What is Futarchy?

Definition Futarchy is a form of governance proposed by economist Robin Hanson, summarized by the slogan: "Vote on values, bet on beliefs.".

The Failure of Voting In traditional DAO governance (1 token = 1 vote), participants often vote based on popularity, politics, or apathy. They suffer no financial penalty if they vote for a bad proposal that destroys the project's value.

The Market Signal In a Futarchy model, decisions are made by prediction markets. Traders bet on the future value of the organization's token conditional on a decision. If the market predicts that "Decision A" will crash the token price, the decision is automatically rejected. This aligns incentives: profit-seeking traders unknowingly act as improved governance delegates.