsiders have no protections.
6/ Outsiders today have little incentive to make proposals or contributions to governance.
Most often, outside proposals are requests for funding or partnership from interested parties.
Most often, outside proposals are requests for funding or partnership from interested parties.
7/ Insiders, on the other hand, often struggle to encourage wider participation.
They miss out on new and interesting ideas, without a way to evaluate them accurately, and a mechanism that rewards the proposers effectively.
They miss out on new and interesting ideas, without a way to evaluate them accurately, and a mechanism that rewards the proposers effectively.
8/ Futarchy solves these problems with evaluation and reward mechanisms.
The futarchy evaluation mechanism is designed to advise, and eventually replace, majority voting governance.
The futarchy evaluation mechanism is designed to advise, and eventually replace, majority voting governance.
9/ To start, we create two conditional markets for a given share, representing two prices:
The share price if the proposal passes
The share price if the proposal fails
Supply and demand allow the market to estimate the impact of the proposal—the difference between the share prices if the proposal passes or fails.
The share price if the proposal passes
The share price if the proposal fails
Supply and demand allow the market to estimate the impact of the proposal—the difference between the share prices if the proposal passes or fails.
10/ Instead of voting "yes" on a proposal, an investor can agree to buy the share if the proposal passes.
Alternatively, instead of voting "no," an investor can sell their shares if the proposal passes instead.
Alternatively, instead of voting "no," an investor can sell their shares if the proposal passes instead.
11/ A proposal is recommended by the market if the share price when the proposal passes is sufficiently higher than if it fails.
As a consequence, for a proposal to be recommended, all investors in favor need to effectively "buy out" current token holders who are against it.
For organizations adopting full futarchy—meaning that market recommendations are binding—this creates a "right to get bought out" that serves as a strong protection for outsiders and minority token holders against insider control.
As a consequence, for a proposal to be recommended, all investors in favor need to effectively "buy out" current token holders who are against it.
For organizations adopting full futarchy—meaning that market recommendations are binding—this creates a "right to get bought out" that serves as a strong protection for outsiders and minority token holders against insider control.
12/ The futarchy proposer mechanism ensures enough liquidity for both conditional markets for all proposals under evaluation.
It regulates the timing and cadence of proposals by auctioning off the right to make proposals.
It also incentivizes meaningful contributions by outsiders by recommending rewards for passing proposals with significant impact.
It regulates the timing and cadence of proposals by auctioning off the right to make proposals.
It also incentivizes meaningful contributions by outsiders by recommending rewards for passing proposals with significant impact.
13/ Rewards get distributed to all players in the process, including the winner of the proposer auction and the liquidity providers of the conditional markets.
There is also the possibility of rewarding intellectual contributors, and those who did other work needed for the proposal to succeed.
There is also the possibility of rewarding intellectual contributors, and those who did other work needed for the proposal to succeed.
14/ Our system is being built by a team combining deep theoretical foundations and practical market expertise.
@robinhanson, inventor of futarchy and pioneering economist in prediction markets, joins as Chief Scientific Officer to guide mechanism design.
Led by @azsantosk, former HFT partner specializing in market microstructure and mechanism design for liquidity.
Backed by @gnosisDAO and @koeppelmann, pioneers of prediction markets on Ethereum and leaders in decentralized infrastructure.
@robinhanson, inventor of futarchy and pioneering economist in prediction markets, joins as Chief Scientific Officer to guide mechanism design.
Led by @azsantosk, former HFT partner specializing in market microstructure and mechanism design for liquidity.
Backed by @gnosisDAO and @koeppelmann, pioneers of prediction markets on Ethereum and leaders in decentralized infrastructure.
15/ We build upon the foundational work of many in the field of conditional markets and information aggregation, advancing these concepts with new implementations and use cases.
Special mention to the @gnosisDAO conditional token framework, the new @seer prediction market on Gnosis, the conditional markets on @Manifold, and the information aggregation tool @Metaculus.
In particular, we expand upon the pioneering work of @MetaDAOProject, who implemented the first on-chain futarchy.
Their successful experiment has significantly moved the concept forward, and we aim to build on that momentum.
Special mention to the @gnosisDAO conditional token framework, the new @seer prediction market on Gnosis, the conditional markets on @Manifold, and the information aggregation tool @Metaculus.
In particular, we expand upon the pioneering work of @MetaDAOProject, who implemented the first on-chain futarchy.
Their successful experiment has significantly moved the concept forward, and we aim to build on that momentum.
16/ Market-based governance is the first step toward a larger vision: aggregating the world's information through markets.
Markets excel at aggregating diverse views and information into clear signals. Conditional relationships between markets can reveal how different pieces of knowledge connect.
Markets excel at aggregating diverse views and information into clear signals. Conditional relationships between markets can reveal how different pieces of knowledge connect.
17/ Yesterday, @VitalikButerin explored how specialized markets can improve governance, science, news, and social media—by designing them specifically to elicit the information we need:
vitalik.eth.limo/general/2024/1…
vitalik.eth.limo/general/2024/1…
18/ Many already trust prediction markets over the usual experts for forecasting events.
The next step: using conditional markets to understand implications—from how elections affect markets to how policy changes impact economic growth.
The next step: using conditional markets to understand implications—from how elections affect markets to how policy changes impact economic growth.
19/ Over time, these interconnected markets will form a global web of knowledge, revealing how everything from monetary policy to technological breakthroughs affects the economy.
20/ Imagine all major financial markets and prediction markets connected through conditional relationships—creating a living map of how the world works.
21/ The pieces are finally coming together: institutional adoption of prediction markets, scalable blockchain infrastructure, and widespread recognition that we need better ways to aggregate knowledge.
22/ The future of markets isn't just about putting existing systems on a blockchain—it's about fundamentally better ways to aggregate and price information.
23/ Today's financial markets are limited: traders struggle to effectively convert their knowledge into value.
We're building markets that make this natural.
We're building markets that make this natural.
24/ Market-based governance is a first step. Beyond that lies a revolution in how organizations make decisions and how the world processes information.
25/ Follow @_futarchy as we build the markets of the future.
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