The State of Onchain Futarchy
EXECUTIVE SUMMARY
In our Cryptocurrency & Bitcoin Predictions for 2025 we noted that DAOs (decentralized autonomous organizations) would begin experimenting with Futarchy in their governance procedures. The take was based on the success and size of Polymarket’s election markets, which vindicated prediction markets as more accurate, responsive, and democratic sources of truth over centralized polling venues. In just two months since our predictions were published, we have seen several advancements in Futarchy and elevated interest in prediction markets. This write up explores the recent developments around and state of Futarchy/ DAO governance and onchain prediction markets.
What is Futarchy?
Futarchy is a governance system that, like democracy, allows anyone to express their views; however, it separates the process of setting goals from the process of evaluating the means to achieve them. In a traditional democracy, voters typically cast ballots that reflect both their values and their beliefs. When voters select a candidate or vote on a policy, they are often expressing a blend of what they value (such as fairness, economic growth, or social justice) and what they believe will best achieve those values (based on their assessments of candidates’ competence or policy efficacy). This contrasts with Futarchy through which individuals vote for goals in accordance with their values, while prediction markets—or "bets"—are used to gauge the most effective means of achieving those goals. This effectively separates the evaluative component from the predictive component (i.e. the outcome). The key advantage of Futarchy is that it harnesses the predictive power of financial markets and asset prices to guide decision-making, with participants placing real monetary stakes behind their forecasts. This market-based approach aligns incentives for accurate forecasting and rigorous analysis in a way that cost-free ballot-box voting typically cannot.
State of Onchain Prediction Markets
At the conclusion of the U.S. election Polymarket’s open interest in unresolved markets (value at stake in active markets on the app) dropped significantly, falling from $512 million at the peak to $113.2 million today. While a significant amount of open interest has fled the app, usage has since remained steady and elevated over pre-election levels.
Trade volume by users swapping outcome tokens is also higher than pre-election levels, ending February with $835.1 million in monthly volume. Despite monthly swap volume declining 68% from the election month highs, it is still 23% higher than the 6-month average (including October 2024) leading into the election and is 57% higher than the September 2024 monthly volume figure. It is also important to note that activity across DeFi is down generally since the December 2024/ early January 2025 highs. As a result, Polymarket’s sluggish open interest growth and volumes may be a result of greater market forces.
A notable area of growth within Polymarket is the number of monthly “initialized questions” (aka markets) on the app. The growing number of markets, while broadening the topics and events available to bet on, can be a contributing factor to declining volume and open interest as an oversaturation of markets dampens the network effects of a few concentrated markets when activity recedes.
State of Onchain Futarchy
While Polymarket activity has come meaningfully off the election mania highs, the inertia of its success is being felt across DAO governance. The most mindshare on Futarchy for onchain governance is concentrated in Solana, with much of the discourse and implementation work for the concept happening by the Solana community and on the Solana chain. Some early initiatives to explore Futarchy in the Ethereum ecosystem have been spearheaded by joint grants from the Optimism and Uniswap Foundations, in addition to Optimism running test markets on application total value locked.
MetaDAO
Solana’s MetaDAO is the first at scale implementation of Futarchy in governance, serving as a platform for DAOs to launch Futarchy markets and for users to participate in votes. Since it’s launch in November 2023 the platform has facilitated 62 Futarchies across nine DAOs (including itself), with 19 of them being completed post-election. Three of the largest Solana-based DAOs - Jito, Marinade, and Sanctum – have completed their first Futarchies post-election, with Sanctum settling four decisions through Futarchy votes. Notably, Sanctum joined Ore in adopting MetaDAO as its primary platform for governance operations, fully committing to Futarchy.
Sanctum, despite only having four completed votes, was able to attract 1,648 unique voters. This is more distinct voters over four proposals than Lido and Ethereum Name Service (ENS) achieved in 2024. Speculation on the app’s season two airdrop and other incentives can skew this value, however. In other DAOs the number of participants is still low, which can be partially attributed to their experimentation with Futarchy while maintaining a traditional governance voting process in parallel.
Under Futarchy the voting process is a market. As a result, tracking swaps and swap volume offers additional gages of participation. Since the MetaDAO v2 launch in May 2024 the platform’s Futarchies have generated $2.26 million in cumulative volume. $902,600 (40%) of this volume was executed after November 1, 2024.
This volume was carried out through 10,318 swaps across all Futarchies. This represents about $219 per vote action and 246 vote actions per Futarchy since MetaDao v2 went live. For reference, Aave and Uniswap averaged more than $450,000 worth of power per vote and did more than 600 votes per proposal in 2024. So, while Futarchies are seeing less vote actions per proposal the lower dollar value per vote action suggests smaller participants are gaining a larger influence in the outcome of votes.
Futarchy Beyond Solana
Experimentation with Futarchy is also expanding to Ethereum and its Layer 2s (L2s). The Optimism and Uniswap foundations announced a joint initiative to experiment with prediction markets in their governance frameworks, with Uniswap announcing its first implementation of futarchic governance on Unichain around grants to lending applications. The application for lending apps to make themselves eligible for the grants closed on February 21. There is no clear indication of when this specific Futarchy will be conducted.
Optimism also opened up a Futarchy contest with OP token rewards on March 10. The contest is powered by mock tokens that allow users to vote on changes in the total value locked (TVL) of apps across the superchain (the all-encompassing term for the of chains developed on the OP tech stack). Users can vote UP or DOWN based on how they believe an app’s TVL will move. The users who vote correctly will receive OP token rewards at the resolution date of June 12, 2025.
New Use Cases and Scaling Futarchy
MetaDAO’s recent passing of a launchpad presents a unique opportunity for DAOs to more seamlessly launch as Futarchies, and attempts to solve the capital/trust paradox that has plagued projects and early investors. The launchpad will initially be permissioned as it is tested, but the proposal noted a longer-term plan to make the generation of Futarchy DAO launches permissionless.
This launchpad model is beneficial for projects in that they get capital raised and a community established before token generation and can launch as a Futarchy from day one. It provides an out of the box solution for spinning up a DAO and token, allowing Futarchies to be more easily formed. A persisting issue with existing DAOs adopting Futarchy is the migration from their old governance system, which has included being 50/50 Futarchy/ traditional governance. A migration to a fully Futarchic model can confuse users and negatively impact Futarchy participation – launching as a Futarchy on day one can aid in driving participation.
The launchpad model is better for investors in that the capital they contribute partially turns into initial liquidity for the token and the funds are locked in a Futarchy that requires community agreement to unlock. In this case, the capital they contribute bolsters onchain liquidity for their investment and the founding team isn’t free to run with the pre-raised funds. At any time, the community can collectively agree to hit the eject button and return funds to pre-token investors.
Mtndao will be the first Futarchy to launch through MetaDAOs launchpad. The token sale is planned around the week of March 31st, 2025, with an exact starting date still to be determined. The sale of tokens is expected to last about a week.
Conclusion
There is clear and growing interest in applying Futarchy to improve DAO governance. Inertia from the success of Polymarket has sparked questions on how this model could provide benefits to decentralized organizations. With many crypto users viewing existing DAO governance as broken and ripe for disruption, Futarchy emerges as a promising alternative. Although its initial implementations are mostly on Solana, its iterations on Ethereum will allow for a valuable apples-to-apples comparison with legacy DeFi DAO governance models. In addition, new developments like the MetaDAO launchpad can make the Futarchy model more scalable and give new DAOs the option to adopt it from day one.
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