Your 2013 paper is very interesting! I’m going to study it in more detail over the next days, thanks for sharing it here.
I have a few questions. Can you give more details on the payment rule? In the paper, the “outcome” being predicted (in the paper’s simpler model), called the quality of the proposal, is bounded in [0, 1], where here the price is not. Is the mechanism still individually-rational?
If I understood correctly, people pay (y_d - Y^*)^2 when their proposal is rejected. This is in contrast to the paper, in which losing bids don’t pay anything. How is the mechanism incentive-compatible? What is the incentive for me to submit a proposal that has only a small probability of being accepted?
Regarding the drawbacks of futarchy, I’m totally for experimentation of different “values” of “vote values” ideas for DAOs, as they’ll make them more general and useful. This proposal is really only intended for DAOs competing with or intended to replace profit motive companies. Such DAOs will be unable to donate to charity or really do anything other than maximizing profits to tokenholders.
The default argument against such concerns is that tokenholders should use some of the profits due to them to promove the charities that they themselves like. I don’t like this argument as this may be inefficient: there may be some low-cost, high-impact opportunity for public good that are uniquely available to the DAOs.
One solution is for charities or other philantropic entities to “bribe” the DAO into acting for the public good. I admit this does not generate the best optics, but at least it prevents economic inefficiencies.