Decision Markets

Decision markets are Umia's core governance mechanism. They replace traditional coin-voting and advisory boards with an economically driven process where strategic decisions are priced, not polled.

Key Insight

Decision markets don't ask "what should we do?", they ask "which option will make the token most valuable?". Traders profit by being right, turning governance into an economically meaningful process.

Inspired by futarchy, decision markets are specialized prediction markets that price the expected outcomes of proposed actions. The market that implies the highest token value wins, and the treasury contract executes the corresponding action.

Why Not Coin-Voting?

Traditional DAO governance suffers from well-documented problems:

Low engagement. Distributing tokens to engaged community members is hard enough; retaining that engagement over years is harder. Voting is repetitive, requires free time, and has no direct incentive.
Weak enforceability. When a treasury is not directly controlled by the DAO, coin-voting is little more than an onchain opinion poll.
No economic signal. Votes don't convey how much a participant believes a decision will impact value, they're binary options that reflect politics more than rational assessment .

Decision markets solve these issues by making participation economically motivated. Traders profit by being right about which decisions will increase token value. This transforms governance from a political ritual into an economically meaningful process.

How a Decision Market Works

Market Creation

A market is submitted through the governance interface. A market is composed of one or more proposals. Each proposal includes:

Title and description explaining the proposed action
Supporting materials such as images, data, or external links
Execution logic: a precise, technical definition of what actions will occur on the treasury contract if the proposal passes

Proposals can be created by the founding team (from designated governance wallets) or by the community (as proposal requests that gather support before moving onchain).

Market Opening

Once a market is approved for evaluation, the smart contracts open N conditional markets, one for each proposal, plus a "No-Op" (do nothing) option.

Each conditional market represents the hypothetical future token price if that specific decision were to pass.

Trading Period

Over a defined period (typically 3 days), traders buy and sell conditional tokens in each market:

When a participant deposits tokens into the decision market, they receive conditional versions for every possible outcome. For example, depositing 25,000 UMIA into a three-choice market yields 25,000 conditional UMIA tokens for choice A, choice B, choice C, and the No-Op option.
Traders can then buy or sell these conditional tokens based on their beliefs about which decision will most positively impact the token's value.
This structure allows participants to trade across all conditional markets simultaneously, leveraging their full deposit across all options without opportunity costs.

Price Discovery

Three key pricing elements drive the market:

Spot price: the non-conditional token price in traditional markets, serving as the baseline.
Conditional token prices: individual outcome pricing based on trading activity within each conditional market.
TWAP (Time-Weighted Average Price): averaged pricing over time to prevent manipulation and produce a reliable signal.

Settlement

At the market's deadline:

The winning outcome is determined by the highest TWAP among all conditional markets.
If the price differential exceeds a pre-defined threshold, the decision is considered informative and the winning proposal is executed.
Winning market trades settle: conditional tokens become redeemable for real tokens.
Losing market trades unwind: traders can redeem their tokens as if no action happened. There are no realized losses on non-winning positions.

The threshold requirement ensures that only decisions with meaningfully different expected outcomes get executed, filtering out low-impact proposals with unclear benefits.

Execution

Anyone can trigger execution of the winning proposal onchain. Umia operates a relayer to ensure timely execution even without active community intervention.

What Decisions Can Be Controlled?

Decision markets govern all strategic actions on the treasury through a constrained governance virtual machine that exposes specific callable functions:

Token issuance. Mint or burn tokens through proposals, for raising additional funds, compensating management, or establishing joint ventures.
Team compensation. Set performance-based compensation packages tied to token price milestones, with allocations that unlock at different appreciation levels.
Treasury management. Approve spending beyond the pre-configured monthly disbursement. Any change to treasury allocation requires a governance proposal.
Organizational changes. Update the operating agreement, adjust the team's monthly budget, or modify decision-market parameters.
Company liquidation or dissolution. At any point, a proposal can liquidate the treasury and shut down the organization, the ultimate mechanism for tokenholders to protect their investment.
Strategic spinoff. Projects can propose to spin out from the Umia legal framework toward any form they find best, from completely private to IPO-track.

Withdrawal and Flexibility

Participants can withdraw from a decision market at any point by extracting equal amounts from all conditions. The system maintains a constant 1:1 equivalency between spot tokens and their conditional versions, ensuring full liquidity.

Governance Maturity

During the early phase, Umia retains the ability to supervise active markets and intervene if necessary. Team proposals require Umia approval before going live, and community proposals are relayed through Umia.

As governance matures, Umia's role decreases, ultimately converging toward a fully permissionless model where ventures self-govern exclusively through decision markets.

The Result

Decision markets provide founders with clear, quantifiable signal about what the market believes will increase value. For tokenholders, they provide genuine economic influence over strategic direction, backed by legal enforceability. Both sides benefit from speed: markets resolve in days, not quarters.

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