Ethereum founder believes in the future of Futarchy

Rage Review : Economist Robin Hanson proposed a new government management model theory, Futarchy, a management model that makes decisions based on the prediction market. This management model complements blockchain technology and can achieve more efficient management. In addition, multiple corresponding projects have begun to be brewed, and some results will be seen next year.

Translation: Annie_Xu

The appeal of prediction markets as a management system has been fully recognized by economist Alex Tabarrok; in the 1990s, economist Robin Hanson summarized this concept and formally named it Futarchy.

Futarchy means that an organization sets a goal and allows people to use economic methods to support methods that they think are useful. If Party A and Party B need to make a decision, tokens representing the two parties will be issued and a corresponding token market will be formed.

The market with the higher price has the decision-making power, and then the token holders of the winning market can receive corresponding benefits according to the achievement of that goal.

Hanson has done academic research on this, but has not been able to accomplish prediction markets at the corporate level. He says senior managers fear that the market's choices will make them look foolish and grandiose.

The wisdom of the crowd can expose the hierarchies that people follow within a structure and the goals of a few people.

Futarchy encounters resistance when penetrating traditional management systems; blockchain, on the other hand, reshapes the existing system and builds decentralized management solutions.

Vitalik Buterin, the founder of the Ethereum public chain, has been talking about the potential of blockchain Futarchy in his blog for many years, and now related projects are in the works.

“Blockchain brings us new types of entities, like DAOs (decentralized autonomous organizations), which have no traditional management structure.”

People are trying to figure out what this governance model looks like. Blockchains make it easy to build markets, so they seem like a natural fit. We now have the technology to explore new forms of cryptoeconomic democracy that can transform governance models across multiple institutions.

Buterin cited several similar projects based on Ethereum, such as Maker DAO and prediction markets Gnosis and Augur.

Outside of the Ethereum ecosystem, there is also the Truth Coin/Hivemind project.

To the layman, the development of the DAO voting system seems to be influenced by the painful lessons of The DAO. But in fact, many projects have been quietly approaching results, and even this incident will not stop them from moving forward.

Vitalik Buterin

Buterin said:

“The DAO incident didn’t stop the whole concept or movement from growing. I liken it to the growth of the internet, when it became a reality, people were very excited; it’s just on a smaller scale.”

"People's expectations are always higher than reality. They are always overexcited at the beginning, but they will slowly calm down over time."

"But I think next year we will see newer projects, some of which have been underway for a while and are close to the Internet application and design stage; lessons learned from the past will serve as reference for these projects."

He believes we are transitioning from a theoretical realm to looking at the real needs of the infrastructure to make these systems a reality. "The technology is really there at this stage for us. We are starting to realize that we need more infrastructure to make these systems more secure and reliable."

"The infrastructure is coming online, sentiment is changing, and people are starting to think about the details. So there are a lot of factors to consider when doing market planning."

"If you look at it from a macro perspective, you only see prices; if you look at it from a micro perspective, you start to think about liquidity, demand, order books, competition, incentive compatibility mechanisms, derivatives."

"I think DAO has already entered this stage, and there will be many big designs. Although the current DAO project is simple, we have to prevent large-scale collusion attacks. We have seen two or three design proposals. Many times, details determine the success or failure of a project."

Buterin cited the history of the development of American democracy in his expectations for public chain management.

“Both Bitcoin and Ethereum currently have a lot of governance risk. But we’re at a stage now that’s like American democracy in 1795. Not the Civil War, more like the Revolutionary War.”