Futarchy

The current economic and political model is broken and does not promise to improve over time. As a result, our economies are mediocre or very bad.

If you possess even a shred of critical thinking and a slight interest in the political landscape, you have probably wondered how our governing bodies, susceptible to external pressures such as corruption and lobbying, can really serve the interests of the people with fairness and objectivity.

To understand its being, I made a diagram with all the main problems summed up ⬇️

A practical example of this model can be seen by comparing two countries, the first developed and the last belonging to the least developed countries (LDCs). Germany and Somalia.

Germany has strong property rights → normal access to water services, GDP per capita of $48700.

In Somalia, weak property rights → 42% of the population w/o regular access to clean water and GDP per capita of only $460.

In Germany, strong property rights incentivise people to produce and develop their own land. This is the biggest difference between the two realities.

Despite aiming for fairness and equality, Western institutions often favour the interests of economic elites and powerful business groups over the needs of ordinary citizens, resulting in a lopsided distribution of influence.

In short, our economies are paying less and less to maintain and promote quality public goods, while inequality has increased, with an average increase rate of 4.8%.

And if once public goods were public bath houses of the Romans, turning into open-source softwares in the 70s, now becoming blockchains and its algorithms.

This model has obviously flaked out in the crypto industry as well, with obvious problems such as teams rugpulling projects or whales manipulating retail investors funds.

Are we f*cked?

Sorta, the traditional model is trying like crazy to get into crypto and corrupt this sector as well, but thanks to DAO systems using Futarchy as a model, we still have hope for change.

Futarchy is a system where decision-making authority is given to markets.

This way, it aims to leverage the collective wisdom of the crowd and the efficiency of markets to make informed and potentially more effective decisions.

It's still an evolving idea, but it has a good chance of succeeding and changing the way we vote, aiming for a positive evolution of the whole ecosystem.

And why the hell this should work!?

Futarchy gives complete power to the crowds, and its potential lies in two key theoretical strengths:

• Efficient Information Aggregation
• Empirical Evidence of Superiority

People naturally gravitate towards correcting imbalances.

Let's try with a irl case scenario: Predicting a policy choice through a futarchy market.

Issue: One option favors an undesired outcome despite its current high market price.

Solution:

1. Incentive to Correct: People with opposing views see the undervalued alternative as a profitable opportunity.
2. Buying Spree: They purchase shares of the undervalued option, driving its price up.
3. Market Correction: As the undervalued option gains traction, the overall market price adjusts towards a more accurate prediction.
4. Manipulation Resistance: This "correction force" makes it difficult for single actors, even powerful ones, to manipulate the market due to countervailing financial incentives.

Outcome → The market price reflects a collective assessment, potentially leading to a more informed and less manipulable policy decision.

Let's see how a practical proposal works 👇

1. Introduction to the scenario:

   • Someone proposes to allocate DAO's resources for marketing campaigns.

2. Community response and wagering:

   • If the DAO believes the proposal will increase the token's value, they wager on its success.

3. Outcome of the proposal:

   • If the proposal passes, those who bet 'YES' gain the opportunity to purchase the DAO's token at a discounted rate.

For instance, we have a company that has to decide whether to fire or keep the CEO:

What's TWAP and how is it calculated?

TWAP stands for Time-Weighted Average Price. It's a way to calculate the average price of something, like a stock or a token, over a specific period of time.

1. Market Participation:

   • Traders engage in conditional markets by placing bids, asks, and executing trades based on their predictions regarding the proposal being evaluated.

2. Time Period:

   • The TWAP calculation spans a specific duration, typically set to 5 days within the MetaDAO for each proposal.

3. Price Tracking:

   • Throughout the designated time frame, a dedicated TWAP program continuously monitors the prices of the traded tokens (META/USDC) in both the conditional-on-pass and conditional-on-fail markets.

4. Weighted Average:

   • The TWAP computes the weighted average price by factoring in the volume-weighted prices of the tokens traded during the entire trading period.

5. Market Resolution:

   • At the conclusion of the time period, the TWAP of both markets is assessed to identify which market exhibits a higher price. The market with the higher TWAP is deemed the winning market.

6. Proposal Outcome:

   • If the TWAP of the pass market surpasses that of the fail market by a predetermined threshold, the proposal is deemed to have passed. Consequently, the autocrat program executes the corresponding actions outlined in the proposal.

A couple of FAQs

1. Market Instability:

   • Q: How will you address potential volatility and "bubbles" in Futarchy markets?
   • A: The premise is that markets are better than alternatives, though not perfect. Combining the model with expert analysis could help normies understand each proposal in simple terms.

2. Theoretical Limitations:

   • Q: How do you plan to account for the limitations of traditional financial theory and its potential impact on market predictions?
   • A: Same response as #1.

3. Choice Representation:

   • Q: Could a model allowing voting for multiple choices be implemented, similar to traditional voting systems?
   • A: Yes, multi-option proposals could be implemented, and there's excitement for this to exist. The timeframe between each proposal would be the same, ensuring fairness.
   • Q: How would you address potential inequities due to changing voting parameters between proposals?
   • A: Same response as above.

4. Safeguards against Manipulation:

   • Q: What safeguards will you implement to prevent manipulation and deceptive practices?
   • A: In a previous proposal, attempts to manipulate the markets failed, demonstrating resilience. AI could be useful in detecting and preventing suspicious behavior.

5. AI Agents:

   • Q: How do you envision the role of AI agents in the ecosystem?
   • A: Long-term, it's expected that the main traders will likely all be AI, indicating potential future developments in this area.

How do I participate?

1. Generating Proposals and Ideas: Share your suggestions and proposals.
2. Creating Content: Help with documentation and communication efforts.
3. Designing UI: Enhance the user experience of our platform with UI design.
4. Spreading the Word: Become an evangelist and spread awareness about our project.
5. Providing Support: Advocate for our cause and assist in building our community.
6. Contributing Openly: The code repositories are open for contributions, and Discord is open for discussion.
7. Getting Started: Dive into proposals, engage in conversations, and deploy your skills through PRs and suggestions.

Futarchy-as-a-Service

A proposal is underway to make Meta-DAO publicly accessible in Futarchy-as-a-Service mode.

This could be one of the most important use cases so far. Although the Meta-DAO stack is completely open-source.

By making the Meta-DAO stack available in FaaS mode, they aim to enhance liquidity, drive interest, and foster broader adoption of the platform.

Stay active in Meta-DAO community

Meta-DAO is an active and constantly developing project, so in order for you to stay up-to-date on news and proposals, you need to be engaged in the community and follow the conversations.

Like the whole crypto space, miss a day and you miss a whole bull market. And yes Anon, if you're not active in any community in this industry then you're NGMI.