Crypto glossary
Futarchy
Futarchy is a governance model in which prediction markets, rather than votes, decide which proposals pass based on their expected effect on a chosen metric.
Economist Robin Hanson summarised futarchy as 'vote on values, bet on beliefs'. The community agrees on a goal, such as the token price or protocol revenue. For each proposal, two conditional markets open: one trading what the metric will be if the proposal passes and one if it fails. When trading ends, the option whose market predicts the better outcome is adopted and trades in the other market are reverted.
In crypto, futarchy has moved from theory to small-scale use, most visibly with MetaDAO on Solana, where projects let conditional token markets approve budgets and changes. Supporters argue it rewards people with real information and punishes those who are wrong, unlike votes that cost nothing.
Markets need liquidity to produce reliable prices, and thin markets can be manipulated by a well-funded trader willing to lose money to force a decision. Choosing the right metric is hard, and many decisions have effects that markets cannot measure within the trading window.
Example
A DAO debates hiring a new development team; the market conditional on approval prices the token 8% higher than the market conditional on rejection, so the proposal passes automatically.