Frequently Asked Questions (FAQ)¶

Common questions about the Prediction DAO system.

General Questions¶

What is Prediction DAO?¶

Prediction DAO is a futarchy-based governance system that uses prediction markets to make decisions. Instead of voting directly on proposals, the community votes on welfare metrics (what defines success), and prediction markets determine which proposals will maximize those metrics.

What is futarchy?¶

Futarchy is a governance system based on the principle: "Vote on values, bet on beliefs."

Community votes on values (welfare metrics that define success)
Prediction markets bet on which proposals will maximize those values
Market prices aggregate distributed knowledge better than voting alone

How does this differ from traditional DAOs?¶

Traditional DAOs use direct voting on proposals. Prediction DAO uses:

Market-based decisions: Traders put money behind their beliefs
Privacy protection: Zero-knowledge proofs hide individual positions
Welfare metrics: Objective measures of success
Anti-collusion: MACI-style key changes prevent vote buying

Is this system suitable for all types of decisions?¶

Futarchy works best for decisions that:

Have measurable outcomes
Affect objective metrics
Benefit from diverse information
Need to prevent collusion

It may not be ideal for purely subjective or values-based decisions.

Getting Started¶

What do I need to participate?¶

MetaMask or compatible Web3 wallet
ETC tokens for gas fees and bonds
Understanding of the proposal you're voting on

Where do I get ETC?¶

Mainnet: Purchase from cryptocurrency exchanges
Testnet: Request from Mordor testnet faucet
Local: Use pre-funded Hardhat test accounts

How much does it cost to participate?¶

Trading: Only gas fees (~150,000 gas per trade)

Submitting Proposals: 50 ETC bond + gas fees (bond returned)

Oracle Reporting: 100 ETC bond + gas fees (bond returned)

Challenging: 150 ETC bond + gas fees (forfeited if challenge fails)

Can I participate anonymously?¶

Yes! Privacy protection is built-in:

Your trading positions are encrypted
Zero-knowledge proofs hide your identity
Only aggregate market data is public
Key-change capability prevents linking positions

Proposals¶

How do I submit a proposal?¶

Connect your wallet
Navigate to "Submit Proposal"
Fill in all required details
Post 50 ETC bond
Submit transaction

See the Submitting Proposals guide for details.

What makes a good proposal?¶

A good proposal has:

Clear objectives and deliverables
Reasonable budget and timeline
Strong rationale for funding
Appropriate welfare metric selection
Credible team or individual

Can I edit a proposal after submission?¶

No, proposals cannot be edited after submission. Consider your proposal carefully before submitting.

What happens if my proposal is rejected?¶

If your proposal fails (FAIL tokens win):

Proposal is not executed
No funds are transferred
Your 50 ETC bond is returned (if submitted in good faith)
You can learn from feedback and submit an improved version

How long does the proposal process take?¶

Minimum timeline:

7 days: Review period
7-21 days: Trading period
3 days: Oracle settlement
2 days: Challenge period
2 days: Timelock
Total: 21-35 days minimum

Can I submit multiple proposals?¶

Yes, but each requires a separate 50 ETC bond. Consider timing to avoid having too many proposals active simultaneously.

Trading¶

How do prediction markets work?¶

Prediction markets create conditional tokens:

PASS tokens: Bet that the proposal will succeed
FAIL tokens: Bet that the proposal will fail
Prices: Reflect aggregate market beliefs (0-1 ETC)
Winner: Determined by oracle-reported welfare metrics

Do I need a counterparty to trade?¶

No! The system uses LMSR (Logarithmic Market Scoring Rule) for automated market making. You can always trade against the automated market maker.

How are prices determined?¶

Prices are calculated using LMSR:

P_pass + P_fail = 1

Prices adjust based on:

Current token holdings
Liquidity parameter (b)
Recent trading activity

What is slippage?¶

Slippage is the difference between expected and executed price. Larger trades cause more slippage. You can:

Split large orders into smaller trades
Trade during high liquidity periods
Accept higher slippage for faster execution

Can I lose more than I invest?¶

No, maximum loss is limited to your initial investment. There are no margin calls or negative balances.

When can I redeem my tokens?¶

After the market resolves:

Oracle submits welfare metric values
Challenge period passes (2 days)
Market finalizes
Winning tokens become redeemable

Navigate to your portfolio and click "Redeem" on settled positions.

What if I hold the losing tokens?¶

Losing tokens become worthless. For example:

If PASS wins: FAIL tokens are worth 0
If FAIL wins: PASS tokens are worth 0

This is the risk of trading prediction markets.

Privacy & Security¶

How is my privacy protected?¶

Multiple privacy layers:

Poseidon Encryption: Positions encrypted with SNARK-friendly hash
Zero-Knowledge Proofs: Groth16 zkSNARKs prove validity without revealing details
Batch Processing: Trades mixed in epochs
Key Changes: MACI-style key updates prevent linking

What information is public?¶

Public:

Total trading volume
Aggregate PASS/FAIL prices
Number of positions (not identities)
Proposal outcomes

Private:

Your position size
Your trading direction
Your identity
Your profit/loss

What is a key change and when should I use it?¶

Key change is a MACI feature that lets you change your encryption key, invalidating previous commitments. Use it if:

You suspect vote buying attempts
You want to break collusion agreements
You want additional privacy
You're concerned about coercion

Is the smart contract code audited?¶

Security Status

This is research and demonstration code. Before mainnet deployment:

Minimum 2 independent security audits required
Bug bounty program (100k USD in ETC)
30-day community review period
Formal verification of critical functions

What are the main security risks?¶

Potential risks:

Smart contract vulnerabilities
Oracle manipulation
Market manipulation
Privacy proof failures
Network attacks

Mitigations are built-in, but always DYOR (Do Your Own Research).

Welfare Metrics¶

What are welfare metrics?¶

Welfare metrics are objective measures of protocol success:

Treasury Value: Total DAO treasury value (TWAP)
Network Activity: Transaction volume and active addresses
Hash Rate Security: Network hash rate metrics
Developer Activity: GitHub contributions and activity

How are welfare metrics measured?¶

Each metric has specific calculation methods:

Treasury: Time-weighted average price of holdings
Network Activity: Composite index of on-chain activity
Hash Rate: Relative to other PoW chains
Developer: GitHub API data

Can welfare metrics be changed?¶

Yes, through the governance process itself. The DAO can vote to:

Add new welfare metrics
Adjust metric weights
Change calculation methods
Update data sources

What if the oracle reports incorrectly?¶

There's a 2-day challenge period where anyone can:

Post 150 ETC challenge bond
Submit counter-evidence
Escalate to UMA for arbitration

If the challenge succeeds:

Oracle's 100 ETC bond is slashed
Challenger receives compensation
Correct values are used

Technical Issues¶

Why did my transaction fail?¶

Common reasons:

Insufficient gas: Increase gas limit
Insufficient balance: Need more ETC
Slippage: Price moved too much, increase tolerance
Network congestion: Try again or increase gas price
Wrong network: Verify you're on correct network

I can't see my position¶

Check:

You're on the correct network
You're using the right wallet address
The transaction confirmed
Your browser cache (try clearing)
Wait for block confirmations

The website won't load¶

Try:

Refresh the page
Clear browser cache
Try a different browser
Check if MetaMask is up to date
Verify your internet connection

Gas fees are too high¶

Strategies to reduce costs:

Trade during off-peak hours
Batch multiple actions
Use Layer 2 solutions (when available)
Wait for lower network congestion

Governance¶

What is ragequit?¶

Ragequit allows minority token holders to exit with their proportional treasury share if they disagree with a proposal. It's a minority protection mechanism borrowed from Moloch DAO.

When can I ragequit?¶

During the 2-day timelock period after a proposal passes but before execution.

How do guardians work?¶

Guardians are a multisig that can:

Trigger emergency pause
Initially 5-of-7 multisig
Powers decrease over time
Full decentralization after Year 4

What is progressive decentralization?¶

A schedule for reducing guardian powers:

Year 1: Full pause authority
Year 2: Increased multisig threshold
Year 3: Reduced pause authority
Year 4+: Full community control

Oracle System¶

Who can be an oracle reporter?¶

Anyone can report oracle values by posting a 100 ETC bond. The first reporter for each proposal gets priority.

How are oracle values verified?¶

Multiple stages:

Designated Reporter: Posts bond and submits values
Evidence: Provides IPFS hash to data sources
Challenge Period: 2-day community review
UMA Escalation: If challenged, UMA token holders arbitrate

What prevents oracle manipulation?¶

Protections include:

Bond requirements (100 ETC)
Challenge mechanism (150 ETC bond)
Evidence requirements
UMA escalation for disputes
Slashing for false reports

Economic Questions¶

How does LMSR work?¶

LMSR (Logarithmic Market Scoring Rule) provides:

Automated liquidity
Bounded loss for market maker
Prices that reflect probabilities
No need for order books

The cost function is:

C(q) = b * ln(e^(q_pass/b) + e^(q_fail/b))

Where does market liquidity come from?¶

Liquidity is provided by:

The LMSR automated market maker
Initial liquidity from proposal bond
DAO treasury allocation
Trader activity

What is the maximum loss for the market maker?¶

The liquidity parameter (b) bounds the maximum loss:

Max Loss = b * ln(2)

This makes market making sustainable.

Can markets be manipulated?¶

Safeguards against manipulation:

Time-weighted average prices (TWAP)
Privacy prevents front-running
Multi-day trading periods
Oracle verification process
Economic cost to manipulate

Getting Help¶

Where can I get support?¶

Check this FAQ
Review the documentation
Join community channels
Ask in Discord/Telegram
Submit GitHub issues

How do I report a bug?¶

Check if it's a known issue
Gather relevant details
Submit to GitHub issues
Include reproduction steps
Add screenshots if applicable

How can I contribute?¶

See the Contributing Guide for:

Code contributions
Documentation improvements
Bug reports
Feature suggestions
Community support

Where can I learn more?¶

Additional resources:

Still Have Questions?¶

If your question isn't answered here:

Search the full documentation
Ask in community channels
Submit a question via GitHub discussions
Contact the team directly

Last Updated: December 2025