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Sponsored Proposals

Sponsored Futarchy lets activist investors and external contributors fund proposals and earn discounted tokens when their ideas add measurable value. It brings new capital + new ideas into the DAO while keeping incentives aligned with tokenholders.

What It Is (in one minute)

  • Anyone can sponsor a proposal by posting funds in a DAO‑approved currency (e.g., sDAI, stablecoin, WETH).
  • Proposals are selected into a monthly evaluation slot (see “Slot Selection”).
  • The DAO runs an advisory futarchy evaluation (YES vs NO markets with a threshold).
  • If futarchy approves (and any required DAO vote passes), sponsors can buy tokens at a discount (vesting).
  • A small at‑risk fraction of the sponsorship (default 5%) subsidizes markets if a proposal fails (anti‑spam + better signals).

Why It Matters for DAOs

  • Capital inflow without selling indiscriminately—only value‑creating proposals unlock discounted tokens.
  • More ideas from outsiders, not just insiders.
  • Credibly neutral selection + evaluation (market‑driven, transparently priced).
  • Aligned ownership—discount flows to those who take risk on value creation.

Core Mechanics

Sponsorship Deposit (DAO‑configured)

  • Currency: DAO chooses the unit (e.g., sDAI / USDC / WETH).
  • Minimum: DAO sets a minimum sponsorship amount (to avoid spam).
  • At‑risk fraction: 5% of the purchase commitment is earmarked for market subsidies if selected and the proposal fails futarchy or is later rejected. If the proposal passes, the at‑risk fraction is refunded.
  • Refunds:
  • Not selected: sponsor can withdraw or roll to next cycle (default: full refund).
  • Selected but fails/rejected: at‑risk portion is spent; the remainder is refunded.
  • Selected and passes: purchase commitment is used to buy discounted tokens; vesting applies.

Discount & Vesting (DAO‑configured)

  • Default discount: 33% (i.e., +50% bonus tokens for the same spend).
  • By policy:
  • 45% of extra tokens → Sponsor
  • 5% of extra tokens → Futarchy Protocol (protocol reward)
  • Vesting: default linear 12 months (DAO can change; can vary per sponsorship program).

Slot Selection (cadence & method)

  • Cadence: start monthly.
  • Mechanism: default top‑by‑sponsorship at the selection event (after an ~2‑week window).
  • Option: weighted lottery by sponsorship (keep as a future toggle).
  • Rollover: unselected proposals may roll into the next window unless withdrawn.

DAO Governance & Execution

Two standard paths after a positive futarchy evaluation:

(A) Requires DAO action (on‑chain change, treasury move, etc.)
- A DAO vote is held after futarchy recommends approval.
- The bonus/discount for sponsors is pre‑approved by the DAO within the program, or proposals can stipulate whether a DAO representative may suspend the discount before payment is executed.

(B) Independent project funded only by the sponsorship
- No DAO vote needed if execution does not touch DAO treasury or parameters, and sends only sponsorship money to a contractor. - Payments to the contractor can be staged (milestones). - A DAO representative may veto the stream at any time; the sponsor receives any unspent funds back, plus a pro‑rata portion of the promised discounted tokens based on funds spent to date.
- Proposals specify whether discount is revocable by a DAO representative.

Multisig custody: We recommend a 2‑of‑3 multisig (e.g., two DAO reps + one trusted technical party) to manage funds for sponsorship and futarchy liquidity.
The same multisig may allocate liquidity to evaluation markets and settle outcomes.

Roles & Responsibilities

DAO - Configure program parameters (currency, minimum, discount %, vesting, at‑risk %). - Approve overall liquidity and who can allocate it (multisig).
- Define selection cadence and method (top‑by‑sponsorship; optional weighted lottery).
- Choose governance hook (Advisory, Veto/Kleros, or FAO — Futarchy Autonomous Optimizer).

Sponsor - Post deposit (purchase commitment + at‑risk fraction).
- Draft proposal; update during the 2‑week window.
- If selected and approved: receive discounted tokens on vesting schedule.
- If selected and fails/rejected: absorb at‑risk fraction (default 5%); remainder refunded.

Futarchy Labs / Operators - Run conditional spot markets (YES/NO), arbitrage bots, solver integrations.
- Provide evaluation infra (TWAP computation, market UX).
- Optionally serve as third signer on the 2‑of‑3 multisig.

Process & Timeline (monthly cadence)

Window 1 (≈ 2 weeks) — Sponsorship period
- Sponsors submit deposits and proposal drafts; can amend and add funds.
- End of window: selection event picks top‑by‑sponsorship (default).
- Unselected proposals can roll over to next month.

Window 2 (≈ 1 week) — Futarchy evaluation
- YES/NO markets open for the selected proposal; DAO‑seeded liquidity is deployed.
- Threshold check: YES > NO + threshold (default 1%) using TWAP over the window.

Window 3 (≈ 1 week) — Decision & settlement
- Path A: DAO vote if required (on‑chain changes/treasury).
- Path B: Independent project executes per proposal; DAO rep retains veto if configured.
- If approved: discounted tokens are purchased and start vesting (12m).
- If failed/rejected: at‑risk 5% is spent on market subsidies; remainder refunded. - YES/NO markets can remain open for this window until the proposal has been approved definitively. - Outcome finality via Reality.eth + Kleros (oracle does not publish thresholds; it resolves outcomes and any governance checks).

Throughput: Expect 1 sponsored proposal per month.
Liquidity can often support this + 1 non‑sponsored advisory proposal per month.

  • Currency: sDAI (or stablecoin/WETH; DAO decides).
  • Minimum sponsorship: set by DAO.
  • At‑risk fraction: 5% of purchase commitment (spent if fail/reject).
  • Discount: 33.33% (default), with 50% extra tokens split as 25% sponsor / 25% Futarchy Protocol.
  • Vesting: 12 months linear (applies to discounted tokens and protocol fee share).
  • Threshold floor: 1% YES over NO (raise for high‑stakes changes).
  • Threshold scaling: per “Thresholds vs. Sponsorship Size”.
  • Selection cadence: monthly; top‑by‑sponsorship (optionally: weighted lottery).
  • Multisig: 2‑of‑3 (2 DAO reps + 1 technical co‑signer).
  • Governance hook: Advisory by default; Veto/Kleros or FAO (Futarchy Autonomous Optimizer) as the DAO matures.
  • Sponsored tokens pool: pre-set cap held by 2-of-3 multisig; program pauses when depleted.

Thresholds vs. Sponsorship Size (impact justification)

Why scale the futarchy threshold with the sponsorship size?
Because the discounted bonus tokens are effectively a prize for creating a value-adding proposal. To keep that prize reasonable, we recommend setting the Threshold scaling: so that it represents an effective 5% prize cap: the total bonus tokens (at market value) should be ≤ 5% of the expected increase in market cap implied by futarchy.

Compute it

Let: - S = sponsorship amount (e.g., 100,000 sDAI) - d = discount (e.g., 0.3333 for 33.33%) - M = current circulating token market cap - prize_cap = 0.05 (5%) - Bonus value at market = S × d / (1 − d)
- 33.33% discount → bonus ≈ 0.5000 × S (≈ 50% of S)

Then: - Required impact (market cap increase)
Impact_required = Bonus_value / prize_cap - Threshold (%), applied to YES vs NO TWAP
Threshold = max(1%, Impact_required / M)

Example (your default numbers):
S = 100k, d = 0.3333 ⇒ Bonus ≈ 50k ⇒ with 5% cap → Impact_required = 1,000,000.
If M = 50,000,000, then Threshold = 1,000,000 / 50,000,000 = 2%.

Rule of thumb - 33.33% discount: Threshold ≈ 10.0 × (S / M) - Always floor at 1%.

Note: If using the 33.33% program where +50% extra tokens are split 25% sponsor / 25% Futarchy Protocol, Bonus_value is the total extra tokens (sponsor + protocol), since both are justified by the same measured impact.

The DAO should pre-allocate a pool of tokens for sponsored sales, held by the program multisig (recommended 2-of-3).
- This pool caps total discounted tokens across approved sponsored proposals.
- When the pool is depleted, the program pauses until the DAO replenishes it by vote.
- Unused tokens return to treasury at program sunset (or at a review checkpoint).

Risks & Safeguards

  • Spam/low‑quality proposals → minimum sponsorship and 5% at‑risk; market costs discourage noise.
  • Self‑dealing → markets price long‑term value; DAO/rep can veto; thresholds can be higher for sensitive changes.
  • Thin markets → DAO‑seeded liquidity; at‑risk subsidies; arbitrage keeps YES/NO coherent.
  • Duplicated ideas → initial central curation may reject duplicates; future IP/attribution features planned.

Worked Example (numbers)

  • Sponsor commits $100k sDAI; at‑risk 5% = $5k.
  • DAO discount is 33% → sponsor receives +45% tokens for the $100k if approved (vesting 12m), with Futarchy Protocol receiving another +5% tokens.
  • If selected & passes: $100k buys discounted tokens; $5k refunded (was at‑risk, unused).
  • If selected & fails/rejected: $5k spent to subsidize markets; $95k refunded.
  • If not selected: sponsor may withdraw or roll to next month (default: full refund).

Alternative: If DAO sets 20% discount, +25% tokens are minted relative to full‑price: 20% of the extra tokens → Sponsor; 5% → Futarchy Protocol (both vest 12m).

Cross‑References