Conditional Prediction Markets: Each proposal has a conditional token representing “Funded.” If the proposal is indeed funded, that token is redeemable for some amount of collateral; otherwise, it is worthless. For each proposal's conditional token, two tokens: UP and DOWN are minted, which reflect the final metric outcome for that proposal if it is funded.
A Decision Rule: Once the market prices are established, the DAO decides which proposals to fund (and in what combination) based on those prices. Different DAOs can define different rules, such as “fund the top n highest-priced proposals,” or “sort proposals by expected return on metric per dollar asked, then pick until the budget is exhausted.”
CFM process outline
┌───────────────────────────────────────────────────────────┐
│ DAO (or Funding Entity) Launches CFM │
│ - Chooses metric, proposals, timeline │
│ - Mints "Funded" outcome tokens │
└───────────────────────────────────────────────────────────┘
│
▼
┌───────────────────────────────────────────────────────────┐
│ Traders: Beliefs & Research │
│ (Participants assess each proposal) │
└───────────────────────────────────────────────────────────┘
│ Trades
▼
┌───────────────────────────────────────────────────────────┐
│ Conditional Scalar Markets (CSMs) │
│ - One market per proposal (UP & DOWN tokens) │
│ - Prices reflect expected performance │
│ - Aggregates traders’ information │
└───────────────────────────────────────────────────────────┘
│ CSM token prices
▼
┌───────────────────────────────────────────────────────────┐
│ Decision Rule │
│ - E.g., top-n, budget-based, or ROI-based │
│ - Pulls market prices to determine which proposals │
│ are likely to deliver the most value │
└───────────────────────────────────────────────────────────┘
│ Selected Proposals
▼
┌───────────────────────────────────────────────────────────┐
│ Funding Allocation │
│ - n proposals receive funding │
│ - Funded tokens → $1/n; Not-funded tokens → 0 │
└───────────────────────────────────────────────────────────┘
│
▼
┌───────────────────────────────────────────────────────────┐
│ Funded Proposals Proceed │
│ - At resolution date, an oracle (e.g., Reality.eth) │
│ reports the final metric(s). │
│ - UP/DOWN tokens pay out based on the measured │
│ performance of each funded proposal. │
└───────────────────────────────────────────────────────────┘
