Gitcoin and Filecoin introduce prediction markets to public goods funding, enabling community members to bet on project outcomes and help badgeholders identify high-impact initiatives. Discover how this futarchy experiment could transform decentralized funding decisions.
As we continue to innovate decentralized funding mechanisms, Gitcoin and Filecoin are excited to introduce an experiment that blends community wisdom with predictive insights: futarchy for public goods funding. For Filecoin’s second Retroactive Public Goods Funding (RetroPGF) round, we are launching a prediction market alongside badgeholder voting, allowing stakeholders to weigh in on the potential success of projects. This futarchy-inspired approach invites a broader community to share insights and potentially amplify the impact of community-driven funding.
At its core, futarchy uses prediction markets as an indicator of what the community believes will drive success. Here, we’re applying this to the funding process. Rather than relying solely on badgeholders to decide which projects receive funding, we’ve set up markets where anyone familiar with Filecoin’s ecosystem can "bet" on project outcomes. These bets reflect what traders believe about the project’s long-term success or community impact. The idea is that collective predictions can give a clear, data-backed perspective on the merit of each project, helping badgeholders make better-informed funding decisions.
Our primary objective is to enhance badgeholders’ ability to spot high-value projects without the need to scrutinize every proposal. With hundreds of submissions, distinguishing which projects are genuine "gems" and which might be low impact can be daunting. The futarchy experiment intends to streamline this by focusing on proposals that fall at the extremes: the top 10% (the “gems”) and the bottom 10% (the “not-so-good”). Badgeholders can use these predictions as a signal for which projects may be worth a closer look—or a second thought.
For this RetroPGF round, we are setting up markets only for a subset of the proposals to test the waters. By concentrating on extremes, the futarchy experiment avoids the need for individual markets for every proposal, keeping cognitive load manageable for traders.
Here’s a breakdown of the process:
The markets will close once RetroPGF voting ends, and winning predictions will be paid out based on the final funding results.
Focusing on the extremes provides a streamlined and impactful approach. Projects in the top 10% are often game-changers, while those in the bottom 10% may not deliver expected value. Concentrating on these ranges helps us avoid diluting trader focus and reduces the need for unnecessary market complexity.
Traders are community members who have insights into Filecoin’s ecosystem or are familiar with the projects in question. Examples include project teams, and other knowledgeable Filecoin stakeholders. By trading on what they perceive as mispriced markets, traders provide valuable signals and have the opportunity to profit, making markets more accurate as they correct mispricings.
A core principle in prediction markets is liquidity. When markets have sufficient liquidity, attempts at manipulation become costly for the manipulator and advantageous for informed traders who can correct the mispricing. As the experiment unfolds, we’ll gauge the liquidity levels necessary to keep markets stable and insightful. As for trader biases, anonymity and diversified participation can help balance this issue by encouraging objective betting.
Through this experiment, Gitcoin and Filecoin aim to:
This initial experiment is the first step in a longer journey. We’re tracking metrics like trader turnout, badgeholder feedback on market predictions, and accuracy of predictions to guide improvements in future futarchy-enabled funding rounds. While challenges like low trader participation or badgeholder skepticism could impact early rounds, each iteration will inform our approach to building more robust, community-driven funding models.
By adding futarchy to the public goods funding toolkit, Gitcoin and Filecoin hope to empower community members with deeper insights into what makes a project successful, building a decentralized, data-backed way of amplifying impact in funding decisions. We’re excited to see how this innovative mechanism shapes the future of public goods funding.
We’ll be sharing updates as this experiment progresses. If you’re a badgeholder, community member, or simply curious about decentralized funding models, we welcome you to follow along and join the conversation!