# Proposal X - Futarchy as a Service (FaaS)

Type: Business project

Entrepreneur(s): 0xNallok

*A note from 0xNallok: Special thanks are owed to the many parties who've supported the project thus far, to those who've taken massive risk on utilizing the systems and believing in a better crypto. It has been one of the most exciting things, not in attention, but seeing the “aha!” moments and expanding the understanding of what is possible with crypto.*

## Overview

The appetite for market-driven governance is palpable. MetaDAO has an opportunity to take its existing codebase and shape it into a prime-time product: to offer futarchy-as-a-service. If executed successfully, such a product would be a boon to the Solana ecosystem and to MetaDAO's bottom line.

If passed, this proposal would fund two workstreams:
- **Minimum viable product**: I would coordinate the creation of a minimum viable product: a Realms-like UI that allows people to create and participate in futarchic DAOs. This requires some modifications to the smart contract and UI to allow for more than one DAO.
- **UI improvements**: I've already been working with engineers to add helpful functionality to the UI. This proposal would fund these features, including:
- historical charts
- improving UX around surfacing information (e.g., showing how much money you have deposited in each proposal)
- showing historical trades
- showing market volume

The goal would be to onboard some early adopter DAOs to test alongside MetaDAO. A few teams have already expressed interest.

## Problem

Most people in crypto agree that the state of governance is abysmal. [Teams can loot the treasury without repurcussions](https://www.coindesk.com/markets/2023/07/21/defi-project-parrot-puts-fate-of-over-70m-treasury-prt-token-to-vote/). [Decentralization theatre abounds](https://www.coindesk.com/consensus-magazine/2023/08/14/cryptos-theater-is-becoming-more-surreal/). [Even some projects that build DAO tooling don't feel comfortable keeping their money in a DAO](https://www.coindesk.com/business/2023/05/05/aragon-fires-back-at-activist-investors-in-early-stages-of-governance-fight/).

The root cause of this issue is token-voting. One-token-one-vote systems have clear [incentive traps](https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action) that lead to uninformed and unengaged voters. Delegated voting systems ('liquid democracy') don't fare much better: most holders don't even do enough research to delegate.

## Design


A possible solution that MetaDAO has been testing out is futarchy. In a futarchy, it's markets that make the decisions. Given that markets are empirically better than experts at predicting things (see #1, #2, and #3), we expect futarchies to perform better than traditional DAOs.

Our objective is to build a product that allows DAOs in the Solana ecosystem to harness the power of the market for their decision-making. This product would look and feel like [Realms](https://realms.today/), only with futarchy instead of voting.

Our short-term goal is to create a minimum viable iteration of this. This iteration would support the following flows:
- I, as a DAO creator, can come to a website and create a futarchic DAO
- I, as a futarchic trader, can trade in multiple DAOs proposals' futarchic markets

To monetize this in the long-term, we could:
- Collect licensing fees
- Collect taker/maker fees in the conditional markets
- Provide ancillary consulting services to help DAOs manage their futarchies

The minimum viable product wouldn't support these. We would instead work with a few select DAOs and sign agreements with them to migrate to a program with fee collection within 6 months of it being released if they wish to continue to use MetaDAO's offering.

### Objectives and Key Results

**Release a minimum viable product by May 21st, 2024**
- Extend the smart contract to support multiple DAOs
- Generalize the UI to support multiple DAOs
- Create docs for interacting with the product
- Partner with 3 DAOs to have them use the product at launch-time

**Improve the overall UI/UX**
- Create an indexer and APIs for order and trade history
- Improve the user experience for creating proposals
- Improve the user experience for trading proposals

### Timeline

**Phase 1**
Initial discussions around implementation, services and visual components
UI design for components
Development of components in React
Program development
Data services / APIs construction

**Phase 2**
Program deployed on devnet
Data services / APIs linked with devnet
UI deployed on dev branch for use with devnet

**Phase 3**
Audit and revisions of program
Testing UI, feedback and revisions mainnet with limited beta testers and on devent

**Phase 4**
Proposal for migration of program
UI live on mainnet
Create documentation and videos

**Final**
Migrate program

## Budget

This project is expected to have deliverables within 30 days with full deployment within two months.

A fair estimate of $86,000 for the two months including the following:
- 1 smart contract engineer ($15,000) (160 hours)
- 2 UI / UX ($32,000) (400 hours)
- 1 data/services developer ($13,000) (140 hours)
- 1 project manager / research / outreach ($26,000) (320 hours)

This breaks down to an average estimate of ~$84/hour and 1020 (wo)man hours total.

One consideration is for a formal audit which would increase the cost by $60k-$200k.

## Business

There are a few ways to monetize FaaS:
- **Taker fees on markets**: we could take 5 - 25 basis points via a taker fee on markets.
- **Monthly licensing fees**: because the code is BSL, we could charge a monthly fee for the code and the site.
- **Support and services**: we could also provide consultation services around futarchic governance, like a Gauntlet model.

In general, we should aim for **vertical integration**. The goal is not to build this product as a primitive and then allow anyone to build front-ends for it: it's to own the whole stack.

### Financial Projections

Today, 293 DAOs use Realms. Realms is a free platform, so plenty of these DAOs are inactive and wouldn't be paying customers. So we estimate that we could acquire 5 - 100 DAOs as customers.

As for estimating ARPU (average revenue per user), we can start by looking at the volume in the Meta-DAO's markets:


Note that this only includes the volume in the finalized market, as all trades in the other market are reverted and thus wouldn't collect fees.

So assuming that proposal 6 - 8 are an appropriate sample, we could earn ~$50 - $500 per proposal. If DAOs see between 1 - 2 proposals per month, that's $100 - $1,000 in taker fee ARPU.

As for monthly licensing fees, Squads charges $99 / month for SquadsX and $399 / month for Squads Pro. I suspect that DAOs would be willing to pay a premium for governance. So we can estimate between $50 - $1,000 in monthly licensing fees.

Putting these together:


The support & services business is different enough that it deserves its own model. This is because consulting / advisory businesses have non-zero marginal costs (you can't earn $25,000,000 in revenue from one consultant) and have lower defensibility. Both cause them to receive lower valuation multiples.

Here's what we project:


Of course, you can use your own numbers if you'd like to come up with your own estimates.