Futarchy Deep Dive: Can Markets Make Better Decisions? | Proph3t

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in my view this is actually the core uh defining property of crypto as a whole uh is like regulation or regulatory resistance like regulatory Arbitrage I think some people are like oh crypto is just regulatory Arbitrage is kind of like a put down I actually think that's have a good thing right hey everyone quick shout out to today's sponsor namada NADA is currently entering phase three of their main net rollout so make sure you check it out by following the link in today's show notes we'll talk more about namada later today but for now let's get started hey everyone quick disclaimer before we get into today's episode nothing said on bell curve is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and the views expressed by anyone on the show

are solely our opinions not Financial advice our guest and I may hold positions in the companies funds or projects discussed all right everyone welcome back to another episode of B curve today I'm talking to profet of meadow profet welcome thanks for having me yeah um I'm really excited to T talk to you this episode The Genesis of this was a somewhat uh frustrated or exasperated tweet that I sent out maybe a week or two ago which is I'm sick of all the pessimism on the timeline I think it's a really interesting time to be alive and especially an interesting time to be working in crypto and I think there's a lot of reason for optimism so wanted to just start putting out uh some more optimistic content around Founders that have really interesting new ideas that I

think are exciting and you reached out to me and I've been super interested in futar for a while so this feels like a long overdue conversation actually and um you know I want to unpack some of the uh more in the weed stuff that you're doing with metad which I find to be a really interesting project but can we actually just set the stage and just talk about futarchy because it's a really big idea I'm sure if you've been kicking around crypto for the last uh couple months or a year you've probably heard of it most likely through metad but Pro can you just set the stage you know Define futar for us and what is it about this idea that initially interested you yeah so f is actually a pretty simple idea which is why it's surprising that like people haven't really explored it that much uh which is essentially

just make the decision with a market like use betting markets or speculative markets as a way of making decisions um like the simplest feat you can think of is like imagine two people are deciding whether or not to get pizza like Alice and Bob and Alice is like hey Bob I bet that if we go get pizza like you'll enjoy the pizza uh like and if Bob is like okay Alice is willing to put money on the line so like clearly She Believes In This and like they use that to make the decision and a sense that's F Turkey um and yeah so like the core idea is uh using markets to make decisions What attracted me to the idea is that I've been a longtime Market participant I

love markets for a long time and one thing you learn if you participate in markets uh is that it's pretty hard to beat the market over a long time um and one reason why that is is because like the market is already pretty darn good at pricing and information and yeah so like when I discovered v tkey through a YouTube video uh where the Creator whose name is ramen Hansen who now actually advises metad um when I watch that YouTube video I was pretty much immediately uh just like in love with the idea I knew that I needed to work on it all right so uh walk us through so this idea of futari grasped you quite a bit and I think to some people might sound like a wildly outlandish idea

which is hey the way that we make decisions in society is experts right yeah it's a bit of a far cry right but actually when you get down into the weeds of it it actually does make a bit of sense especially even on an organizational level like from my understanding one of the key tenants of futarchy is that there's still some sort of voting mechanism in that your elected representatives or citizens kind of would vote on the big core ideas right like these are the goals for a society and then it's futarchy that actually is more about the how right so what the actual policies are that gets left up to the market and what's interesting about that philosophy to me is that that's roughly how it works even at a company as well which is you have typically a CEO or someone like that they sort of

set the guiding vision and might have a hand in like what the two or three Northstar goals are for the year but you really delegate the how down to the front lines where the most information exists and that's very similar actually to the futarchy construction of okay you still have this sort of uh leader or government or whatever that sets the the rough guidelines but then you Cascade the how of the decision-making the policy down to the front lines AKA markets where there's a lot more information is is that roughly yeah kind of go one step deeper for us and explain some of the the tenants of butar and whether or not you see it like if what I just describe resonates with you sure yeah so what you're kind of alluding to is this uh Robin Hensen yeah I mean his

motto for fut turkey is vote on values bet on beliefs so essentially like yeah for any organization like to make decisions you need an objective function you need something that you're optimizing for uh in a country it might be the welfare of the citizens in a corporation uh it's probably something like the uh shareholder value so yeah like one way to resolve the question of picking the objective function is to vote on that or uh I mean you can there's that's not the only way though like with metad da and sanctum which are what I would consider like the two live Dows or the two live Fator keys today the objective function was just kind of

picked to Creation which is the token value uh but yeah essentially you need to pick this objective function and then um you can have speculative markets bet on how something would affect that objective function similar to like the way we make decisions we like yeah if you have some objective function like I want to be happy and then you have multiple options with a decision like I'm going to use this restaurant example again like which place do I go you kind of look at okay what is my happiness conditional on each option what is my happiness conditional on going to the Chinese restaurant what is my happiness conditional on going to the pizza restaurant uh what is my happiness conditional on and so on and so forth uh it's the same thing with fart key where then it's there are markets where people

bet on what is the objective function so in today normally like what is the value of the token conditional on passing a proposal what is the value the token conditional on failing a proposal uh it's kind of like the high level idea okay so uh this is maybe like a little bit in the weeds here but how specific do you get with the object like from your perspective I guess and maybe we can draw a little bit on your uh you know early experience here with metad is you know how specific like how many when you're defining this objective function uh like at a company it's ultimately always something like the share price right like you're always doing this to benefit the stock but generally the leadership sets kind of okay there's a

perspective here of these are the things that I think will move the needle for the year right and that generally comes from either one person or a very small group of people but then there are many many decisions which get made about okay so for Block Works maybe it's you know the goal is to be the number one uh you know we want to focus on data onchain data because we think that's what's going to um Drive the most Equity value for the business and so outs like that decision tends to get made at sort of the higher level but then the how we do that of becoming the best onchain data provider we Cascade that down you know to the front lines so I guess in in a few tarkey system here right there's always the kind of implicit goal for for every kind of company it's the same

which is the equity value of the share price then there are typically these kind of higher level guideline decision goals for an organization and then there's like a million little Frontline uh decisions that get made all the time which is I would say kind of the how the why and the objective function so what like help me fit that framework that at least I'm very familiar with in a company setting onto a futar uh framework sure so I would say um today futy is doing much of what like the board or the CEO would do of a company as in it's deciding like should we do this project or like financial decisions so like should we allocate tokens to a liquidity mining program or in second

case they're like deciding whether or not to allocate tokens actually to people who participate in governance like who participated in FY um which is yeah I guess in a typical company if companies had tokens that would probably be a board level decision um and we've done a little bit of the like front lines uh front line decisions like these small tactical things like you can still use markets for that right like in theory you can use markets for pretty much any decision like you could use a market for what you should wear in the morning um or uh like whether you should approve a GitHub PLL request uh but I think right now our main focus has been on uh the high level decisions like board level super interesting um yeah so

uh you know one thing that I always think about when it comes to a futar is and this is some of the push back that you hear in general is there's this fear that people are going to manipulate markets right like if you you know in an organization I guess the the hurdle rate for making good decisions right is there's some sort of hiring process you hopefully have other competent people and so you know the people that ultimately end up making those decisions have to work their way up or get get get some actual IRL uh frictions through to be in a decision-making position um in this instance anyone who has access to Capital basically can make decisions and you would hope right the incentive mechanism is positive there that someone that has capital and they put it to work uh to make decisions are aligned with

the outcome but there are attack factors here as well where you could maybe destroy Equity value in an organization and profit by some other way simplest would be like shorting the organization or something like that so how would you respond to maybe some of the um you know some of those concerns around futy sure yeah so manipulation um is uh not as big of an issue as one would originally think simply because uh markets are uh and I expect manipulation to also like to be less and less of a problem over time um given that markets themselves uh have inbuilt incentives that are like correct manipulation in that if you manipulate a

market uh say like you're in poly market and uh let's just pick on the Taiwan market like there's a market I believe right now on whether China will invade Taiwan say you uh Michael you uh want to convince people for whatever reason that the odds are actually 20% when right now the price in poly Market is % um you could then take a bunch of money and bid up yes like you could go uh buy a bunch of yes and in the short term that would certainly move up the price towards uh your goal like if yeah if you put in I would guess on that market probably a few maybe like $100,000 would move it up

uh in the short term to to like 20% uh where I think it's right now run 10% odds uh but the problem you run into is that then anyone else looking at that market uh if they don't think that there's any new information that's come out they have an incentive to take the other side of the bet they have an incentive to go and like buy no um which is actually what happens so like yeah several times people have tried to manipulate po Market uh like in the middle of the night um by uh you to move prices uh and it all it has historically been self-correcting within like 15 minutes um in equity markets we have like flash crashes occasionally where someone try to manipulate an equity index uh so they can like get some

derivative payoff like some they can profit on their derivative trades uh and yeah normally it like self prcts within 15 or so minutes um once people realize okay this is just like a manipulation it's not something fundamental that's happened like there's not a war or something that has just occurred or like started um and then yeah we've already seen this in FY where yeah like early on in Meadow's life cycle metad is itself a FY um Ben Hawkins who works for the salon Foundation he created a proposal to medad uh to buy the native token uh at below the book Val or below the spot price so it was a good deal for him bad deal for the Dow and he spent $250,000 which was at the time was the third of

the market cap of the project uh bidding in the past Market in order to get so essentially manipulating it like to try to get it to pass and the problem he ran into was this problem of like if you Place High bids people like to sell and um because then they can make money by placing in the high bids uh right like yeah so here's another thing I want to actually draw like what the question that I want to lead to here is how uh where do you see the line because there's a commonality here in between at least the way that I look at it like futarchy and prediction markets and some of these other New Market structures that we're trying in crypto um but I want to get a sense like one thing that I uh you know if you look at markets ESS

essentially what we're talking about here is price Discovery right which is in markets that's price discovery of asset value and this would be price Discovery the equivalent of price discovery of which who has the best idea and so you know when when I think about price Discovery in a from a market mechanism what you need is liquidity uh so one you know how do you think about drawing uh liquidity into making these decisions for something like the president of the United States I would imagine it's very easy for maybe a less known uh you know new startup like metad I would imagine it's a little bit more difficult and then even in the end State uh you know markets that are more they're always going to have a discrepancy in terms of where the liquidity goes and I would guess that the more like liquidity there is around

idea price Discovery the better the decisions are that ultimately end up getting made so do you view like in a in a futar sort of world are the decisions that are the most important that have the most liquidity and attention moving towards them always kind of done better and then will uh in F turkey areas where there's just less interest or eyeballs or liquidity does the decision- making struggle or is it worse in some way yeah I think over the long term there's a positive correlation between liquidity and decision markets and like the quality of decision markets um as in like the quality of the signal that they output and whether or not they're making good decisions in and essentially like where we're at in terms of liquidity

we're kind of like uh pre ether Delta ethereum defi like we're really early in that and like markets just take time to form um I think as we get more Dows not to say that like I mean markets have already formed to some extent in that like yeah I guess when we started it was all just like uh people are still figuring figuring out how to trade and don't know what to trade now like we've done more than $3 million of volume um and there are like a few people that run Bots that like Arbitrage the markets um so like that's those are some interesting data points in terms of Market formation but yeah definitely like pree Delta ethereum defi um in that

like liquidity life cycle uh and in the short term I actually don't know if liquidity matters that much because it seems like a big reason why people the people who do participate in Fatar key like to participate is that it's this kind of fun game of uh trying to like manipulate like trying to get it to go your direction um um and it's much easier or maybe more fun to play that game if you can move the price uh which is easier to do when it's low liquidity um so yeah I'm not sure like if today uh more liquidity would necessarily help my I would I would assume yeah more

liquidity probably on average would help but you also lose this like fun aspect of it this episode is brought to you by namada NADA is the shielded asset Hub rewarding you for protecting the multi-chain Shield your data across any asset and any chain and get shielding rewards for helping strengthen data protection for everyone to learn more follow the link in the description below today's episode is brought to you by Ledger the global leader in digital asset security celebrating 10 years of innovation Ledger is trusted by 7 million users secures 20% of the world's digital assets and Remains the most secure Hardware wallet for your crypto and login follow the link in this episode's show notes to grab your Ledger today maybe do you envision a a scenario in the future here where perhaps for

really large actual societal level decisions it's almost the inverse of what it is today and you apply a futarchy sort of framework where okay if we do if you know to take the extreme if we're deciding on the president of the United States who that's going to be um maybe we decide a futar a futarchy type scenario gets us to a better place than just like open feels heretical to say right but like a more representative democracy or the Electoral College or whatever framework we have in place today uh you know we're not that there's going to be a lot of eyeballs and attention and dollars that get put into that race um and that might sound uncomfortable to people on the first blush but you know I think if you looked at it that's already essentially what happens right it just happens more by

proxy um so maybe there's a world where because of just to like there are super packs right that actual dollars that get donated there there are people in high positions that use their influence right so you know influencing of decision- making happens either way um you might you could make a you know you could make I think you could make pros and cons in either direction but maybe for some of the uh decisions at smaller companies or where less eyeballs are going to go maybe more of a legacy system remains in place right because essentially less good price Discovery here means less good decisions get made so do you envision like a patchwork sort of system here in the ultimate end state or do you envision an entire world ideally on F turkey uh I mean I'm biased obviously

but I would say like entire world on F Turkey um I mean yeah like I guess it is to say I don't think democracy is that greatest system it is kind of like as the quote goes like it's the worst system except for all the others like it's probably better than like uh dictatorship uh where yeah or like kingdoms um but it's there's no like axium etched into the universe there's no physical law that is that is the best system um and like we've seen very clearly like we see very clearly the failings which is like yeah in the US only 37% of people even know who their Congress person is right and how many people even like how many people know what bills their Congress person is

voting on um like and and the content of those bills like very few people uh whereas you compare that to markets like and Traders uh or like yeah the typical Analyst at like a hedge fund who understands far like a deep amount about the companies uh in their sector that they analyze um so yeah I mean I think UT like full Domination by markets is my like expected outcome and where do you draw the line here in between you know I think people will probably look at something like futari and see you know some comparisons to something like prediction markets and you know I've been pretty interested

with prediction markets in general like watching frankly the moment that poly Market had during the US election I thought was super interesting right and it actually kind of hit home with me uh I saw before so XI released their new model this week and a day or two before the odds of poly Market on there was a market um will xai have the leading AI uh you know or llm uh by end of February and the odds shot up to 80% and what was interesting to me about that is that's the functional equivalent of a scoop right if you're watching that market if that move is that significant what is that telling you that's has to be some Insider saying hey there's a high likelihood right like that you should

bet that xai's new model is going to be competitive with Chachi bt03 mini or whatever the latest model is um and so that's not actually that different to me than if there was some scoop from The New York Times of hey xai rumored to be much far far far ahead of where you thought it was going to be and could be competitive with Chachi bg3 the underlying credibility mechanism is different the in the in the prediction Market case it's dollars that people are putting on the line um in the New York times case it's The credibility of the magazine right and the organization and uh right like because if they get Scoops like this wrong then eventually people won't trust them and their revenue stream dries up so it's actually in some ways actually very similar to The

Economic Security argument that you get for validators today but um without getting too far into that example it's functionally looking very similar um and so I I you know I'm very curious in your mind where do you draw the line in between um it seems like like one of the things that crypto is allowing us to do is take a market-based mechanism that's historically existed in financial markets and apply it to other sectors like governance and media so where do you kind of draw the line between futari and something like prediction markets sure I mean I'm a big fan of prediction markets I love poly Market I'm a user of poly Market um and yeah I guess it it is pretty different than FY

like the what we're trying to go after where yeah I would see uh prediction markets are uh kind of this two-sided platform where on one side you have people like me and other like uh people who are speculating like you could call them DG or speculators people who like have fun uh trading in these markets and uh that is like the producer of information and then you also have the consumer of information like during the presidential election there were a lot of people watching the poly Market odds that we not actually trading in the markets um and so that's like yeah I guess that is kind of the how prediction

markets work in fut turkey it's a little different in that like yeah so I guess it wasn't like the US government like wanted to know uh How likely uh people like uh different candidates were to win the election and So Paid poly Market to run these markets um so they could surface that information it was instead just like it appears that people like gambling on the US election uh or like like betting on it um and people also like betting on sports which is like where you've seen them go recently um and then that has this side effect whereas V is much more like okay an organization has a decision they want

made they want specific information uh relative to like what is the conditional value of each uh option that they can take uh like which option is the best and so they're like kind of paying traders to to surface that information yeah it's I I think that that's there was a really influential post that I read when I was first getting into crypto called markets are eating the World by this guy Taylor Pearson um and you know he was writing this in like 2017 or 2018 so a lot of you know what crypto has become today uh you know he didn't get super into to the weeds are specific on it but he connected this idea of markets driving more of capital allocation and societal level decision-making um and sort of

connected that with blockchain technology and you know I think that the defining use case and win for crypto thus far has been Capital formation in markets that's around money but it's also around Market structure and decreasing cost of issuance and and things like that and if you think about even how Capital formation used to happen um in like medieval times right it would be a monarch that says hey I'm giving this grant Christopher Columbus go explore the New World open up the Indies for us right like that that's you know it was a completely top down hierarchical sort of structure and capital formation and actual societal level decision-making was concentrated in this one very small group and over time if you zoom out and look at uh the way that this happens in the United States today you know it's much more

decentralized and markets bbased and I think crypto just accelerates that much further and when you decrease the the friction of spinning up a market and participants engaging you actually weirdly almost get you can apply market-based mechanisms to things outside of just Capital formation and price Discovery you can do it to things like decisionmaking and uh and like media and uh and it's it's a super interesting and content right it's it's a very interesting idea uh and it's I can see why you got pilled on it so hard um it's definitely fascinating and I think follows the general historical Trend NADA is the shielded asset Hub rewarding you to protect the multichain built to give you full control over

sharing your personal information namada brings data protection to existing assets applications and networks NADA ends the era of transparency by default enabling shielded transfers and shielded cross-chain actions to protect your data even when interacting with transparent chains namada also introduces a novel shielding rewards system by holding your assets in the shielded set you help strengthen nada's data protection guarantees and collect n rewards in return to learn more about namada follow the link in the description below Ledger is the global leader in digital asset security trusted by 7 million users and securing 20% of the world's digital Assets in recent years Ledger has built a comprehensive ecosystem of products and services making digital ownership

more secure and accessible for everyone Ledger's newest devices Ledger stacks and Ledger Flex introduced the world's first secure touchscreens making it easier and safer to manage your assets alongside Ledger stacks and Ledger Flex they have also launched The Ledger security key app offering a safer alternative to traditional password management follow the link in today's show notes to get started with Ledger today one more question for you on the sort of higher level societal side of things before we get into I want to start to zoom in and ask like why crypto and metad DOW and talk about what you're building um so one of the historical criticisms of futari has been on this idea of societal values right like there would be a lot like if you are you know if you were to just ask everyone in the

US today what is the objective fun function of government you probably get a lot of different answers and so that's that's forced critics right over the time to or the the past you know uh since Robin Hansen introduced this idea to say you can't really Define what this is but I wonder actually to present the other side of that if that is actually a positive forcing function because you see that now a lot with what's going on with Doge right a lot of this discussion around doge is people are getting very upset about it and I think the underlying reason why you know you hear such people think this is literally saving the government or they think it's the worst thing in the world that it's dismantling the government is we haven't decided as a society what the objective function of a government should be and I

wonder a little bit if utar could be a forcing function there where it forces an entire nation to align on what that is like how do you think about the historical criticism there and then you know just Society come to coming to agreement on the objective function of government I agree with the criticism uh which is that yeah like I'm not super bullish on uh the US like every citizen kind of aligning on an objective function uh it's definitely possible but like yeah I'm much more I guess if you look at like development of Technology historically with a radical uh new technology uh like the internet like it

wasn't walmart.com that really capitalized on that or like BL blockbuster.com it was like the new uh new entrance um that capitalized on this new technology and became the new replacement of the old thing uh so I'm I think I'm more bullish on alternative institutions which come to the objective function pretty early on uh like it could be and I I frankly think like token like it's it's pretty hard to improve upon value per token um like yeah uh umber research uh which is yeah this like still on a research um group they published this uh post about

t turkey where they talked about um yeah like advantages and disadvantages uh one of the things they talked about there is yeah like token price is uh like such a good objective function for a number of reasons um but yeah like you can also have alternative instit like Network States for example that use some other objective function like Robin Hansen has talked to me about potentially using like the value of a passport like imagine you have a country that allows people to freely purchase passports like you can trade your passport then the value of that passport is kind of a good proxy of like how nice it is to be a citizen in that country uh or like a resident of that country and so it's it

might be a pretty good proxy for um just like what we actually want which is some societal welfare function uh yeah okay so final question for you here uh on the society level stuff is you know this is the Milton fredman thing that the only thing that a corporation should care about is it's profit or share price or I can't really remember right but it's it's a very well-defined objective function which is oriented towards generating profit however you know where that's where the rubber has met the road with that in real life which generally I'm mostly a fan of however I do think you need some sort of counterveiling force because you know you've had these horrendous uh societal level decisions that companies have made like I'm aligning someone who I can't remember if it was GM or c Toyota I think it might

have been Toyota but an example is they uh you know they made a bunch of Camry or something like that and they uncover they decid or they figured out that there was a critical failure around the break and they ran ran a cost benefit analysis of shipping out the cars uh with the brake failure and paying the lawsuits of people who died or recalling it they found it was more expensive to recall so they shipped it out with the brake failure bad stuff like that right companies uh understanding that the uh you know they're their te chemical pollutant are poisonous right and not doing anything there's like a bunch of bunch of examples of this and historically we've needed uh you know because if the share price is ultimately determined on profits that actually bumps into an overall societal level good and that's where government is

supposed to sort of step in and so you know how do you get that sort of counterveiling force I guess if we're moving everything entirely to a market-based system uh and then actually one something I just thought about maybe because Trump just launched a mem coin is if we do make if share price is like the ultimate good aligning sort of thing do we end up with like a US coin and then we make the US coin the the defining because right now we actually don't have that the ability to do um a share price type metric on a on a country so maybe we can start there from the share price on a country observation do we need like country Equity or country share price or something like that and then how what do you think about the counterveiling force of government if everything is markets

based sure um and have you ever read uh Snow Crash by Neil Stevenson by chance got on my bookshelf here I haven't read it gotcha um well yeah I think my I actually I would push back on um the idea that uh I think like that is uh I I spent a lot of time thinking about which what's the best objective function for a f turkey like yeah do you want to use token price or do you want to use like another alternative is you have everyone who's a member of the organization uh self-report like how happy they are and then you have

Financial contracts that pay out relative to that self-reported happiness um and then you bet on how given policies would affect that happiness uh I I don't know I think like imagine a world uh where there's one F turkey that like one called One World Government that controls everything and this uh entity has a token and uh we measure the token in some uh we measure the token in terms of like how many uh Commodities in like some inflation adjusted metric essentially for like technical reasons you actually at that point can't use

like a currency like USD uh but yeah you have some like inflation adjusted metric um then what is the uh what is the fkey actually optimizing for and then yeah you have all these people who own these tokens so what the fkey at that point is optimizing for is the amount of stuff per token like the amount of goods produced per token um and like I I like the idea of a post scarcity Society so that at least is appealing to me um yeah I guess I guess defining objective functions is hard I I'm kind of rambling and it is because it's just like this is

it's like normative economics versus positive economics uh like normative economics is pretty hard because uh it's it's really hard to say like what should happen um I can just say I like uh token price is a good objective function cool so in this instance then are you advocating for like in order for this to take place or for futarchy to apply to a government you would need some form of like bonds are the closest thing that I could if you didn't have a country token uh like some form of equity it would probably be bonds right that you'd be like optimizing something around because that's basically what bonds are in a sense it's a bet on the growth and stability of the country uh but you know in order to optimize for share price

here would countries need a token yeah countries would need a token and that's that's why I asked you if I'd read snow crash because yeah he paints like a a picture of a world where everything is kind of a corporation um and I think that's a very like possible future interesting okay uh all right let's let's move on here to I want to discuss where crypto intersects with FY so you know I think we were kind of getting at it or when I was rambling about what I like about markets and crypto and all that type of stuff but walk me through this idea of uh futari which was pioneered by Robin Henson I'm assuming completely independently of crypto because it was from a while ago but uh connect this idea of futar and crypto to me

sure um so like what does pkey look like in practice well like why are why is crypto a good natural fit for this idea yeah yeah okay um yeah so Robin Hansen did invent pkey in 1999 uh another term for it is decision markets um and yeah and it hasn't it hadn't been done until metad which uh I guess launched like a year ago and I think a big reason for that is regulation right right and this is like in my view this is actually the core uh defining property of crypto as a whole uh is like regulation or regulatory resistance like regulatory

Arbitrage I think some people are like oh crypto just regulatory Arbitrage is kind of like a put down I actually think that's kind of a good thing right like before Bitcoin we had bit gold uh and it got shut down by uh I believe finsen or like the they got shut down by the government because it was an unlicensed money transmitter so Bitcoin is an license money transmitter and yet it like it hasn't been shut down and I think one reason for that is because it's decentralized uh and yeah like I If you were to do this um in a non- crypto world you would essentially You' have to ask for permission like you probably have to go to like the SEC or like NASDAQ or whoever lists these uh like you want to do feat for a company you'd have to work with all these people um to

get these markets working um probably have to apply for a bunch of licenses is like in the US you'd have to apply for the money transmitter licenses uh and that's like really cumbersome uh whereas crypto just like a solo Dev like me can develop the smart contract and then publish it on the Solon a blockchain I think that's like a core unlock um so yeah I think that's like the reason why I hasn't done so uh walk me through what metad looks like in in practice today so yeah talk me through kind of like the project right cuz I think most people kind of have a general sense of all right uh there's metad da and it's bringing futar to crypto in some way but walk me through finally almost like what the

business model of metad actually looks like sure yeah so uh metad is the first F turkey da and it's also like its main business is servicing other FY Dows which is kind of recursive uh but yeah like the goal is kind of to rationalize the world through market-based decision-making and um and like yeah originally I believe the way to achieve that would be to just build a dow that was governed by F tar because I believe other projects would probably not want to adopt the turkey now I believe other projects do actually want to adopt the Turkey um and so like yeah we service other doubts uh in terms of business model so we don't make money today uh there are like a few

ways I have ways we can make money uh but the goal right now is to like prove that the model works right like metad was kind of selling a signal uh which is this decision-making signal of whether or not like you kind of put the decision into the machine into the metad down machine and outputs a signal like should you do this or not or like should which option should you pick um and a signal could actually be extremely value destructive uh or value creative depending on if it's a good signal or not and so my main goal right now is like first proving that the signal works and that it's valuable and then we can figure out like how to capture value by providing that signal Traders AI

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will build on decentralized protocols like Moro whether you're an individual fund fintech or institution Moro is for you follow the link in today's show notes to try Moro today okay so uh this is I want to I want to ask you a little bit more the specifics of like this idea of a Launchpad here and you know when I think about the existing governance structures that have taken over especially in something like ethereum we kind of just said hey we really like this idea of something called the Dow right which isn't a corporation uh you know there aren't these concepts of limited liability and hierarchy and things like that uh you know I think a lot of people got really pilled by this quote that vitalik said back in 2017 sort of time frame where a corporation uh he had this really great

quote about Uber right where a company you know sort of centralizes value and sucks it up towards the top whereas a dow actually pushes complexity and value out to the individual Uber drivers right like and everyone kind of loved this idea um and what we wound up with was a whole bunch of basically onetoone democracies um and not an an enormous amount of hierarchy uh which has been I think maybe in some cases successful in many others very challenged but there was never like one entity that really facilitated the creation of dows outside of some of the infrastructure like the Aragon the world um but you know it strikes me that in the futarchy case here we have a very interesting compelling new form of governance or decision- making at a company and actually kind of like a uh you know an entity which is helping to facilitate

that and I I would really love to describe this kind of idea of like a Launchpad so like walk us walk us through how that actually works in practice and yeah sure and yeah I guess um a lot of us remember icos which happened mostly around 2017 2018 and uh icos didn't really work uh vitalic has a blog post where he talks about why a big reason was essentially like you have this new team uh or actually let's first talk about how Capital formation works in the traditional world uh for new technology projects which is uh mostly in Silicon Valley I think like 60% of all venture capital investors invested specifically

like in the Bay Area uh and how it works there is yeah you have like a uh a bunch of people who have an idea and then they form a company and then they sell off Equity gradually to venture investors who then invest money into the um into the business into the company uh and for every next round like if you raise money for the seat stage in order for you to raise a series a you need to prove to the investors like you've actually done something useful with the money right like you have some growth or like um even even if it's not growth like maybe you're building a really Capital intensive business like you're building a new uh airplane or a new type of car or something you still need to show something to investors uh and so you can't just like one shot the uh you

can't just like go raise money once and then never come back again um and that forces you to be pretty disciplined uh with how you spend your money um and how you allocate your time uh because you either grow or die and then icos happened where it is actually like most of the icos were one Capital formation processes where it's just like okay you have a team with an idea and then they go raise $20 million worth of e um and it's all pretty much within the team's control and so if the team just like starts faffing off or like uh hangs out of zusu like you can't really do anything about that like it's already all invested uh you can't really get that money back even ironically Aragon

which itself was supposed to be a dow project um and had this really good uh like launch video uh and just like built up a bunch of hype and caus a lot of people to invest their money into their Ico even they like didn't really want to give that money over to the Aragon Dow so that people could get their e back um because that's what people wanted to do because they saw it's like uh yeah they didn't need that much eth thing it was like $200 million worth of it at the time um and yeah like that's not a very effective Capital formation process I think um because incentives a lot and those are pretty poor incentives uh they essentially just incentivize you to like be really good at writing a white paper

like Shing your idea and not actually building or growing a business and uh yeah so what we're building or like the idea is to uh have it so that yeah say you have an idea you post it on metad um and then anyone can invest money into that idea and it doesn't go to you it goes to a ft turkey Dow and everyone like in the capital formation everyone in the investment process gets the same price uh and so like yeah say you and me and other people invest uh in this new uh projects that's building like a new types of new type of per protocol for example on

salana um and then if the team rugs like they just walk away on day one then anyone can just raise a proposal to liquidate the treasury and get the money back right like in nfts nfts are probably even worse Capital formation process than uh iOS were like a lot of times you'll have like these memes of like oh the founder just died postm or something like and then they walk off with the money uh so that can't happen and then also yeah if like the team is failing to execute uh then you can still like you can essentially return the money back to the uh back to the original people who invested So like um yeah c can I question though how so what is the actual infrastructure that supports uh that supports futar here

look like in practice because I understand in principle the idea that people could just take a vote but the other thing that I mean the one of the owners of these Dows that or sorry what someone at a dow that's maybe sitting on a multisig could collude to just empty the treasury and walk away and then you can vote to your heart's content but you might not be able to get those funds back so what is the actual enforcement mechanism here for fut tkey that prevents some of what you just described yeah so it's actually it's not going I I know today Dow is kind of a funny term because it does get used for these like multi but here the the money that's being raised is actually going to an onchain account on salana who uh who can only be move like where funds can

only move be moved out of that account if someone raises an onchain Proposal with an sbm instruction so like move funds um and the time weed average price in the past Market is higher than the time we price of the fail Market essentially if the market believes that it's good for the value of the token um to do something and yeah so like it is actually custody in the onchain Dow got it okay cool um and now that kind of leads me to my next question which is why you know I'm curious why salana um why did you pick salana here is there something about what the chain uh support maybe just in I know government governance has actually been a little bit challenged on ethereum well for a couple of reasons but also just because

of the cost of voting and things like that right it's just you know onchain bootes were expensive uh maybe not now but they used to be um so is there some sort of technical reason to choose salana here was it just like that's where you saw momentum was going yeah let's just start there yeah there were I would say uh technical strategic and um like Vibes based reasons for going to Salon uh the technical reason was yeah most Dow money today is on ethereum L1 uh and you can't do fkey on ethereum L1 like you really you just can't have every trade be like a $250 uh cost or I guess it's not currently there but like at the time it was um and you you like you can't have

that much friction for participation in governance um so that's the technical reason the Vibes based reason was just I really admired what was going on in salana and the way of like shipping things which which I thought was closer to Silicon Valley than crypto I.E closer to a model that works than a model that doesn't is like historically not and then the Strategic reason was yeah at the time this was like post FDX uh people were really sour on Solana like a lot of my e friends saw it as a joke and uh I like yeah in markets to make outsize returns you have to be both contrarian and right um what that meant in practice here was that I believed that there was like a lot of feature

opportunity on Sal relative to uh the number of teams building on salana I there' be like more opportunity for me and for medow on Solana okay so uh maybe you know as we're starting to wind down here talk to me about where F turkey is implemented in practice today um and what some of the so you mentioned metad and sanctum as being the two examples of things working live but I also know that goo's grant program used futari um to vote on who basically who gets and for how much and so you know my dual question to you is what does the current state of adoption and usage look like and then again on the business model side of things when you see um you know when jto is using futar in its grants

program is that somehow Revenue that's flowing back to metad or what does that look like yeah so there have been 60 decision markets created a little less than half of those have been metad which means there a little more than half of those were other Dows on the platform um and yeah in terms of the names people who have created proposals through metad it's uh marinade sanctum jod drift um as and or as like the main ones and we also and Dean list Cole uh future da and yeah so those are like the names using it I said I call that specifically sanctum and medad as the two orgs that I would consider full futes in that they're making uh they're using futarchy for all

of their uh all their main decisions uh so like business decisions and token tokenomics decisions like where to allocate tokens and uh the other ORS all use fetar in like some respect is like some part of their governance uh see how like goo for example used fkey to decide whether or not to turn on the jto Fe switch so whether they not to start uh Distributing value back to the jto Token holders uh they are also using it for a grants program for the reaking product uh drift has used it for a bunch of their uh grants uh marinade used it to make an economic decision around uh the way that their like LST uh validator

system works or uses it for like used it to decide uh their mining emission uh like essentially tokenomics and then also uh various uh like yeah mostly tokenomics decisions actually from War uh and then yeah so that's kind of like how people are using it today nice anything uh give us a sense of like the future road map here and like what you're excited for so what in your most optimistic uh case because that was originally going circling back to the top of this episode and the theme is everyone's very gloomy at the current moment you know everyone's everyone's bags got wrecked uh you know everyone's very bearish on this year from a token price perspective uh you know there's this kind of nihilism idea that we

didn't really do anything here with meme coins I'm just so not in that camp so you know talk to us a little bit get us get us a gas St about futar and metad like where do you hope that the business is you know on a two-year time Horizon but also sort of paint us a vision of the future like what in your most you know sort of wild this expectations are we looking at from a futar perspective on a three to five year time Horizon sure I mean I guess this could fix Global Capital formation like yeah my I my odds are currently uh above 80% that future actually works um as in it's like uh yeah solid system that can actually make decisions like fairly effectively um and if that's the case

then just naturally over time you would expect organizations that adopt fedar to just become more prominent right like if organization a has a return on invested capital of 8% per year and organization B has a return on invested capital of 20% per year it's not going to be very long before organization B is just like uh completely squashed organization a or just like grown grown far beyond it both because people will allocate more money to or Capital towards organization B and it'll just like naturally grow that Capital faster um so yeah like the the long term I mean the sky is the limit this could totally re change um like I believe probably will totally change uh

the way the world works and the way that we all work together and uh yeah like make decisions um I would say like shortterm like next two years is fixing crypto decision- making like Dows have not really worked out in the past uh and like fixing that I think would be a great first step uh and so yeah I'm also I mean I think there's like reasons to be jaded but also uh it really it's like a one event problem right maybe you don't even believe P tury will be the thing that works uh but like you kind of have to admit that like anyone kind of

has to admit there is some non-negligible probability like that FY actually does work and conditional on it working it would be like a huge thing um and yeah so like given that there must be other ideas that people are perhaps building on right like building right now that just have not come to the line light yet or uh people that like ideas that haven't come up yet like haven't formed yet um or projects that haven't formed yet that could also affect the world in the same way so yeah I mean it only takes one it's basically the I think like the bull case all right well that's uh very very exciting and uh you know if folks that

are building on salana here or are just interested in learning in futarchy or following the progress of metad um you know what's the best way to either follow you learn more about the project or whatever it is yeah Twitter um so yeah if you want to just follow uh like Twitter is where we post everything um so that's a good place if you want to build uh like yeah I believe you as a Founder should build on this uh Launchpad system because um like you you will benefit from doing that both because you'll be able to raise more money uh through the system but also because like and I believe this is the more important one you will have a community from day one that wants you to win uh so yeah if you are a Founder

that is early stage like it could even be like pre- raise like or pre idea it could even be I would please please please encourage you to reach out to me uh and talk about how we could potentially do that excellent all right Propet it's been a really great time uh chatting with you my man we'll have to do a six-month or 12-month check-in to show why uh being optimistic pays and definitely rooting for what you're doing at metad with futarchy so yeah man we'll have to do it again sometime soon and thanks for coming on the show for sure thank you so much for having me on Cheers man [Music]