MetaDAO: a new experiment in human coordination

The Effects of Good Government in the City. Ambrogio Lorenzetti, 1339.

Current governance structures are broken.

In a country, a politician will run on the policies that are most likely to get him re-elected, not the ones that are truly best for the people he represents.

In a company, a manager has little incentive to bet on moonshot product lines that could 10x the value of the company, if it also means he could lose his job.

In a DAO, getting people to vote is hard and direct democracy makes for mediocre products. They have been a failure in crypto for the most part.

Often, what works best is having a benevolent dictator in charge, where one person makes the final decision, as in many founder-led startups and open source projects. The risk here is that the organization rests on the shoulders of a single person. If the person loses their mind, it's hard for the organization to succeed.

Enter Futarchy

Markets do a much better job than humans at getting to the most accurate information. Information is decentralized. No expert can hold that much information in his head. It's dispersed across the brains of millions of humans and markets are the mechanism through which that information can be gathered and communicated in one place. This was Friedrich Hayek's brilliant insight.

We have proof that markets work in practice, not just theory.

Orange futures predict the weather better than forecasters. The Iowa Electronic markets predict the US Presidential elections winner better than polls or political analysts. And Wall Street traders predicted who would be held responsible for the Challenger explosion four months before a presidential committee did.

Markets applied to organizations is called futarchy, an idea invented by Robin Hanson in 2000. You can apply market-led governance in anything from small groups of people to public companies and governments. You just need an agreed upon desired outcome and a metric that represents that outcome. An example would be wealth and GDP for countries.

I'll use an experimental new project called Meta-DAO to show how decision markets work.

MetaDAO's goal is to increase the value of the project. A investment fund comes along and puts up a proposal to acquire $10,000 worth of the native token, $META. Alongside the capital, the fund offers MetaDAO legitimacy, attracting more attention to the project. The proposal gains enough traction and a market is created. There are two options: pass or fail. Market participants have five days to trade to signal their decision whether the fund adds enough value to the project to warrant a sweetheart deal on the tokens. At the expire date, the average price across all days is taken. If the pass market is greater than 5 percent of the fail market, the proposal passes. Otherwise it fails.

Why now

Before a technology is widely adopted, the idea has been around for a long time and it has been tried many times before. Before there was Instacart, there was WebVan. So you have to ask, why futarchy now and why MetaDAO?

Past experiments of futarchy have failed because the organization in question didn't start out using markets to make decisions. If you don't start out with markets you are at the mercy of asking humans to act against their own interests. Hanson uses the example of deadlines. Take a manager whose job it is to ship some piece of software on time. If he adds a market to have everyone vote on whether the software will ship on time and the market concludes no, he'll have time to figure out what needs to happen to make sure the team meets the deadline. If he still fails to meet the deadline, he'll have no one to blame. There was nothing that came out of left field. Decision markets make managers look bad.

MetaDAO on the otherhand, started making decisions almost right from the outset. It launched on November 8, 2023. After one week, it decentralized. All big decisions from then on would be made using markets. There is no team or foundation token allocation. 10,000 $META were distributed to early participants with the remainder going to the DAO's treasury. It's founded by an anonymous character named Prophet and has managed to attract a group of talented free thinkers. Unlike most crypto projects, it plans to create products that generate cash flow. An example of one is a futarchy-as-a-service software product for other DAOs to easily adopt its same governance structure.

How to participate

With crypto projects, people often think that you have to code to drive the most value. In reality, marketing is just as important as product. If users don't hear about your project, it's as if it didn't exist. Great marketing is the ability to tell a project's story: what it is and where it's going. This can be written content, videos, tweets, even art. If you're not a storyteller, you can trade, code, design, scheme, make deals happen. There's something you're especially suited for, anon.

—
Thanks to Isaac Yonemoto for reading drafts and giving feedback.

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