Futarchy - a lovely market-driven governance theory coined by economist Robin Hanson over twenty years ago. The first time I heard about it I fell in love. As a long-time market believer and participant it aligned perfectly with my core values. When I saw Proph3t’s presentation of MetaDAO and Futarchy at Solana Breakpoint in Singapore I was sold. In my mind it was the perfect PMF product for crypto. In November 2024 I became fully futarded and started building an EVM-aligned decision market together with my co-founder 0xFerd. Decision markets allow organizations to put up governance proposals for trading, and effectively utilize markets as an arbiter of truth for decision making.  Now that we’re approaching testnet launch, I thought I would publish a series of articles further outlining my thesis on Futarchy and why it’s needed in crypto.

Why Futarchy

I’m going to skip the main points often presented by Robin Hanson and keep this section to my own epistemological lens talking about why we need Futarchy in crypto.

I think Futarchy fits in and is needed in crypto for three main reasons:

1. The financialization of everything includes governance

2. Tokenized native organizations provide clear PMF for implementation

3. Current DAO governance is broken

The financialization of everything

As crypto emerged in 2008 to be the antidote to the traditional, siloed financial system, the primary use case has ended up being the progressive financialization of a broader range of assets ranging from culture to social capital to data and interactions. You can see this by looking at the applications that have achieved the most product-market-fit.

• Store of value (bitcoin)

• Stable coins (usdt/usdc/dai)

• DeFi (aave, uniswap, hyperliquid etc.)

Governance is also perceived to be financialized as the majority of crypto native orgs have their native token that is touted as a governance token. The thing is, no one buys the token for governance rights, it’s bought (and sold) as a tool for speculating on the underlying value of the network / application. This is why Futarchy is the logical next step in governance, it creates new means to speculate and make money by participating in governance and providing unique insights.

We’re seeing everything move towards an auction-based model, including governance, funding and social capital. I believe crypto as a whole is part of a broader technological trajectory where decentralized networks will be a key piece of infrastructure in equalizing the playing field between social classes by enabling ownership. Futarchy plays a key role in allowing for trustless joint ownership to happen, as it enables the alignment of  incentives across various stakeholders.

Crypto governance is broken

I have been a part of and witnessed several different forms of crypto governance, both decentralized and centralized, quadratic and token-weighted and none of these forms work particularly well.

Let’s start with centralized crypto governance. This is typically done through two different entities: a foundation set up somewhere regulators can’t touch it and an LLC who does the operational work developing a product or network. The LLC usually requests a budget from the Foundation which then sends over money to the LLC to pay for salaries and other related costs.

So where does the money come from? Well from a token sale of course. Historically these were often done through SAFTs which is a contract that states that the “buyer” (actually investor) gets tokens sometime in the future for the assets put in today in the foundation. Unless it’s a DAO, these tokens typically do not have any governing rights over the project. I suppose you can already see the problem here, incentives are far from aligned. This is obviously not a governance model that’s going to work in the long run and I suspect it was mostly a phenomenon from the 2021 cycle that we won’t be seeing (as) much of in the future.

Then we have on-chain governance through DAOs. At first glance, DAOs seem like a great idea—transparent, community-driven governance where token holders can directly participate in decision-making. In reality though, DAOs are a mess.

Let’s start with the most obvious issue: the vast majority of tokens are usually held by a small majority, making it inherently pointless as the powerful minority can veto any governance proposal, which means governance ends up being plutocratic by default. A great example of this is MakerDAOs recent proposal to relax borrowing restrictions. A handful of large token holders—often the team, early investors, or whales—can push through whatever they want, while smaller holders have practically no influence.

In TradFi we at least have laws to protect the interests of minority shareholders, which seem to have worked just good enough for now. Most DAOs just end up being a front for centralized control anyway. Sure, they claim to be “decentralized,” but in reality it’s often a small core team that writes the proposals, controls the treasury, and sets the agenda. The DAO just rubber-stamps decisions that were already made behind closed doors. In many cases, governance forums and voting structures are nothing more than a layer of faux legitimacy covering up what is essentially a centralized organization.

The above leads to the voter apathy problem. In theory, every token holder has a say, but in practice, nobody actually votes. The vast majority of governance proposals attract single-digit voter participation, leaving decision-making in the hands of a tiny, hyper-engaged minority or governance delegates who end up becoming unelected bureaucrats. Instead of being a democratic system, DAOs become either whale-controlled oligarchies or bureaucratic swamp pits where power consolidates over time.

Futarchy is a recognition of the fact that markets are already running the show, financialization and speculation is the use case. The only question is whether we embrace that reality and build governance systems that actually reflect market-based decision-making, or whether we keep pretending DAOs will suddenly start working.

Tokenized native organizations provide clear PMF

Finally, Futarchy is particularly well-suited for the governance of crypto-native organizations due to their inherent reliance on native tokens. As the age old saying goes:

“vote on values, but bet on beliefs”

In crypto, “voting on values” is often not necessary, as it can be agreed upon that the value of the organization's native token is the value that should be focused on. Given that the vast majority of “crypto companies” have at some point launched their own token - because doing so has been a massive arbitrage in fundraising - it’s possible to implement Futarchy on the vast majority of organizations easily. Additionally, there are several conflicts of interest amongst stakeholders that Futarchy presents a solution to, more on that to follow below.

We’re about to launch V1 of robin.markets on testnet. We’re looking for active traders, speculators and builders to contribute by providing feedback to this step toward a future where governance is liquid, dynamic, and driven by markets rather than stagnating in political inefficiencies.

If you’re a trader, a builder, or just as futarded as I am, join our community and get involved in the next iteration of governance by joining our Discord here: https://discord.gg/8PB8JutMvs