• Abstract

• Context

• Why Use A Futarchy For Governance?

• Participants In A Futarchy

• Types Of Proposals In A Futarchy

• The Potential Of Meta-DAO’s Futarchy

• Conclusion

Abstract:

Institutions, and how they are governed, create different incentive structures for citizens of nations. Comparing countries such as North/South Korea reveal how the right institutions create vastly different outcomes for similar populations, and this is no different in crypto. When institutions such as FTX/Alameda did not have a structure of transparency and honesty, we ended up with customer funds being used, huge amounts of fraud and theft from users.

While the majority of crypto participants use the asset class for speculation and investment due to its lucrative financial upside, ultimately, code (and the blockchain) will be adopted by human societies in various forms, due to how it allows one to check the legitimacy of ownership, provenance, proof of funds, and more.

And with Meta-DAO’s execution of an onchain futarchy, governance in crypto might have taken a giant leap forward with code being used to create a new incentive structure for market participants, allowing the forces of predictive markets and an open price to trade to help the DAO develop from a simple idea, into a benevolent organisation that can empower the sovereign individual of the 21st century.

This essay will explain in-depth how a futarchy functions, how Meta-DAO has enabled it for crypto participants with smart contract technology, and how one can begin participating in Meta-DAO’s futarchy, as well as $META’s speculative upside.

Context:

In order to understand human behaviour, it’s crucial to understand how institutions and incentive guide societies. If one lives in a low-trust, high-violence society where bribery, corruption and theft are the best means to acquiring wealth - the smartest individuals will trend towards that behaviour. If one lives in a high-trust, low-violence society where capitalism and innovation are rewarded, and building valuable businesses/assets are the best means to wealth - that too will influence that society to behave in that manner.

In the context of the blockchain, the incentive structures/institutional issues within it can be seen in a multitude of examples, such as:

• A new layer-one chain deploys, and with new market participants bridging to it to buy any new tokens on it (memes, protocols, pool2-farms), anonymous developers can easily deploy tokens where they control large amounts of the supply, and sell those tokens on the open market with the exit liquidity of eager buyers

• A DAO has its decisions governed by token stakers, and the token supply is accumulated by several entities who wish to redeem the DAO’s treasury, or give themselves huge financial bonuses without delivering promises to token holders. Due to the institutional structure of that DAO being controlled by who owns the most supply, decisions that enrich top holders, as opposed to the project/protocol long-term, are much more likely than not.

• A new token/protocol launches with low float, with venture capitalists (VCs) and private investors owning much of the supply at a much lower valuation than current market price. As the VC/private investor tokens unlock, the monetary incentive leads to these parties to cash out their returns against public buyers, who end up bagholding at a loss.

However, Meta-DAO’s creation of a futarchy alongside the usage of smart contracts creates an entirely new governance structure that circumvents the issues seen in the examples above, and instead, is a groundbreaking step towards humans beginning to trust code for governance, as per GCR’s prediction:

What Is A Futarchy, & Why Use It For Governance?

A futarchy is an governance structure where prediction markets are used to determine decisions on policy, and where members of that structure vote on values, and bet on beliefs. First popularized by Vitalik in 2014, Meta-DAO is the first DAO to properly implement this structure on the blockchain on Solana’s Virtual Machine.

Let’s look at how Meta-DAO’s futarchy functions:

Participants in a futarchy can raise proposals for market participants to vote upon through the usage of prediction markets. Instead of decisions made via token or stakers, decisions are directly influenced by participants betting on the impact a proposal has on the $META token, and whether it will have a positive/negative impact.

Here’s what a basic futarchy proposal/decision might look like:

(Source: https://medium.com/coinmonks/a-deep-dive-into-futarchy-what-national-governments-and-private-organisations-can-learn-from-a-9408aa2fb887)

And in the case of Meta-DAO, the endgame of its futarchy would be it going from helping develop projects under the Meta-DAO banner, to eventually institutions, even nations working together with the DAO as it continues to grow in participants and value provided through its governance structure.

Considering that the 5 FAANG companies are known for their innovations in institutional structures, and that they have provided over 7 trillion USD worth of shareholder value, while Meta-DAO is still an early stage project, it helps frame the potential of using a futarchy for governance, and how its new structure could lay the groundwork for a more prosperous society.

Meta’s futarchy functions through the usage of the “autocrat”, a smart contract that allows proposals to be submitted to the DAO, and it creates 2 separate pass/fail token markets, which then allow market participants to speculate on the proposal, and to predict the effects it will have on Meta’s token price, $META.

The autocrat program regulates and checks the price of the pass/fail market tokens, and then either executes/disregards the proposal based on the market’s decision. The market that wins the pass/fail decision is finalized, while the losing market is reverted.

The autocrat reverts markets via the conditional_vault program, which allows users to deposit underlying tokens (either $META or $USDC currently) into a pass/fail vault (the token market), and redeem the tokens after the proposal has been decided upon. This ensures the vault will never have more liabilities than assets, and that users will always be able to redeem what they’ve placed into the proposal.

And as the structure of proposals in this futarchy allows participants to predict the proposal’s impact on $META price, this brings in the power of predictive markets and speculation to provide better governance decisions than other traditional structures. Predictive markets have been shown to predict political elections better than traditional bookmakers, forecast weather and movements in the prices of commodities, and a futarchy taps into this speculative power that would not be used in a democratic or autocratic structure.

Participants in a Futarchy:

There are 3 main roles inside a futarchy, although participants can be a composite of multiple ones:

1. Analysts/traders

These are market participants who speculate on token prices and market trends, contributing their speculation and predictive agency to various proposals, and to help govern a futarchy from detrimental decisions.

2. Entrepreneurs

These are individuals inside the futarchy that wish to build and develop projects in the interest of the futarchy. Be it someone in Meta-DAO who wishes to create a creative studio and is requesting a grant in order to hire artists and coders, or someone requesting a business development role for the DAO, entrepreneurs are crucial for helping drive innovation and creation on the base layer for a futarchy.

3. Cyber-agents

These are the coders and developers that help the futarchy enact proposals, and build out assets for its benefit. While the entrepreneurs guide the vision of the futarchy, and the analysts/traders help predict the outcomes of various proposals, cyber-agents are the integral engineers that keep the futarchy running, and help it function on the blockchain.

The Types of Proposals in a Futarchy:

While anyone can submit proposals to Meta-DAO, it’s recommended by Meta-DAO leader Proph3t to use one of the four formats below:

• Business project

• Business direct action

• Operations project

• Operations direct action

And anyone can view the templates for these proposals at the link here: https://blog.themetadao.org/a-futards-guide-to-the-meta-dao-7a6b8d66443a

These proposal templates help consolidate the desires of the proposer to the DAO, and ensure that the proposals are explained in enough detail for the DAO to make a balanced decision on them.

And that’s the bare bones of what a futarchy is, and how it functions!

Hopefully through this breakdown of the futarchy, the roles within it and how proposals function alongside the autocrat’s smart contracts, you can start to see the potential of this new governance model.

Now, how does the futarchy work in real life?

The Case Study of Proposal #3

After the Meta-DAO treasury grew from $10,000 to $30,000 several months after launching in November 2023, Rar3 created a proposal for Meta_DAO to raise an additional $75,000, $35,000 of those funds to be used to provide META/USDC liquidity on an AMM. The proposal passed with a pass price of $24.2, and a fail price of $18.9 - proposal link here: https://app.themetadao.org/proposal?id=3

However, Proph3t, creator of Meta-DAO, wanted the proposal to fail, and analyzed the various ways he could cause the proposal to fail, and how the futarchy’s structure prevented him from doing so as a possible bad actor.

When the proposal was live, the pass META (pMETA) was valued at $24.5, while the fail META (fMETA) was valued at $11. He considered this a huge mispricing from the market, and thus started buying the fMETA market, and selling the pMETA market. In the middle of the proposal deadline, Proph3t was sitting on 191 fMETA, and 82 pMETA, and wanted the proposal to fail so he could redeem the fMETA for normal META.

How could he possibly manipulate the markets to his favour? Well, he could actively buy the fail market, and sell the pass market, but if he was unable to change the trends in the markets, he would be stuck buying META above fair value in the fail market, and selling it in the below fair value in the pass market. On top of that, other traders might spot the price dislocation, and push it back to where prices were at the beginning.

When the Hunt brothers attempted to corner the silver market in 1979, despite the short-term spike in its price, people responded by smelting down their silver to profit from the manipulated price, bringing the market back to equilibrium. And plenty of arbitrage firms exist in traditional markets, preventing the manipulation of asset prices in more mature markets.

Or Proph3t could do a smear campaign on the proposal, but while the proposal might fail, it would damage his reputation to the futarchy in the long term, and have real financial consequences to him as someone working for the DAO.

Finally, he could do a hostage-style negotiation with the DAO, but it wouldn’t be in the interests of Meta-DAO long term to allow the passing/failing of proposals solely because of such tactics.

From this example, you can see how the futarchy works IRL, and not just on paper:

• Price incentives in the pass/fail META markets for traders to speculate and predict the impact of a proposal

• The financial impact of lying about the proposal’s impact on futarchy participants help prevent selfish actions

• A group of individuals unified by shared values and goals under the futarchy, thus incentivising participants to act best for the DAO’s long-term future

• And the immutability of the autocrat smart contracts to help determine the passing/failure of a proposal

Can you begin to grasp the revolution of this form of governance?

You get the power of prediction markets helping to correct and direct decisions, the direct incentive structure preventing bad actors, and code becoming a vital part of governance to further remove the chances of human error/manipulation in decision making.

The Potential of Meta-DAO’s Futarchy

The price of $META has gone from $25 to $1,000 over the past few months, with a circulating market cap of around 13-14 million as of February 28th 2024, showcasing the market beginning to realize the potential of the project, and what it represents - an evolution of governance structure inside the crypto space that can be used to incentivise a flywheel of positive behaviour for futarchy participants and $META holders.

Here’s a simple breakdown of this potential flywheel:

• $META price is driven upward by speculators who believe in the potential upside of the token

• $META price increases the monetary value of submitting quality proposals to the DAO, and building value for the futarchy

• Proposals created by entrepreneurs, analysts, and futarchy participants lead to increased adoption and speculation on the $META token, with the price prediction mechanism allowing the market to participate in Meta-DAO’s governance

• $META price is driven upwards by the speculation, and the reflexive cycle repeats itself

Conclusion: How much is an entirely new structure of governance and innovation worth in this asset class?

Considering the speculation we’ve seen so far this cycle on new token standards such as $ORDI and $PANDORA, as well as the growth of new protocols such as $PEAS, I have little doubt that the innovation and possibilities that $META presents as both a token and DAO have yet to be fully seen. Especially as majors continue to trend towards new all time highs, bringing new institutional as well as retail participants into crypto.

There will be a multitude of billion-dollar DAOs and protocols that will be created this cycle - and Meta-DAO has the potential to be a standout performer this cycle.

I hope you enjoyed this deep dive into what a futarchy is, what Meta-DAO’s futarchy is, how it functions, and its potential to be a groundbreaking shift forward in crypto governance. I’m personally very bullish for what $META represents, and what it can accomplish this bull market in our asset class.

Nothing will stop the expansion of fiat currency.

Which means our internet coins have only ONE direction to go on a long enough timescale…

UP.

I was back in Singapore last weekend, spending time with the family. I went for a walk in Ion Orchard, one of our most popular shopping malls, where people are meant to enjoy themselves and have fun times with friends/family.

(like that’s possible in Disneyland with the Death Penalty lmao)

I was greeted by the dark, deadened serotonin-overloaded stare of young men lost in quiet desperation, their psyches and physiques trapped in a state of shock and nervous overexcitement, their souls lost in a cultural purgatory of a never-ending societal crab bucket to climb out of.

I have zero doubt that stems from the pressure cooker culture of the country, as well as the fact that you have a younger generation walking around seeing the opulence and wealth of the boomers, knowing they will NEVER reach the same level of wealth in their lifetimes due to how the fiat system is setup and how the housing ponzi has been pumped in most Western/developed nations.

Remember:

You have an entire GLOBAL population of such youths, waging from paycheck to paycheck, watching the clown world of celebrities print millions from OnlyFans, Tiktok, influencing, etc etc and they are desperately wishing for a way out.

Quiet desperation isn’t just the English way.

It’s the way of the Zoomers and those born after the boomers who understand the Ponzi was stacked against them from the day they sprang forth from the cosmos, with Boomer Cantillionaires mocking their poverty and wagedom from their ever-pumping assets that they acquired at much better income/asset ratios when they were in their youth.

There are only a few ways out of this scheme as a 1st worldooor:

1. Becoming a digital nomad and moving to a poorer 2nd/3rd world country.

But anyone with common sense knows that unless they are able to create a sustainable income stream that can grow, moving to Vietnam, Thailand, LatAm doesn’t mean you’ll have a great life forever - it means you’ll have a decent standard of living in a place you have no connections in (usually) for as long as you can sustain an online income stream before your business/job/industry eventually gets replaced by technology or becomes too saturated.

Ask the dropshippers who made it off fidget spinners how they’re doing these days if they didn’t upgrade their skills and ran out of their early windfalls.

Or the 2000s affiliate marketers that printed 6 figs easily from Clickbank offers before the space became more saturated. Or the internet copywriters that thought they could print millions off ripping Dan Kennedy sales letter templates forever. It’s not looking good for any of them. Quiet desperation awaits.

2. Embrace clown world with wh0ring/clown world antics

If you’re a cute Asian female, you can always punch in your Yoko Ono card, go to the gym for a couple of months, learn to put freckles on your cheeks and cash it in with OnlyFans.

Do a couple of twerking TikToks, start printing a few thousand each month with a decent sales funnel. Maybe sell your used undies and bathwater to desperate men online. You will print from this. Call it yield farming with extra steps.

Or maybe you become a gay twink online or femboy if you’re desperate enough. Most don’t have that level of guts/desperation to do this option, or the appearance/desirability to do so.

Again, quiet desperation awaits.

3. As someone with little to no other options, hypergamble your way to as much moolah as you can through the speculative markets of crypto, stocks, options, you name it.

Many in the developed world are smart enough to know the game is rigged against them, which will drive them towards moonshot investments and punts that would freak out a value-driven boomer investor and/or give them a heart attack.

This cycle will be marked by what I believe to be a level of utter desperation and escapism, that will blow away the boomer ideas of efficient markets, P/E ratios, value, and other antiquated values. Imagine telling your boomer parents you got a 100x off $JOE because yellow boi meme is good lmao

No, it is not different this time. Similar ridiculous behavioral patterns have occurred in periods of hyperinflation, such as Weimar Germany.

Off the top of my head, here are several factors that will fuel this cycle:

1. A new form of technology, allowing a new form of speculation/growth

The blockchain can still be considered new if you market it well enough. Add in some words on scalability, immutable ownership etc, and it becomes interesting enough for people to allocate into this asset class.

We’ve got Ordinals on BTC, with clear adoption and usage by speculators, paving the way for funds and institutions to begin speculating on them further. We’ve got socialfi tech on BASE and other EVMs, letting us punt on our favorite influencers and egirls.

We’ve got Blur making NFTs more efficient, and tools like Maestro, Bananabot, Unibot, Newslybot all making our lives easier as degens.

Now, one must not fade the shitcoining speculator.

For he is at the forefront of technology, aping with the skin of his teeth into contracts, chains, satoshis, all for the promise of filthy lucre.

2. A run from fiat into more and more speculative assets further down the risk-curve.

It’s unlikely we don’t see more money printing if/when enough negative economic indicators emerge from the West.

If you think not, you underestimate the greed of politicians and elites to pump their bags, and to use the printer to kick the can down the road.

We will most certainly hit new all time highs denominated in USD and other fiat currencies for this reason alone. Dumb take, I know, but if money supply goes up, there’s no way $BTC and by proxy $ETH don't go up in price.

Just duh, keep it simple.

3. A wave of institutional adoption through ETFs, Blackrock, and other big tradfi names starting to pump our bags.

Unironically, this will lead tokens with decentralized narratives to pump for fear of elites seizing the asset class for themselves. I’m looking at $TAO, $ATOR, and other such tokens to take lead with that narrative and grow even further from how well they’ve performed this year.

This will also push our altcoins and ETH to run hard, due to the next wave of new retail participants being biased from BTC’s high unit price, and looking at cheaper alternatives and memecoins for better returns.

When it comes to memecoins, the winners for this current wave of expansion are very clear - $PEPE, $JOE, $BITCOIN, $SPX, etc - all of those with strong cults and communities have many a way to go.

Most have forgotten what a raging bull market is like.

It is a fiendish time of pumps that do not end, of feverishly chasing the next big thing, desperately aping into whatever you think may be the next 5, 10, 20x gem. As of now, you can still allocate into the right coins and be considered "early". I believe once we hit range highs on $BTC on this move (be it $45-52k range), that is when alts run even harder, before eventually the liquidity is pulled by the participants who were in the ponzi scheme earlier, and the money transfer from the hands of the many, into the hands of the few once again.

We are still in a zero-sum game, and will continue to be so until we see clear signs of new blood entering the space, and an increase of liquidity.

However, we are nearly at the brink of the PVP shifting to PVE, and for the market to truly charge forward as a bull once more.

You didn’t stick around this bear to lose, you stuck around to win. The signs of what will be this cycle’s winners are already here, you only need listen. I will end this tirade with two words:

Bet More.

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