Futarchy Dapp

[yribero]

Why adopt Futarchy for the Governance of Blockchains ?

The following three premises yield the conclusion that Futarchy (ref: https://mason.gmu.edu/~rhanson/futarchy2013.pdf) should be used for the governance of blockchains;

1. It is not difficult to distinguish better functioning blockchains from worse ones, especially over a longer time period (f.e. Market cap, user activity etc.)
2. Blockchain governance (DAOs) usually fail by not aggregating relevant available information for good decision making
3. Speculative markets are humanity’s best known way of aggregating information

Thus, we should leverage Futarchy for picking the right decisions regarding blockchain governance.

See Manipulation in Conditional Decision Markets

An example Futarchy contract for an important governance decision;

Instead of voting, why not use Futarchy to determine whether or not to sunset the ‘Inter Protocol’? How would that work?

1. Create two conditional markets for BLD

market A: buy/sell BLD if the protocol is sunsetted. The price in this market gives us: E [ price of BLD | sunset ‘Inter Protocol’ this financial quarter]

Market B: buy/sell BLD if the protocol is maintained. The price in this market gives us:

E [ price of BLD | maintain status quo this financial quarter]

2. At the end of the trading period if, for example, E[price of BLD | sunset] > E[price of BLD | maintain SQ] at the end of the trading period => then according to the Futarchy contract the ‘Inter Protocol’ should be sunsetted.

Blockchain Implementation

Despite its appearance, the Futarchy mechanisms are not trivial to implement on blockchain. What to do with transactions of the market that did not win without polluting the application chain that requires the Futarchy decision? If a dedicated ledger is used to run Futarchy as an application in itself, it requires orchestration between the Futarchy application and the chain that uses Futarchy to inform its decision. The architecture of the cosmos ecosystem with Agoric’s orchestration capabilities is an excellent candidate to enable the next generation of governance technologies.

Copy of Cosmic Futarchy.drawio.pdf
Repository: https://github.com/yribero/futarchy-dapp