Should GnosisDAO seek a partnership with Metaculus?
Summary
Metaculus (https://www.metaculus.com) is a very strong online forecasting community, and GnosisDAO might benefit from a partnering with Metaculus to help set initial market odds and decide when to remove liquidity from prediction markets. There might also be secondary benefits from engaging with the Metaculus community.
Disclosure: I am not personally involved with running Metaculus, but I have friends who are.
What is Metaculus
Metaculus (https://www.metaculus.com) is a very strong online forecasting community. It is somewhat similar in function to a prediction market, but instead of trading valuable tokens, users directly input their probabilities of events happening. Metaculus also computes “community forecasts”, which takes a straight average of user forecasts and a “metaculus forecast” which tries to optimally combine user forecasts for the best possible prediction.
It is very similar to the Good Judgement Project (https://goodjudgment.com/), except all Metaculus questions are open to anyone while GJP forecasts only consider the work of those who have been invited as “superforecasters”. Metaculus seems to me to have a much stronger community spirit. I can’t find many comparisons of the performance of Metaculus vs GJP - I know of someone who is a superforecaster on the GJP platform who currently ranked around 80th on Metaculus, which I take to indicate that there are many engaged talented users of the platform.
What could Metaculus offer GnosisDAO?
Two important parameters for GnosisDAO prediction markets are:
- The market starting odds
- When liquidity should be removed
The amount of money lost due to providing liquidity on an AMM prediction market depends on how far the final odds are from the starting odds. If the starting odds are closer to the final odds, the costs of providing liquidity for the market are lower.
Choosing good starting odds and withdrawing liquidity before the final odds have converged too much can reduce the cost of information from running a prediction market. If the markets can be run efficiently, this means that GnosisDAO will be able to afford to run more markets and provide larger amounts of liquidity, both of which can improve the decisions made by the DAO.
Anyone running a market must make a guess at appropriate starting odds, and ideally they should also have a strategy for when to remove liquidity. Making good choices of these parameters is especially critical for high stakes markets where the DAO might want to provide a large amount of liquidity to get highly precise odds.
GnosisDAO could partner with Metaculus by posting market questions to Metaculus a few days before launching a prediction market to extract a credible estimate of starting odds and when the price is likely to cross above or below “impermanent loss boundaries” - relying on these initial estimates would enable GnosisDAO to announce on market creation when it will withdraw liquidity, giving some certainty to traders about when they will be able to sell out of a market.
Metaculus has previously partnered with organisations to run competitions awarding prizes to the best forecasters on a set of questions. I imagine GnosisDAO could partner with them in a similar manner.
Alternative option
Instead of taking opening odds from Metaculus, markets could be seeded with a small amount of liquidity and, after odds have settled, liquidity could be increased.
This has the advantage of being much simpler for GnosisDAO to implement.
Other considerations
Algorithmically optimised crowd forecasts have in some cases outperformed prediction markets (e.g. https://goodjudgment.com/wp-content/uploads/2020/11/Goldstein-et-al-GJP-vs-ICPM.pdf). While I doubt that this would continue to be true in a mature, liquid prediction marketplace (one could always trade based on optimised crowd forecasts, after all), optimised crowd forecasts could still be a valuable way to bootstrap an immature prediction marketplace like Omen/GnosisDAO.
Both the GnosisDAO community and the Metaculus community are excited about making better decisions based on aggregated forecasts, whether this aggregation is via market prices or hobbyist forecasting. Globally, the community that is interested in this topic is still very small. Engaging with Metaculus will bring GnosisDAO to the attention of a sizeable slice of this community.