FUT - Futarchy

Supports:

• • Staking Mechanisms

Context:

In decentralized autonomous organizations (DAOs), the challenge is to make effective governance decisions in a way that is both rapid and reflects the collective wisdom and preference of the community.

Problem:

Traditional voting mechanisms in DAOs often rely on direct democracy or representation, which can result in suboptimal decision-making due to voter apathy, lack of expertise among voters on specific issues, or the influence of charismatic leaders rather than rational decision-making.

Forces:

• Information Asymmetry: Not all voters have the same level of information or expertise.
• Participation Fatigue: Voters tire of constant voting, leading to reduced engagement over time.
• Rational Ignorance: Voters may not have sufficient incentive to educate themselves on every issue.
• Misaligned Incentives: Voters might vote for short-term gains over long-term benefits.

Solution:

Implement a Futarchy model where decisions are made based on prediction markets rather than traditional voting alone. In this governance model, a proposed action is accepted if a corresponding prediction market forecasts a positive outcome on a predefined success metric better than the status quo. DAO members can speculate or bet on the anticipated outcome of various decisions using tokens. The market’s decision, which aggregates diverse information and viewpoint from incentivized and informed market participants, dictates whether the proposal is implemented.

Therefore:

Adopt Futarchy to exploit collective intelligence in making complex and impactful decisions, leveraging markets’ efficiency in aggregating diverse opinions and information, incentivizing informed participation, and predicting outcomes effectively.