Market predictions are all the rage lately, so I'd like to propose a new concept that might support some really cool experiments.

The idea wasn't my original creation; it came from a rather fantastical research paper. The author, Ralph Merkle, one of the "founding fathers" of crypto, radically proposed using prediction markets to govern countries. And this very paper was published in the journal *Cryonics*.

When I first read it, I only found the concept interesting, but its practicality was zero. Recently, upon rereading it, I suddenly realized that if the scenario is not limited to national governance, it is actually a universally applicable solution with considerable operability.

If you don't remember who Merkel is, he is the co-inventor of "asymmetric encryption" (public-private key) and the inventor of "Merkle Tree".

Every transaction on the blockchain relies on public and private keys. Each Bitcoin block is imprinted with a Merkle tree "root" (used to efficiently prove that all transactions within the block are complete and have not been tampered with).

Thesis Background

Merkel launched a fierce attack, arguing that "one person, one vote" democracy is a complete mess. She claimed that this system forces most ordinary people—who lack understanding of economics, political science, and sociology, and are misled by the media—to vote on extremely complex bills.

This is not only unfair, but also inevitably leads to mediocre and poor decision-making. The governance machine designed in the paper (which Merkel calls DAO democracy) operates on a logic completely opposite to that of traditional voting systems.

Traditional voting is "decision first, results later" (people vote for option A, then bear the consequences, good or bad). Merkel's machine is "predicting results first, then making decisions." The machine's operation relies on two core components:

1. The sole objective: the citizens' "happiness index"

The machine has a unique and immutable ultimate goal (protected by a DAO contract), which is called the "happiness index".

This index is obtained by all citizens themselves through "post-hoc scoring". Every year, all citizens score the past year, for example, from 0 (worst) to 1 (best). The average of all scores is the "annual happiness index" for that year.

This score is the only metric the system pursues.

2. Decision Engine: Predicting Markets

With a single objective, decision-making becomes simple. When someone submits a new bill (such as "whether to build a new high-speed rail line"), the system doesn't initiate a vote; instead, it automatically opens two parallel prediction markets:

Market A: What is your prediction for the long-term "happiness index" if the bill passes?
Market B: What is the predicted long-term "happiness index" if nothing is done?

Then, the machine waits for the prediction period to end and then looks at the prices in markets A and B.

If the price in market A is higher than that in market B (the prediction is 0.72), the machine automatically determines that the bill should pass. Otherwise, it should be rejected.

The ingenuity of the design

The brilliance of this design lies in transforming "decision-making" from a "political problem" rife with bias and populism into an "information problem" that rewards rationality and professionalism.

In prediction markets, someone who makes random bets ("I don't care, I just hate high-speed rail!") will lose money. Those who truly profit are the ones who can most accurately predict whether "this bill will actually make most people happier in the future."

It cleverly utilizes "greed," allowing the voice of reason, rather than the loudest voice, to dominate decision-making. Of course, the specific mechanisms are far more complex than I've explained; those interested can refer to the paper themselves.

Back to reality

Personally, I think the feasibility of using this machine to govern a country is zero.

Merkel herself also mentioned many difficult problems: such as how to prevent the system from choosing an absurd solution like "giving everyone hallucinogens" in order to pursue high scores? And how to deal with a bill that "has a 10% chance of causing the end of the world"?

Besides these technical difficulties, political friction also means that no political system can possibly apply this solution.

However, if it's not about national governance, but rather some narrower areas, I think there's a possibility that, through appropriate abstraction and carefully crafted conditions, it's likely to be a viable path.

To give a simple example

The neighborhood's "owners' committee" made a decision. Those who value appearances wanted to spend 100,000 yuan to build a useless fountain. Those who prioritize their basic needs wanted to use the money to repair the leaky roof.

In traditional voting, this matter ultimately becomes a matter of "the loudest voice" rather than "the right person" winning.

Applying the "Merkel machine":

Objective: Annual homeowner satisfaction.
Two proposals were submitted to let prediction markets determine pricing:

Market A: What is your prediction for the average "satisfaction" score at the end of the year if the fountain is repaired?
Market B: What is the predicted average "satisfaction" score at the end of the year if the roof is repaired?

Homeowners whose homes are leaking (the true "experts" on this issue) would only have one vote in a traditional poll. But in this market, they are 100% certain that fixing the roof will improve satisfaction, so they dare to bet heavily on "Market B". The system sees that the price (predicted satisfaction) of "Market B" is higher than that of "Market A" and automatically approves the roof repair proposal.

Settlement: At the end of the year, all homeowners gave their ratings. Those whose homes were no longer leaking gave them high scores. The people who bet on the roof repairs won the money that those who bet on the fountain repairs had.

The actual application design may be more complex than this, but the basic logic is as follows.

Essentially, it involves entrusting a highly subjective and open community decision-making process to an equally open, financially driven predictive machine for arbitration. The principle of one person, one vote in democracy hasn't disappeared; it has simply taken a different form to keep the entire mechanism running.

This product could even become a "governance as a service" platform. The platform itself does not determine any KPIs or schemes; it only provides a neutral "toolbox" (such as DAO contracts, prediction markets, and oracles).

Any organization, from industry associations to open-source communities, can register to use it and then "insert" its own unique KPIs (such as "satisfaction" or "downloads") and specific proposals.

The platform is only responsible for running the market and returning the "optimal solution." It acts like a neutral "referee," providing a plug-and-play decision-making machine for all organizations that need to make difficult, transparent decisions.