DAOs Embrace Futarchy Governance: MetaDAO Expands on Solana, Ethereum Foundations Initiate Experiments

Executive Summary

Decentralized Autonomous Organizations (DAOs) are increasingly exploring Futarchy, a governance model that leverages prediction markets for decision-making. This trend is significantly influenced by the validation of prediction markets, particularly following the substantial trading activity seen on platforms like Polymarket. Solana's MetaDAO is emerging as a primary facilitator for at-scale Futarchy implementation, while initiatives from the Optimism and Uniswap Foundations indicate a growing interest within the Ethereum ecosystem.

The Event in Detail

MetaDAO, launched in November 2023 on Solana, has become a central platform for operationalizing Futarchy. It has facilitated 62 Futarchies across nine DAOs, with 19 completed post-election. Notable Solana-based DAOs such as Jito, Marinade, and Sanctum have integrated MetaDAO for their governance. Sanctum, for instance, adopted MetaDAO as its primary platform, settling four decisions through Futarchy votes and attracting 1,648 unique voters for those proposals, a higher distinct voter count than Lido and Ethereum Name Service (ENS) achieved in 2024. A new launchpad from MetaDAO aims to simplify the creation of Futarchy DAOs, potentially addressing capital formation and trust issues for new projects.

Beyond Solana, the Uniswap Foundation and Optimism Foundation have partnered through a joint grant to Butter to pilot Futarchy implementations on Ethereum and Layer 2s. Optimism launched a specific 21-day on-chain governance experiment in March 2025, distributing 500,000 OP tokens as incentives. Participants used simulated tokens, OP-PLAY, to predict Total Value Locked (TVL) growth for projects receiving OP incentives, with the top five projects receiving grants. This experiment highlighted challenges, as selected projects like Rocket Pool and SuperForm underperformed in actual TVL growth, partly due to the use of USD-denominated metrics susceptible to ETH price volatility. High user friction, requiring six on-chain interactions per bet, and information asymmetry, contributed to reduced participation and accuracy. Experts ("Badge Holders") exhibited the lowest win rates.

Meanwhile, the broader prediction market landscape has shown volatility. Polymarket, after experiencing a surge in trading volume to $2.6 billion in November 2024, largely driven by the U.S. election, saw a significant decline. Trading volume plummeted to $515 million in January 2025, from $1.9 billion in December, with open interest falling 77% from November 2024 to January 2025.

Market Implications

The increasing adoption of Futarchy signals a potential shift in how decentralized organizations make decisions and allocate resources. The explicit reliance on market mechanisms for governance, rather than traditional voting, could lead to more efficient and resilient DAOs if successfully implemented. The "Futarchy as a Service" model offered by MetaDAO could lower barriers for new DAOs to adopt this governance structure from inception.

However, the Optimism experiment demonstrated critical challenges. The use of USD-denominated metrics for TVL, subject to underlying asset price volatility, skewed results and led to inaccurate predictions. High user friction directly impacted participation rates, indicating that practical implementation requires simplified interfaces and fewer on-chain interactions. The low win rates among experts suggest that even informed participants struggle under suboptimal market designs. These findings indicate that while Futarchy offers a promising theoretical framework, its effectiveness is highly contingent on robust metric design, reduced user friction, and clear, unbiased information flows. The post-election decline in Polymarket's activity underscores the reliance of current prediction markets on high-profile events for sustained engagement and liquidity, raising questions about long-term sustainability for more routine governance decisions.

Expert Commentary

Proponents of Futarchy, such as those associated with MetaDAO, emphasize its built-in mechanisms to mitigate market manipulation. Participants place actual capital at risk, which naturally limits speculative behavior. The system also incentivizes large holders to diversify their holdings, potentially fostering a more balanced decision-making process. Concerns regarding market crashes or bubbles within Futarchy systems are acknowledged, with comparisons drawn to "market perturbations" in traditional governance. The key differentiator is the capital-at-risk component, which acts as a self-correcting mechanism: participants with consistently poor trading performance will exhaust their capital, leading to more responsible engagement.

Futarchy is also seen as advantageous for leveraging expert knowledge. It does not require universal participation, as a few informed participants with "compelling and competing information" can effectively price a market. This focus on the quality of participants over quantity is particularly beneficial for complex or technical decisions within DAOs.

Broader Context

The rise of Futarchy is occurring within a larger trend of growth in the Web3 prediction market ecosystem, which expanded from $4.43 billion in 2024 to $6.11 billion in 2025, projecting a compound annual growth rate (CAGR) of 37.8%. This growth indicates a shift in prediction markets from speculative tools to potential foundational infrastructure for institutional decision-making. Polymarket's acquisition of QCEX, a CFTC-licensed derivatives exchange, highlights a move towards regulatory compliance, attracting institutional capital. However, the future evolution of Futarchy and prediction markets hinges on resolving regulatory ambiguities, strengthening governance models against bias and manipulation, and continually refining mechanisms to ensure that the "collective wisdom" of the market translates into optimal decentralized governance outcomes. Future developments may involve more sophisticated metrics beyond simple token price and safeguards against harmful decisions, potentially through "futures contracts for bad decisions."

source:

[1] The State of Onchain Futarchy (https://www.galaxy.com/insights/research/the- ...)[2] Futarchy: When prediction markets become governance weapons, a governance experiment that subverts the DAO decision-making paradigm | PANews (https://vertexaisearch.cloud.google.com/groun ...)[3] Polymarket Faces Difficulties in 2025 After Boom in 2024 | blogtienso on Binance Square (https://vertexaisearch.cloud.google.com/groun ...)

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