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Add documentation for zrml-futarchy #89

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Nov 25, 2024
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Add documentation for zrml-futarchy #89

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Update futarchy docs
maltekliemann Nov 16, 2024
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Fix compile error by removing search bar and localization
maltekliemann Nov 25, 2024
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34 changes: 34 additions & 0 deletions docs/learn/futarchy.md
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Expand Up @@ -145,6 +145,40 @@ extrinsic improve the welfare measure? Once the decision is made, the code is
automatically executed or discarded. The laborious interpretation and
enforcement of ambiguous policy is no longer required.

## Futarchy on Zeitgeist

The futarchy pallet zrml-futarchy is introduced in v0.6.0 of Zeitgeist and
allows the Zeitgeist chain to govern itself using prediction markets. A
governance proposal can be submitted to zrml-futarchy using the
`submit_proposal` extrinsic. The only origin that is allowed to call this
extrinsic at the moment is root. Therefore, one must first submit a governance
proposal suggesting a call into zrml-futarchy's `submit_proposal` to
pallet-democracy first and let the token holders decide before going forward
with the proposal in zrml-futarchy. This ensures that the markets involved in
the proposal are properly configured and the pool is deep enough to ensure a
sane market.

Suppose that $X$ is the call that a user wishes to make. To do so, they first
create two markets:

- $M_0$: _Will $X$ be enacted?_
- $M_1$: _What's the welfare measure at time $T$?_

Then they create a combinatorial pool from these two markets. The outcomes in
the combinatorial pool will be:

- $L_+$: _Welfare measure long if $X$ enacted_
- $L_-$: _Welfare measure long if $X$ not enacted_
- $S_+$: _Welfare measure short if $X$ enacted_
- $S_-$: _Welfare measure short if $X$ not enacted_

The outcomes $L_{\bullet}$ can be used to measure the predicted success or
failure of the proposal: If the price of $L_+$ is greater than that of $L_-$,
the proposal is expected to be successful. We call these the _positive_ and
_negative outcomes_. When calling the `submit_proposal` extrinsic, this data is
specified as the `oracle` parameter, whose fields are `pool_id`,
`positive_outcome` and `negative_outcome`.
Comment on lines +178 to +180
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In the example above there are two positive outcomes, one for L and one for S, right? (and two negative outcomes)

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So, I expect two proposals to be submitted. One for L and one for S. Is this right? Then we have two pools, right? But this is also confusing from the standpoint that one can think about a pool that trades Welfare measure long if X enacted (L+) and Welfare measure short if X enacted (S+) and another pool that trades Welfare measure long if X not enacted (L-) and Welfare measure short if X not enacted (S-).

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On the other hand I read this:

Zeitgeist's combinatorial tokens allow users to combine outcome tokens of several markets and trade these combined tokens in a single liquidity pool.

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No, just one positive and one negative outcome. The idea is to measure whether or not the welfare measure is higher if the proposal is enacted or not. This boils down to checking that L+ is more valuable to L-.


## Further Reading and Viewing

- [What is Futarchy? - Trading on The Future - Friederike Ernst #TOA18](https://www.youtube.com/watch?v=XonwBPXpyJQ)
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