A few days ago, an originally tepid project Meta-Dao (@MetaDAOProject) was retweeted multiple times in one day by toly, the co-founder of Solana Labs, and attracted the attention of many crypto players.
其代币Meta（合约地址：METADDFL6wWMWEoKTFJwcThTbUmtarRJZjRpzUvkxhr）也在三日之内从50美金飙升至插针最高点1600美金，并在一日之后回落至754美金。
In addition to the huge fluctuations in currency prices and arbitrage opportunities, I am very interested in the new Dao governance model Meta-Dao is trying on the blockchain. This series of articles will give you an in-depth understanding of the ins and outs of Meta-Dao.
What is Futarchy?
In the picture above, toly shouts "Futarchy is the future". Like me, most of them must have come across Futarchy for the first time, an obscure academic term that they can’t even pronounce. So what exactly is Futarchy?
Futarchy is a new form of democracy that has not yet been tried. It was first proposed by economist Robin Hanson in a manifesto "Futarchy: Vote Values, But Bet Beliefs" published in 2000. It aims to be guided by market mechanisms. policy decisions and address some of the limitations existing in traditional democratic systems.
如今的民主制按照形式划分可以分为直接民主、代议制民主或者两者的混合。直接民主，即公民被赋予完全的控制权、责任感和平等权，他们直接参与国家的决策，代议制民主则是公民将投票权转移给代表（比如中国的人大代表），代表代替人民对国家问题作出决策。
Although the most widely used form of democracy in the world is representative democracy, representative democracy is not without its flaws. It has the following problems:
1. Voter apathy: That is, individuals do not have enough motivation to study potentially harmful policies because they do not directly participate in decision-making. This will cause voters to feel that their opinions and needs are not fully taken into account, and their votes will have minimal impact, thereby reducing the citizenry level of political participation.
2. Information asymmetry: Voters have little incentive or means to thoroughly research their appointees, which means those in power may not have the ability or motivation to act in the best interests of the group
3. Short-termism: Democratic systems may be affected by short-term election cycles, leading to policies that focus too much on immediate needs and ignore long-term interests.
Futarchy的基本理念是把决策权交给市场，与其他决策方式相比，市场有很多好处。有如下的理论和经验证据：
理论依据：
In efficient capital markets, asset prices reflect all relevant information, thereby providing the best forecast of future events based on current information.
Paul W. Rhode and Koleman S. Strumpf 《Historical Presidential Betting Markets》》
1.市场的自我纠正：例如在一个选举预测市场中，如果特朗普赢得选举的机会为50%，但是合约价格仅为32美分，市场参与者会被激励去买入这些合约直至价格上升至50美分，反映其真实胜率，同理，如果价格高于50美分为65美分，参与者会被激励卖出或做空，直至价格降至50美分。其结果是市场难以操纵，即使财力雄厚的个人也很难推动市场，因为这样做将为其他参与者纠正这些错误定价提供有利可图的机会。
2. The rewards of accurate forecasting: Over time, the market will give greater power to those with better forecasting skills. This is because high returns both directly increase traders' capital and improve their ability to raise funds from investors.
经验依据：
In practice, what evidence is there to prove that market forecasts are better than some institutions? For example, racetrack markets outperformed horse racing expert forecasts, Florida orange juice commodity futures outperformed government weather forecasts, betting markets outperformed polls in predicting U.S. election results, and betting markets consistently outperformed forecasts of HP printer sales. Better than HP's official forecast.
In the paper "Forecasting Elections: Comparing Prediction Markets, Polls, and Their Biases", the accuracy and information content of prediction markets and polls in predicting election results is explored through the 2008 election data.
The authors find that in the early stages and in elections with higher uncertainty, bias-adjusted prediction markets provide more accurate victory probabilities and more information than polls.
In addition, it is mentioned in the paper "Historical Presidential Betting Markets" that "in the 15 elections between 1884 and 1940, the candidate most favored by the betting market in mid-October won the election in 11 times, with only one exception being 1916 ", when markets initially favored the candidate who ultimately lost." This demonstrates the remarkable ability of betting markets to aggregate information and predict election outcomes, albeit in an era that lacked scientific polling.
以上只举了博彩市场在预测选举时的例子，其他例子读者可以自行通过互联网搜索。
当然Futarchy也并非完美的决策方案，它也存在如下的缺陷：
One of the biggest evils of the market is the Keynesian beauty contest, an economic concept in which contestants choose which faces are most attractive to other contestants, rather than their own favorite faces. In this metaphor, instead of investing based on their fundamental analysis of a company, each investor is trying to predict how other investors will act, basing their investment decisions on predictions of market psychology rather than the actual value of the company. .
This is especially evident in cryptocurrency markets, as many tokens are reflexively priced (price movements in financial markets are affected by the interplay between market participants’ expectations and behaviors, which creates a self-reinforcing feedback loop , causing the price to be deviated from the actual economic value), there is no fundamentals. The expectation of its rise lies in others thinking that its price will rise, such as meme tokens.
How does Futarchy work?
Futarchy的运作原理就存在于那句口号中--"投票价值观，投注信念"，这意味着公众首先投票决定我们想要什么（比如，我们想要增加GDP，减少污染，增加就业等），然后使用预测市场来选择最适合的政策来实现这些指标。
Assume that the chosen success indicator is GDP (in trillions of dollars) and a 10-year time lag is set, at which point there is a proposed policy: "Bail out the banks."
Two assets were issued, each promising to pay token holders $1 per trillion of GDP after 10 years. The market may be allowed to run for two weeks, during which time the average price of "pro-bailout" tokens ("yes" tokens) is $24.94 (implying that the market believes that GDP in 10 years will be $24.94 trillion), The average price of "anti-bank bailout" tokens ("no" tokens) is $26.20.
Ultimately there was no bailout of the banks. All trades on the “pro bail out the banks” market are revoked, and after 10 years everyone holding assets in the “anti bail out the banks” market will receive $26.20 per token.
How to implement it using Dao?
Dao(Decentralized autonomous organizations,去中心化自治组织)
的优势在于可以快速地对我们社交互动的一个方面进行原型设计和实验。而且Dao的去中心化和自动化特性有助于提高决策过程的透明度和组织运作的效率。
Futarchy, as a political system for managing government, seems unlikely to be implemented nationwide anytime soon, and it hasn't even really been tried for businesses. However, as a completely new organizational form, the DAO may become the ideal platform for Futarchy to shine.
What follows is a method of implementing Futarchy through Dao on ETH conceived in the article "An Introduction to Futarchy" published by Buterin in 2014 (assuming that the token symbol of Dao is $Futa):
T new $Futa are issued in each round, and n proposals P[1]...P[n] can be made. Each proposal can just consist of "send money to this address". How the money will be used can be communicated on higher-level channels such as forums.
Generate n pairs of assets R[i] and S[i] based on the number of proposals, and randomly allocate T units of each type of token in some way (e.g., allocate to miners according to a formula determined by itself, the holding of $Futa By). DAO also provides n markets M, where market M[i] allows transactions between R[i] and S[i].
The DAO monitors the average price of S[i] denominated in R[i] across all markets and lets the market run for b blocks (e.g. 2 weeks). At the end of the period, if market M[k] has the highest average price, then strategy P[k] is selected and the next period starts.
Except for the transactions in the market through proposal P[k], all other market transactions will be rolled back. The value of R[k] will be anchored to some external assets (such as ETH), S[k] is worth Z $Futa, and a good value of Z is between 0.1 and m. To achieve this, Dao needs to sell its own tokens to raise ETH and target m to coordinate the price of S[k].
For more detailed design, please refer to V God’s original text.
Summarize
This article spends a long time mainly introducing the theoretical source of Meta-Dao, introducing the advantages of Futarchy compared to public opinion polls in prediction, and the theoretical basis of using Dao to conduct this experiment. The next article will formally introduce the theory and practical design of MetaDao.
参考资料：
1.《Forecasting Elections: Comparing Prediction Markets, Polls, and Their Biases》（https://scholar.google.com.sg/scholar?q=Forecasting+Elections:+Comparing+Prediction+Markets,+Polls,+and+Their+Biases&hl=zh-CN&as_sdt=0&as_vis=1&oi=scholart）
2.《Historical Presidential Betting Markets》（https://www.aeaweb.org/articles？id=10.1257/0895330041371277）
3.《Futarchy: Vote Values, But Bet Beliefs》（https://mason.gmu.edu/~rhanson/futarchy.html）
4.《An Introduction to Futarchy》（https://blog.ethereum.org/2014/08/21/introduction-futarchy）