Conditional Markets
The core engine of Futarchy is the "Conditional Market." This involves asking two linked questions:
Market Pass: "What will be the TWAP (Time-Weighted Average Price) of Token $XYZ over 7 days IF the proposal PASSES?"
Market Fail: "What will be the TWAP of Token $XYZ over 7 days IF the proposal FAILS?"
The Decision Logic FaaSFi compares the implied prices of these two markets.
IF (Price_Pass > Price_Fail + Spread_Threshold) -> Execute Proposal.
ELSE -> Reject Proposal.
Why Markets are Better Traders who believe the proposal is bad for the DAO will short the "Market Pass" asset. Traders who believe it is good will long it. The resulting price difference is an objective, financialized consensus of the proposal's expected value.
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