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Metalos governance uses prediction markets to make decisions. Community members can create proposals, pledge liquidity to support ideas, and trade on outcomes. This guide walks you through each participation method.
Demo Mode Available: Practice all governance features in demo mode (see User Guides - Demo Mode) without connecting a wallet. Perfect for learning before using real funds.
Creating Draft Proposals
Draft proposals are the first step in the governance process. Anyone can create a draft to suggest changes to the protocol.
Navigate to Governance
Go to the Governance page at metalos.xyz/governance and click "Create Proposal" in the top-right corner.
Choose a Template
Select the appropriate proposal type:
- 🏦 Vault Addition: Propose adding a new yield vault to a risk tier
- 🎯 Priority Signal: Suggest what Metalos should focus on (vaults, marketing, partnerships, etc.)
- ⚙️ Parameter Change: Modify protocol parameters (fees, limits, timelines)
- 🔄 Vault Recategorization: Move a vault to a different risk tier
- 🗑️ Vault Removal: Propose removing a vault from the platform
- 📝 General Proposal: Custom proposal not covered by templates
Each template provides a pre-filled structure with guidance on what information to include.
Fill in Proposal Details
The form asks for:
Title (required)
- Clear, descriptive title
- Example: "Add Aave V3 USDC Vault to Extremely Safe Tier"
Description (required)
- The template provides a structure
- Fill in all sections (Summary, Rationale, Risk Assessment, Expected Impact)
- Include supporting data and research
Supporting Research (optional but recommended)
- Link to your Research Chat sessions
- Include AI-generated summaries
- Reference protocol audits, TVL data, etc.
Use Research Chat to gather data for your proposal. You can link directly to shared research sessions.
Review & Submit
Before submitting:
- Preview how your proposal will appear
- Check all information is accurate
- Ensure you've addressed potential concerns
- Review the template sections are complete
Click "Create Draft" to submit.
Draft Created
Your proposal appears in the Drafts tab as a "Draft Proposal" card.
It shows:
- Your proposal title and summary
- Current pledge amount (starts at $0)
- Thumbs up/down votes from community
- Days remaining to reach activation threshold
Draft Activation Requirements
For a draft to activate and become a live proposal:
| Requirement | Threshold |
|---|
| Minimum Liquidity | $500 USDC pledged |
| Time Limit | 7 days to reach minimum |
| Community Support | More thumbs up than down (optional filter) |
If a draft fails to activate:
- All pledged liquidity is automatically refunded
- Proposal is archived
- You can revise and resubmit
Make sure your proposal is well-researched and clearly written. Poorly justified proposals may not attract enough pledges to activate.
Pledging Liquidity to Drafts
Pledging shows support for draft proposals and provides the initial liquidity for prediction markets.
Browse Draft Proposals
Navigate to the Drafts tab on the governance page.
Review available drafts:
- Read the full proposal details
- Check supporting research
- Evaluate if you support the idea
Open Proposal Details
Click on a draft proposal card to see:
- Full proposal text
- Current pledge amount
- Number of supporters
- Days remaining
- Community sentiment (thumbs up/down ratio)
Pledge USDC
If you support the proposal:
- Enter your pledge amount (minimum $10)
- Click "Pledge to Support"
- Approve the transaction in your wallet
- Your pledge is added to the total
Your pledged USDC is held in escrow. If the proposal activates, it becomes initial liquidity for the prediction market and you receive LP tokens. If it fails to activate, you're automatically refunded.
Vote with Thumbs
Show general sentiment:
- 👍 Thumbs Up: Support this proposal direction
- 👎 Thumbs Down: Concerns or opposition
This doesn't require pledging—it's a free signal.
Track Progress
Watch the draft progress toward activation:
- Pledge amount increasing
- Community votes coming in
- Countdown to deadline
You can pledge additional USDC anytime before activation or cancellation.
What Happens to Your Pledge?
If the draft activates ($500+ reached):
- ✅ Your USDC becomes initial liquidity in the prediction market
- ✅ You receive LP tokens (PASS/FAIL pair)
- ✅ You can trade, hold, or provide additional liquidity
- ✅ You earn trading fees from the market
If the draft fails to activate:
- ✅ Your USDC is automatically refunded
- ✅ No fees or penalties
- ✅ Funds returned to your wallet
Pledging early helps proposals activate faster and shows strong community support. Early pledgers also earn more trading fees if the market becomes active.
Trading Prediction Markets
Once a draft activates, it becomes a live proposal with a prediction market where you can trade PASS and FAIL tokens.
Understanding PASS/FAIL Tokens
PASS Tokens: Bet the proposal will pass
- Worth $1 if proposal passes, $0 if it fails
- Price reflects market's probability of passing
- Example: $0.65 = market thinks 65% chance of passing
FAIL Tokens: Bet the proposal will fail
- Worth $1 if proposal fails, $0 if it passes
- Price reflects market's probability of failing
- Example: $0.35 = market thinks 35% chance of failing
Note: PASS price + FAIL price always = $1.00
How to Trade
Navigate to Active Proposals
Go to the Active tab on the governance page.
You'll see all live proposals with prediction markets.
Select a Proposal
Click on a proposal card to see:
- Proposal details
- Current market prices (PASS/FAIL)
- Trading volume
- Your current position (if any)
- Market depth
- Price chart
Choose Your Position
Decide what to trade:
Buy PASS if you think the proposal will pass:
- Good proposal idea
- Strong community support
- Clear benefits to protocol
- Well-researched and justified
Buy FAIL if you think the proposal will fail:
- Concerns about the proposal
- Missing information or rushed
- Better alternatives exist
- Community opposition visible
Enter Trade Details
In the trade panel:
- Select Buy or Sell
- Choose PASS or FAIL token
- Enter the amount of USDC to spend (for buys) or tokens to sell
- Review the estimated outcome:
- Tokens you'll receive/give up
- Price impact (slippage)
- Trading fees
- Your new position
Large trades may experience slippage if the market has low liquidity. Start with smaller amounts.
Execute Trade
Click "Confirm Trade" and approve the transaction in your wallet.
The trade executes immediately:
- Your USDC is swapped for tokens (or vice versa)
- Your position updates
- Market price may shift based on your trade size
Monitor Your Position
Track your position in the "Your Position" panel:
- PASS tokens held
- FAIL tokens held
- Average entry price
- Current market value
- Unrealized P&L
Trading Strategies
Strategy: Buy the outcome you believe will occur
- Research the proposal thoroughly
- Buy PASS if you think it passes
- Buy FAIL if you think it fails
- Hold until resolution
Risk: You lose your entire investment if you're wrong
Reward: ~2x return if you're right
Strategy: Provide liquidity and earn trading fees
- Pledge liquidity during draft phase (automatic LP position)
- Or buy both PASS and FAIL tokens to provide balanced liquidity
- Earn fees from traders
- Less directional risk
Risk: Lower upside, still exposed to price movements
Reward: Steady fee income, reduced directional risk
Strategy: Buy low, sell high based on sentiment changes
- Watch for sentiment shifts
- Buy when pessimism peaks, sell when optimism peaks
- Take profits before resolution
Risk: Requires active monitoring
Reward: Can profit even if outcome prediction is wrong
Strategy: Exploit pricing inefficiencies
- PASS + FAIL should always = $1.00
- If temporarily mispriced, buy the cheap side
- Profit from price correction
Risk: Rare opportunities, requires fast execution
Reward: Low-risk profits when available
Market Dynamics
How Prices Change:
- Buy pressure increases price
- Sell pressure decreases price
- Large trades have bigger impact
- New information shifts sentiment
- Time decay affects pricing
Price Discovery:
- Markets aggregate collective intelligence
- Price represents community's probability assessment
- More traders = more accurate pricing
- Can be more reliable than polls or votes
Redemption Process
After a proposal concludes (passes or fails), you can redeem your winning tokens for $1 each.
Wait for Resolution
Proposals conclude after the voting period ends (typically 48 hours for real proposals, 5 minutes in demo mode).
The outcome is determined by:
- Futarchy mechanism (price-based decision)
- Or simple vote count (depends on proposal type)
- Or time-weighted market price
Once resolved, the proposal shows "Passed" or "Failed" status.
Navigate to Completed Proposals
Go to the Completed tab on the governance page.
Find proposals where you have positions.
Check Your Position
Open the proposal details to see:
- Final outcome (Passed or Failed)
- Your PASS token balance
- Your FAIL token balance
- Which tokens are winners (worth $1)
- Which tokens are losers (worth $0)
Redeem Winning Tokens
If you hold winning tokens:
- Click "Redeem" button
- Review redemption amount (number of winning tokens × $1.00)
- Confirm the transaction
- Receive USDC back to your wallet
Each winning token redeems for exactly $1.00 USDC.
Losing Tokens
Losing tokens become worthless:
- FAIL tokens worth $0 if proposal passed
- PASS tokens worth $0 if proposal failed
- No redemption value
- Can be kept as memorabilia or burned
Redemption Examples
Scenario:
- You bought 100 PASS tokens at $0.60 each ($60 spent)
- Proposal passed
- PASS tokens are winners
Redemption:
- Redeem 100 PASS × $1.00 = $100 USDC
- Profit: $100 - $60 = $40 (67% return)
Result: ✅ Profitable trade
Scenario:
- You bought 100 PASS tokens at $0.60 each ($60 spent)
- Proposal failed
- PASS tokens are losers
Redemption:
- PASS tokens worth $0
- No redemption value
- Total loss: $60
Result: ❌ Loss on trade
Scenario:
- You pledged $500 during draft phase
- Received 250 PASS + 250 FAIL tokens (balanced LP position)
- Proposal passed
Redemption:
- 250 PASS × $1.00 = $250 USDC
- 250 FAIL × $0.00 = $0
- Plus trading fees earned: ~$20
- Total return: $270
Result: ⚠️ Loss of $230 from initial $500, but earned fees. Would have been better to sell FAIL tokens before resolution.
Scenario:
- You pledged $500 during draft phase
- Received 250 PASS + 250 FAIL tokens
- Sold 200 FAIL at average $0.40 = $80
- Kept 250 PASS tokens
- Proposal passed
Redemption:
- 250 PASS × $1.00 = $250
- Already received $80 from FAIL sales
- Trading fees earned: ~$20
- Total return: $350
Result: ✅ Loss of only $150 from initial $500 (30% loss), much better than holding both sides.
Market makers can reduce risk by actively managing their positions—selling the losing side as sentiment shifts rather than holding to resolution.
Governance Lifecycle
Understanding the full proposal lifecycle:
Draft Phase (7 days)
- Proposal is created
- Community pledges liquidity
- Must reach $500 minimum
- Community votes thumbs up/down
- Either activates or expires
Activation
- Draft reaches $500+ in pledges
- Automatically becomes active proposal
- Pledgers receive PASS/FAIL LP tokens
- Prediction market opens for trading
Active Trading (48 hours)
- Community trades PASS/FAIL tokens
- Prices reflect probability assessment
- Market makers earn fees
- Information accumulates in prices
Resolution
- Trading period ends
- Outcome determined (varies by proposal type)
- Winning tokens worth $1
- Losing tokens worth $0
Redemption
- Winners redeem tokens for USDC
- Losing tokens become worthless
- Proposal marked as Completed
Best Practices
For Proposal Creators
Do:
- ✅ Research thoroughly before proposing
- ✅ Use templates to structure your proposal
- ✅ Include supporting data and analysis
- ✅ Address potential concerns proactively
- ✅ Engage with community feedback
Don't:
- ❌ Submit rushed or incomplete proposals
- ❌ Ignore community questions or concerns
- ❌ Make claims without supporting evidence
- ❌ Propose changes you haven't researched
For Pledgers
Do:
- ✅ Read the full proposal before pledging
- ✅ Check the creator's research and supporting data
- ✅ Start with small pledges to test the process
- ✅ Use thumbs up/down to signal sentiment
- ✅ Actively manage your LP position after activation
Don't:
- ❌ Pledge blindly without reading
- ❌ Pledge amounts you can't afford to lose
- ❌ Forget that pledges convert to LP tokens (both PASS and FAIL)
- ❌ Ignore the market after activation
For Traders
Do:
- ✅ Research both sides of the proposal
- ✅ Consider what information others might not have
- ✅ Start with small positions
- ✅ Monitor market sentiment and news
- ✅ Take profits when appropriate
Don't:
- ❌ FOMO into trades during price spikes
- ❌ Trade large amounts in low-liquidity markets
- ❌ Ignore slippage warnings
- ❌ Hold losing positions hoping for reversal
- ❌ Trade on emotion instead of analysis
Understanding Market Prices
What Prices Tell You
PASS at $0.80, FAIL at $0.20:
- Market thinks 80% chance of passing
- Strong consensus in favor
- Buying PASS offers lower returns but higher probability
- Buying FAIL is contrarian bet with high upside if correct
PASS at $0.50, FAIL at $0.50:
- Market is uncertain (50/50)
- No clear consensus
- High variance in possible outcomes
- Good opportunity for informed traders
PASS at $0.20, FAIL at $0.80:
- Market thinks 80% chance of failing
- Strong opposition
- Buying PASS is contrarian bet
- Buying FAIL is safer but lower upside
Price Movements
Prices increase when:
- More traders buy that outcome
- New positive information emerges
- Community sentiment shifts
- Influential supporters pledge
Prices decrease when:
- Traders sell that outcome
- Concerns or issues discovered
- Alternative proposals appear
- Time runs out with low conviction
Governance Tips
Research Before Participating
Use Metalos Research Chat to gather data:
For Vault Addition Proposals:
- "What audits has [Protocol] completed?"
- "What's the current TVL and APY for [Protocol] on Base?"
- "Show me GitHub activity for [Protocol]"
- "Any recent security incidents with [Protocol]?"
For Parameter Changes:
- "How do other protocols handle [Parameter]?"
- "What's the typical range for [Parameter] in DeFi?"
- "What are the risks of changing [Parameter]?"
For Priority Signals:
- "What's the current Base network TVL trend?"
- "How is user growth for DeFi on Base?"
- "What marketing strategies work for DeFi protocols?"
Timing Your Participation
Create Drafts:
- When you've done thorough research
- After discussing with community
- When you can support it with pledges
- During periods of high community engagement
Pledge Liquidity:
- Early to help proposals activate
- After reviewing supporting research
- When you genuinely support the idea
- With amounts you're comfortable locking up
Trade Markets:
- After researching both sides
- When you have conviction
- During normal market hours (more liquidity)
- Before major information releases
Redeem Tokens:
- Immediately after resolution (get your USDC back)
- No benefit to delaying redemption
Common Questions
Can I cancel my pledge?
Before activation: No, pledges are locked until the draft either activates or expires.
After activation: You receive LP tokens and can sell them on the market, but can't "cancel" the original pledge.
If draft fails: Automatic refund, no action needed.
What if I change my mind after pledging?
Once a draft activates and you receive LP tokens, you can:
- Sell your PASS tokens if you think it will fail
- Sell your FAIL tokens if you think it will pass
- Sell both and exit the position entirely
You can't "undo" the pledge, but you can trade out of your position.
How much can I profit from trading?
Maximum profit: Up to 100% if you buy at the right price
- Buy PASS at $0.50, proposal passes: 100% profit ($1 - $0.50)
- Buy PASS at $0.20, proposal passes: 400% profit ($1 - $0.20)
Risk: You lose 100% if wrong
Reality: Most trades earn 10-50% returns with moderate risk.
What happens if not enough people trade?
Low liquidity markets have:
- Higher price volatility
- More slippage on trades
- Less reliable price signals
This is normal for new or niche proposals. Larger, more important proposals typically attract more liquidity.
Can proposal creators trade on their own proposals?
Yes, but it may be seen as a conflict of interest. Best practice:
- Disclose if you're trading
- Focus on creating good proposals rather than profiting from markets
- Build reputation through valuable proposals
What if I miss the redemption window?
There's no deadline for redemption. You can redeem winning tokens anytime after the proposal resolves, even months later.
Governance in Real Mode vs Demo Mode
| Feature | Demo Mode | Real Mode (Coming Soon) |
|---|
| Wallet Required | No | Yes |
| Real Funds | No (simulated) | Yes (USDC) |
| Blockchain Txs | No | Yes |
| Gas Fees | No | Yes (~$1-5 per tx) |
| Timing | Accelerated (5 min) | Real-time (48 hours) |
| Data Persistence | localStorage | On-chain |
| Redemption | Simulated | Real USDC payout |
Real mode involves real financial risk. Only participate with funds you can afford to lose. Prediction market trading is speculative.
Next Steps
Current Status: Governance features are available in demo mode only. Real on-chain governance will launch after the platform establishes initial traction. Demo mode lets you learn the mechanics now.