Evolving Algorand Governance - Governance Discussions - Algorand
Evolving Algorand Governance
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May 2022
post by shaih on May 3, 2022
As we announced last week, the Algorand Foundation intends to bring to a vote in Governance Period G3 (June 2022 voting session), a proposal to evolve governance away from the current focus on just rewarding passive Algo holders.
Starting in G4 (the 3rd quarter of 2022), we intend to grant extra “governance seats” and rewards that favor active participants in the Algorand ecosystem, starting with DeFi participants (and later expanding to other constituencies such as NFT creators, developers, node runners, etc.).
We need feedback from the wider Algorand community as we develop the exact rules that will govern these governance seats and their associated rewards. The feedback that we get will be incorporated into the proposals that will be brought to a governance vote in the June 1st 2022 voting session. From there, changes and modifications to these rules will be brought for vote by the governors before taking effect.
Please use this forum to discuss and give us feedback regarding specific rules. We ask for your guidance on the fundamental questions of who should be considered an “active participant” for the purpose of governance, how to decide if a specific Algorand account belongs to that set, and how many governance seats (and rewards) they should get.
Specifically, for the G4 (Q3 2022) governance period, we intend to have two forms of governance seats: passive Algo holders as we do now, and DeFi participants. Some technical questions that we need to resolve include:
How do we identify accounts that participate in DeFi, and how many governance seats they should get?
How to reconcile changing participation levels over time? For example, how much weight should be given to a vote that happens sometime in the middle of a governance period, vs. how much to use for calculating rewards at the end of the period.
Should we have just a single governance rewards pool that is distributed among all governors, or should each segment have its own rewards pool? (E.g., 50% of the rewards go to DeFi participants and the other 50% to passive Algo holders.)
Below are plausible rules, these are meant as examples to promote discussion, NOT as the final rules that we will use.
- Algo holders who commit to holding their Algos in their account for [three months], would get [one] governance seat for every Algo they commit.
We are asking for feedback here, and the parameters are up for discussion. For example, should we modify the three-month period? Should we ditch the commitment altogether and move to a low-watermark system instead? Etc.
DeFi projects that average at least [$10M TVL] as listed in DefiLlama would be tasked with providing the Algorand Foundation with a list of active accounts and their balances. These accounts will get [three] governance seats for every Algo-equivalent that they hold (using daily average).
Each project will give the Foundation a list just prior to opening each voting session, and another list at the end of the governance period. The voting power of each account will be determined by the former list, and the rewards will be determined by [the minimum] of all these lists.
Again, the above is just an example, quantities above like the $10M TVL and three seats are of course up for discussion.
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post by michel on May 3, 2022
Hi all, this is Michel from C3 Protocol and Rand Labs (AlgoExplorer + MyAlgo).
I wanted to leave a brief note on my opinion as to why this discussion is extremely important.
I believe that the current Algorand Governance tokenomics are materially handicapping the DeFi ecosystem of Algorand. This tokenomics are cannibalizing Algorand’s TVL by creating an extremely high risk free interest rate (9-10% APY) from which the DeFi alternative needs to compete with.
9% might not seam too much, but when taking into account the risk free nature of it (i.e. no smart contract risk, hot wallet risk, etc…) it is a huge floor on a Sharpe ratio basis (Return/Risk ratio). Thus, if institutions where to choose between allocation $ millions into Algorand DeFi, 9% APY with no risk is an extremely better alternative to say 25% APY with smart contract risk and custody risk. Also, remember that the smart contract risk in Algorand is even bigger than other EVM alternatives given how nascent TEAL still is and whales know this.
Therefore, all the Algorand holders are getting inflated to the tune of 280 million new circulating Algos per year to the expense of nothing good but rather direct cannibalization of DeFi and TVL which has been empirically demonstrated to be a leading indicator of price appreciation.
It is for these simple reasons that I believe Algorand Governance should be either shot down all together or drastically modified to change from the current negative incentives cannibalizing Algorand DeFi to positive incentives purely towards DeFi adoption of Algorand. I believe that done right, Governance rewards allocated to DeFi in a fair way can boost the ecosystem to a place where it can compete with other top 5 blockchains. This will be exponentially more effective as many whales and institutional investors won’t want to take the smart contract risk meaning that the APY will be further concentrated into the hands of retail degens who have strong word of mouth from which network effects benefit the most (in comparison to whales/institutions).
Crypto users are constantly seeking APY and it has become the defacto way of acquiring users for blockchains. Therefore, I believe spending 280millon Algos annually towards making users from other ecosystem come and test Algorand’s DeFi and tools by directing those rewards towards boosting APY’s is a much better use of funds and inflation than the current situation.
Happy to hear more thoughts on this.
post by lopezm on May 3, 2022
I find ICP governance to be very practical for both the foundation and the holders.
post by majicman42 on May 3, 2022
I agree that a 9% relatively risk free return is very difficult for DeFi projects to compete with. However, making drastic changes to the existing infrastructure or doing away with governance itself is something that large exchanges, who hold a lions share of the Algos currently in governance participation, are unlikely to support since they have business models set in place that revolve around the current setup. Along with the community, AF will need to work with these exchanges to find a common ground on pushing forward a proposal that reduces the incentives for simply holding Algo but maybe in a staggered approach.
Maybe something like this:
3 different tiers of governance. 1st tier is your standard 3 month commitment, similar to the status quo except that this tier would be capped at a 3% interest rate (or something comparable to the official Fed rate) with a 1.25 seat bonus for DeFi activity. 2nd tier is a 6 month commitment w/ a DeFi activity bonus of counting 2 seats for every Algo committed. Proposing a middle ground tier between the current 3 month commitment and the xGov year long commitment since that is a pretty significant time gap. 3rd tier would be the xGov year long commitment that overwhelmingly passed last round, only users who have actively engaged in the last few Governance votes (we need official Algorand Governance Participation NFT’s please…) are eligible for this tier. These xGovernors get a DeFi activity bonus of 3 seats for every Algo committed, are able to formulate, evaluate and propose measures to be put to vote, and also share a percentage of the fee revenue generated through the protocol transactions. Quarterly votes on new measures would still apply.
post by Algo_Cleanup on May 3, 2022
One concern is the lack of support among dapps for cold storage Currently very difficult to participate in defi if there is no ledger support.
Michel and the foundation make great points for rewarding with compensation and extra votes for those that participate in the defi space.
Two interesting scenarios come to mind.
Rewarding a defi wallet based on the assets held, but this raises the question will the wallet that minted goBTC be treated the same as the one that swapped for goBTC on tinyman?
Rewarding a defi wallet based on the value of the defi assets, but this raises the question of an individual holding lots of LP tokens, clearly participating in defi, but the value may have significantly dropped over the governance period.
Just a few of my initial thoughts.
post by HashMapsData2Value on May 3, 2022
HashMapsData2Value Regular
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+1 to Michel’s comments. I do believe that the exact return might change once we have exhausted the Foundation’s reserves and we start dipping into the FeeSink from the transaction fees, but in the meanwhile DeFi is being affected.
One thing that hasn’t been mentioned here is running a participation node. Accounts that are engaged in consensus are listed as “Online”.
Let me preface this by saying that I do NOT believe that participation node runners should receive rewards for running a node. Silvio has argued this before and it comes down to the fact that the cost is simply too low, the “work” (and hardware required) doesn’t really scale with the Algos staked. We’d be at risk of centralization. (I DO however believe Relay nodes should be rewarded, since running one is very costly. Preferably they should compete with each other to the point that nodes are barely breaking even.)
But I do think if you run a participation node so your account is online while you engage in governance, you should have more of a say. Maybe it should 2x your voting power, or something. This would be a good way to encourage participating in consensus, decentralizing Algorand.
(As always, we need to be careful to do this in such a way that whales dont just split their holdings over many smaller accounts.)
post by defidaddy on May 3, 2022
Governance should always exist as a form of shareholder vote just as regular stocks hold votes. If your holding shares between certain periods, you are eligible.
Now, I agree this isn’t worth much but that is why we have xgov which already passed the vote… this needs to be expanded upon to bring more value to the blockchain as a whole. We do this just like everyone else… staking, and what that means is you must run a participation node. With concerns around defi participation I would concede the longer lock up periods but it is absolutely vital that we start securing and decentralizing the network. We can worry about relay nodes later. They are already paid until a certain date. At some point maybe we make relay nodes another layer of governance with lockups and slashing to incentivize good node running similar to running a validator on ethereum.
So here is what I would like to do as a participant.
- Have my whole stack backing a participation node. This would be a layer of governance.
- Participate in governance voting. Same rules as stocks. Small reward.
- Use something like algofi to do governance so real coins are locked up and receive wrapped tokens to use in defi. Ideally a non permanent loss pool.
I would do all this and be happy with all parts summing up to ~10% apr which anyone can do. This brings much more value than just doing defi rewards or just doing governance. If everyone did this it should count towards TVL and everyone is happy.
Abondoning governance and just handing out money in the form of government subsidies is distasteful and I would avoid at all costs. It only gets messier from here.
post by Gov22 on May 3, 2022
Created this new account, and leaving this comment just as a suggestion : Algo should really take a step back and think about how coherent their brand is… I almost missed the last vote because I never received a notification in my app… plus the app logo changed… plus the app drastically changed ( to pera )… I had thought my account was hacked… No direct communication in advance… No notification… No option to “vote with (majority)” so you don’t lose rewards…
I didn’t even know these forums existed until someone on reddit is linking to them - if you want feedback from the algo community - why can’t I leave this reply right inside the pera app? why didn’t I get a notification that the foundation wants feedback from governors? why was no “Welcome to algorand” email or text or splash page in pera or so on ever happen? Why don’t I know about most of your ecosystem, and why have you put so little emphasis on me ever being welcomed/invited/informed of any of it?
Im constantly told “you have to dyor” and “you have to contribute” and “you have to get informed, get involved” - as if it’s solely my fault that algo feels so fractured in so many ways… Meanwhile, entire counties, entire states, are protesting, rioting even - because someone couldn’t vote - because they didn’t update their drivers license for the last 20 years - and that HAS to be racist…
Anyway - “we are very new” seems to be the overall crypto theme - so many of these issues were never yours to solve in a day - but you really should put more effort into solidifying the “brand” and doing more to get your core community involved further, included better, and informed more meaningfully…
post by LuisERodriguez on May 3, 2022
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shaih](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I am wondering why the governance dapp/smart contract could not read all the smart contracts a user may have opted in to .
. This way, all Algo tokens a governor or xGov holds should count towards governance .
. For any ASAs held, the foundation or through a vote itself, create a whitelist of other tokens that can count towards governance ?
Edit#1: Also note that the high APY is only high due to the number of participating tokens is not high enough. If we automatically count all tokens a user holds in a wallet or locked up in smart contracts then users can collect rewards for both governance and participating in DEFI/games etc, this should solve he issue.
I assume there will be different tier of rewards for xGovs ( time commitment required) versus just voting.
Thanks,
Luis E. Rodriguez
https://www.linkedin.com/in/luis-e-rodriguez-b8969922/
post by nollied on May 3, 2022
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i would be weary of giving too much power to the rich. although any dampening of wealth opens exploits to sybil accounts. to combat this, identity/KYC systems can be employed, but with the sacrifice of permissionless-ness. it’s a delicate balance.
a measure of breadth and depth of governance contribution is important. if you only vote on one item with 10,000 algos soft-staked, you are probably less valuable as a governer than someone who voted on 50 items, yet only soft-staked 100 algos. this of course assumes their depth level is reasonable – ie. they were diligent.
one way to measure this is to hold a peer-to-peer review of importance. the coordinape tool comes to mind, although it can be done in a plethora of ways. these reviews are notoriously hard to get right. beware.
ah yes… allocation of resources for public goods. i’m an active member in the gitcoin DAO and this is a problem we have dedicated workstreams to solve (like for example, the fraud detection and defense workstream that i am a leader in).
we are collectively building the 2.0 version of gitcoin grants where we are adopting a more modular approach for funding allocation. the goal is to provide all of the tools and processes needed to conduct resource allocation (based on the consensus of the community) without sacrificing legitimacy.
i would love to facilitate a collaboration between algorand and our fraud detection and defense workstream within gitcoin for fraud resilient governance fund allocations. this could be amazing!
this is called 1 dollar 1 vote (1d1v) and means that the rich potentially have unfairly amplified voices over the poor majority. we use quadratic funding, although it’s ripe with exploits so it should be proceeded with caution.
post by defi on May 3, 2022
I agree DeFi participation should be the strong factor in governance classification. If the goal is to improve DeFi participation then communication improvements are a must, i.e. an announcement of new tokens or dApps in Pera wallet or an ad on Vestige would be a start.
Greater award will be based on the amount of Algorand held in an ecosystem wallet as well as the extent of dApp use/support. Not everyone has the creativity to design a NFT, coding experience or resources needed to run a node. These skills, should not be a requirement for taking part in governance.
Rewards should, of course, be based on the amount of Algorand held as well as the length of time one is willing to commit their tokens. However, if a minimum commitment is being considered, care must be taken so as not to ostracize those with less resources.
post by algouk on May 3, 2022
Gov22](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I missed the last vote.
For security all my crypto is done on a another computer which is normally switched off and disconnected.
Are mobile apps and the security of my phone sufficient for crypto?
The only way for me to keep up now is by subscribing to the Twitter account.
I was aware of the forum, but I thought it was just for technical issues and devs.
post by algouk on May 3, 2022
How are passive Algo holders rewarded?
Apart from a possible increase of value of the token over time?
I’m committing my Algo every three months and trying to vote on governance.
Should most Algo holders even vote?
As we probably don’t fully understand what we voting for.
Am I in a minority or a silent majority?
post by KennyG on May 3, 2022
Some really great ideas moving forward. I would first just advise to take as much time as needed before rushing out a change to Governance. It’s should be important to remember some of the qualities that Silvio has been pointing out, most importantly, inclusiveness. Creating Tiers may challenge this important aspect of the Algorand we have all come to love.
I think there can be a much simpler way to move Governance toward DeFi platforms without making initial massive changes. Why not run all Governance through DeFi platforms. It is essentially being done now. Stake Algo on your platform of choice for Governance, and then borrow to participate in DeFi. I believe if given more time this would have eventually happened.
Now, platforms should have some parameters. First, participating platforms should support cold wallets. Second, platforms participating in Governance must have PUBLIC auctions for liquidations.
I think this would be an acceptable next step in the evolution of the current Governance system that has been identified as the largest and most successful.
Great discussion. Thanks
post by nollied on May 3, 2022
agreed. these things take time and are brittle.
post by D3G on May 3, 2022
I will start by saying that this is a damn great post and I’m glad someone started this. I am sick of staking and governance systems. The majority of exchanges (these leaches) using the funds of others to participate in every single staking/governance and for this to stop, we need to get rid of this airdrops mentality… Nothing it’s free on this world, and as it was designed Algorand, it doesn’t need to attract billions of tokens staked for security. Algorand needs to attract investors, retailers, etc. through defi dapps, not through a fkn governance system with free Algo airdropped for nothing basically.
post by KennyG on May 3, 2022
Algo_Cleanup](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I agree with Dapps supporting cold storage.
post by cooleydw494 on May 3, 2022
I think this is a great post and very well thought out. I’d point out that governance rewards will continue to decrease and that perhaps some changes could be made via proposals rather than a dismantling from the top down (although exchanges and Algorand Inc will decide right?).
I don’t dislike the governance program and I think that some goals may not be the same for everyone, but to be honest I’m not knowledgeable enough to have an opinion on this. This sounds like a good idea, but Algorand governance also seems to have benefits to me. It does at the very least seem that the TVL argument is correct but I can’t synthesize that into a particularly strong opinion.
In any case, just some thoughts. I appreciate the post and think this is an important discussion as somebody who wants Algorand to achieve the success it deserves.
post by metigue on May 3, 2022
Hello all.
If the question is how do we reward active participation in the Algorand ecosystem to foster growth then I strongly disagree with rewarding participation in currently popular defi platforms with more than $10m TVL
This would only lead to pooling of funds on these already established platforms and make it harder for new projects to break into the space. Why would anyone try a new DeFi platform when they would lose their extra governance votes? It kills the potential for innovation and cements the status quo.
We need to reward all active participation equally or not at all - The problem is we can’t just count the smart contracts someone has value locked away in because not all smart contracts could be considered “active” participation.
I believe the solution to this lies in the auditing of smart contracts - If we included a simple standard flag in TEAL for “This account is actively participating with X amount” that could be added to contracts either by developers but only enabled after a short approval process or only added by approved auditors. This would be better than having a minimum TVL requirement because any project could potentially benefit and it would be easy to widen the scope of “active participation”
post by D3G on May 3, 2022
I rather see the governance rewards and voting power, distributed among all defi projects running on Algo based on their TVL/Ape - Value/Algo contribution, than airdropped for free in a gov. After all, the projects, devs, active users should be rewarded, not exchanges for participating with ur share, neither the lazy VC whales which votes are always pushed in their favor. I really hate these systems designed to grab a penny for nothing. If the only utility of a token, it’s to get u more tokens, than that token it’s useless…
post by KennyG on May 3, 2022
michel](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
So, it’s hard to disagree with most of your comments. I don’t think you can just dissolve the current Governance system. This would be very risky in that most current retail investors are growing weary of the ever-changing Algorand ecosystem. I for one would be frustrated with an immediate change that drastic. It’s already hard to go long in this current environment due to the constant changes. Slowly evolve the current system.
post by cooleydw494 on May 3, 2022
cooleydw494](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I’d also point out that even if there are valid concerns and what seem to be obvious solutions to seemingly obvious perceived problems, that the people behind governance have put a lot of thought and care into it for their own reasons and goals.
Silvio Micali speaks about the difficulty of creating the right incentives for a system to function well and discourage bad actors. Certainly we’ve seen our fair share of bad actors already intention-wise, but it’s worth asking the question of whether TVL is everyone’s primary goal, and if prioritizing it would be detrimental to other goals.
As I’ve said I’m far from a genius on these topics, but for those of you that are, at the very least remember to respect the hard work and serious thought put into this system in the first place by some brilliant minds. The OP was not particularly disrespectful but a few comments seem a little pointed.
post by jaclarke on May 3, 2022
Hi, this is John from Algofi (lending, AMM, NanoSwap). I’d like to briefly offer some thoughts on the Foundation’s proposal to evolve governance.
As a leading L1, Algorand is competing with Ethereum and other alternative L1s. Specifically, Algorand is competing for dApp users / TVL and their developers. Now, Algorand has a strong case that its technology is superior. (1) PPOS is a novel consensus algorithm that will enable Algorand to solve the blockchain trilemma, making the chain scalable, secure, and decentralized. (2) AVM is intuitive and safer to build on. (3) Algorand has never had downtime (unlike some other chains). (4) Algorand’s developer documentation is robust. So, as a developer, if you think these properties are important for your application, you should build on Algorand. But, as we’ve seen, the market is not so efficient and it isn’t just a matter of technology. Large incentive programs can tilt the scales in favor of a given chain if executed well.
Indeed, in the last year, L1s have taken advantage of their treasuries, propped up by marketing and network effects, to deploy large user / developer incentive programs:
- Terra’s Anchor Protocol pays users roughly 20% to lend UST, their asset backed stablecoins (this costs the chain ~$2bn annually after staking rewards)
- Avalanche has committed nearly $500mn to DeFi and multiverse applications through their Avalanche Rush and Avalanche Multiverse programs
- Fantom announced a 370mm FTM incentive program that pays out to developers directly as a function of TVL
- NEAR launched an $800mm grants program to fund ecosystem development with a focus on DeFi. NEAR has also launched a UST competitor, USN
- Elron launched a $1.3bn incentive program to support the growth of its native DEX, Maiar
These programs have greatly benefited their DeFi ecosystems with native token price appreciation more than paying for them. As Michel said, incentive programs help grow TVL which is empirically correlated with token FDV. Intuitively, it makes sense that larger, flourishing dApp ecosystems help their native token appreciate (all things equal). Then the more valuable token can be deployed into other verticals like the ones Shai noted (NFTs, node runners, etc.). It’s critical for the Foundation to take advantage of these early days of DeFi to get users / TVL, developers, and build network effects for Algorand. We need to compete at both the technological and ecosystem development level, not one or the other. The best framework in which to do this today would be to modify Algorand Foundation governance to support DeFi.
I’ll come back with some thoughts on a potential compensation structure and implementation to measure DeFi usage.
Overall, I’m very excited to see the Foundation taking the steps I believe are necessary for Algorand to compete and, ultimately, win the lion’s share of DeFi users and developers. I invite any follow ups, comments, or critiques of my position.
Links:
post by LinxFit on May 3, 2022
I think you need to be careful with this. Trying to tie governance with other projects can cause issues with market volatility. Also I think being in actual governance such as Algorand’s governance isn’t “passive”. You still have to join, you still have to make a decision else you are dropped. There is something that has to happen to also the position is still liquid the person is actively locking the token.
While I understand 1 algo=1vote makes sense and is the easiest to follow. As for time, I think that(time) is the best standard as it rewards the patient and not the ones looking for right now yield. There is a reason token locking and slashing has been implemented in so many protocols, those willing to take the risk are typically willing to contribute.
I think there are several issues and they need to be laid bare in many systems and talked about:
1Q. Does staking an L0/L1 token really help the core ecosystem? Especially if that core ecosystem is limited by scarcity (Limit of total available tokens and limited to unlocked/unstaked tokens)?
1A. From a L1 perspective you would want that token to be used a lot and traded around a lot. Basically your L1 token would be worth the usefulness of your ecosystem. Locking it away in a staking mechanism while may temporarily increase it’s value. That would be lost if lets say a lot of people just stopped staking and started spending.
2Q. Does TVL really mean have value? What would 10M TVL mean if it never moved or if it only moved during a market crash, like we are experiencing now?
2A. Probably not. That TVL is still locked to the wallet that deposited it so it isn’t going to get used unless it is some sort of AMM. I think being able to move volumes cheaply or provide a unique use case would be better to incentivize over pure $ amount. An example of this is lending collateral. Large TVLs because people are dropping their LPs into the protocol and then borrowing more to get more until they reach a certain point where inevitably a liquidation cascade happens.
3Q. Would it be better to lock a token for a certain amount of time, 2w, 1m, 3m, 6m, 1y, 2y, 4y? Maybe cause slashing?
3A. I think people willing to take a risk is a good thing. Locking for a certain amount of time does provide some stability to the protocol. I think you could possibly build a liquid locked staking mechanism allowing your position to still be liquid. Then falling outside the rules of locking causes you to get slashed.
I think there are a lot of possibilities. As for just owning the coin to gain staking isn’t healthy for the ecosystem. I think offering input into gov similar to now, building new/innovative dapps, time holding/active staking, and producing governance proposals would be a more healthy mechanism. I think you could follow all of the above on chain.
post by MarkEllison0 on May 3, 2022
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I agree the risk-free rate of return for governance is too high and it is smothering Algorand DeFi. Just look at the numbers, currently there is $2.6 billion locked up in governance and just $186 million locked up in DeFi.
I think this is very important and needs to be addressed, however, I think this can get very complicated very quickly.
I would propose a simple solution. Instead of needing to worry about governance seats and how to award those, for which participants, and how to track it, how about we cut the governance rewards in half and divert the cut funds to a new program focused specifically on rewarding DeFi users, NFT artists, developers, etc, similar to Aeneas. This accomplishes the goal of keeping governance simple, reducing the governance reward to make DeFi more competitive, and having a new source of funds to incentivize users of the ecosystem. The parameters of this new fund could even be voted on each governance period.
I believe this is the best of both worlds and keeps everyone happy. I understand the desire to change governance fundamentally to be more inclusive, but I think relying on community built solutions like Gard, Algofi Vault, and Folks Liquid Governance might just be easier to run with for those who want double exposure.
post by KennyG on May 3, 2022
jaclarke](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I’m glad you posted. Algofi is an amazing product. Some insight into how Algofi’s Vault is doing would be interesting. Maybe Governance could be done through collateralized vaults, and participants rewarded in the platforms token. Governance Vaults could be standardized modules for any platform designed by the Foundation?
post by Esg on May 3, 2022
Can governors just get paid from transaction fees and
partial from rewards reserve maybe burn part of reserve higher price per algo less rewards needed to keep govenors happy…more defi transactions may= more rewards.
post by Riley on May 3, 2022
There is currently no such thing as a passive Algo holder. Everyone participating in governance has Algo price exposure and therefore market risk and the governance program is no different than a staking pool where one earns a reward for locking up their exposure for a 3 month period of time. The fact that this isn’t currently considered a part of the Algorand TVL is an administrative issue and not a real problem to solve because everyone participating in governance is exposed. There is also a great upward price benefit to people permanently locking up Algos for an extended period of time.
We should not be creating a dynamic between Algo governance participants and other forms of Defi. We should expand governance rewards and increase the hold time significantly so we have extreme upward pressure on the price AND SIGNIFICANTLY increase the incentives provided to the rest of the ecosystem to drive increased utilization on Tinyman, Algofi, Pactfi, Humble, Yieldly, Folks Finance and etc.
We also shouldn’t just assume that all the capital sitting in Algorand governance will just flow to the rest of the ecosystem if the program changes. The capital may permanently leave Algorand because there are people there who have been hurt by the hack in our ecosystem and from the collapse of some tokens prices in our ecosystem. Don’t just assume they won’t leave Algorand.
In summary, we don’t need to create an us vs them mentally in Algorand. The Defi utilization problem, the TVL problem and governance are three separate issues that can be resolved without anyone losing. Algos are not scare resources at this time and we need to make them scarce.
post by HolisticNicole on May 3, 2022
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So, I was asked by Staci W to post some of my thoughts here that I originally posted on a Twitter thread that Michel posted there. When Staci says jump… Ha.
For reference: This Thread
I’m looking forward to an honest and open discussion on this. I’ll be very honest, my gut reaction to this is to be pissed off. Kind of viscerally, I feel like this is a betrayal to the promises and guarantees that Algorand made with it’s widely promoted Governance pathway to 2030. These guarantees are what brought a huge number of people into the algo ecosystem to begin with. As Michel stated, very low risk with huge up-side potential, & a chance to be tangibly involved with a project so promising IS one of those once-in-a-lifetime opportunities that everyone wants to find.
I feel like Governance participation at an individual level is important, if the goal is to have a truly decentralized blockchain. If Algorand still feels that way as well, they have to make it worth people’s time and attention. No one wants Monster Exchange controlling Algorand, but you can’t make it a waste of time for everyone just to try to keep them out of the playground. Governors, by and large, want to help. We want to participate. We want to engage. But many of us are investors, not necessarily blockchain experts or NFT creators. I don’t really think one is more important than the other - just different. If Algorand really is for everybody, let’s make sure we act like it. This draft proposal doesn’t feel like that.
On that note, Governance is brand new. We’re coming up on our 3rd vote this quarter, and 2 out of 3 have been delayed, w/ the proposals changed to introduce sweeping changes to governance, virtually straight out of the gate. After so much promotion that Algorand had the gold standard of governance, shouldn’t we be giving both the governance model AND the ecosystem some real time to function as it was envisioned before so dramatically revamping it? I think it makes Algorand look unstable to do such abrupt u-turns so quickly out of the gate.
Further, the hypothesis that defi platforms could give The Foundation wallet addresses participating on their platforms and their respective balances in return for 3 seats in gov for each algo-equivalent those wallets hold is very concerning to me. Independent companies sharing customers’ engaged wallet addresses and active balances, so that their trading or liquidity is rewarded in exchange for influence? That just sounds shady when I type it.
This is also insinuated in places/posts to be a way to thwart whales & exchanges… do we not remember DENA? These exchanges/whales can and do participate - which is good - but I feel like any kind of argument that this adjustment to the way governance operates will deter them is dangerous and false. I worry that doing this could actually have the opposite effect, and allow whales and exchanges to fully take over governance if they get something akin to triple the seats at the table for each algo, because they “participate in the ecosystem”.
Additionally, tying governance to node running will introduce other complications. Personally, I live in an extremely rural location. No cell service, only satellite internet with slow speeds, high latency, and very, very low data caps. Running a node is not an option for me (as cool as that would be), and a huge chunk of the world population is in a similar situation. For that reason, I’m not opposed to incentives for node runners, just tying it to governance. Just food for thought.
I understand the arguments to stimulate innovation, growth & participation in the ecosystem. Those are obviously critical issues that need to be addressed, and they should definitely, unequivocally be a main focus. However, I don’t think blowing up a plan before allowing it to even try to work & reneging on the vision that was so enthusiastically sold to early supporters is the right way to do that.
I also don’t agree that 9-10% is outrageously high, or that the roughly 4% inflation is so cataclysmic to the price action. I mean, we’re all looking around at fiat right now, right? As a historically traditional investor, even I-Bonds are over 9% now. While the risk:reward ratio is obviously relevant, I think in this case it’s kind of a cop-out. It’s the very thing that was used to spur interest in the 1st place. It feels a bit rug-pull-ish, to be honest.
Lastly, here are my questions. (Warning: Crypto newbie opinions incoming.) Last quarter we voted to start an xDAO. I fully support this. Is there a way to make the actual xDAO a full fledged platform that we could physically deposit our tokens to and lock, similarly to some defi platforms? Could our governance payouts have to ‘vest’ in some way that is actually invested and involved in the ecosystem via this platform before they unlock and we can have full access to them? If not, and these things could only be done through defi platforms, what do we do about forcing people to make their investments vulnerable to security breaches, hacks, etc.? What about hard locks, extended durations of commitment, etc.? I feel like there are solutions that will benefit everybody here… we just have to be creative enough to find them
I’ll step off my soapbox now… I’m looking forward to reading others’ thoughts, though. Cheers!
post by markmc on May 3, 2022
KennyG](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
+1 for “Why not run all Governance through DeFi platforms?”
Today, for a Governor to earn their reward, they must be active, i.e., vote.
Why not expand the eligibility criteria so that a Governor must vote AND participate in DeFi (or hold NFTs / ASAs)?
What if a Governor could only vote tokens that were held in DeFi?
What if every ASA got a vote? Or 10x vote?
post by myshkin on May 3, 2022
This seems like a drastic move just to chase last year’s Defillama success stories. I think it will create perverse incentives and make the reward and governance structures unnecessarily complicated and cumbersome. Eventually, all governance proposals will devolve into a scrum for remaining Foundation cash, ruled by the few with the deepest pockets and loudest voices. Please do not go this route.
post by defidaddy on May 3, 2022
I’ve feel similarly but I was thinking it made sense to incentivize participation nodes. Silvio and other smart people here think otherwise. It doesn’t make sense to me because validators on eth are / will be rewarded about 5% + whatever fees are associated. Why shouldn’t we reward validators?
If we broke down governance into tiers of participation it could be voting, extended lock up periods, and node running (participation/ relay). That could maybe account for 5-7% APR then some of the dapps implement a way to lock up your real Algo while doing the above, and give you wrapped tokens which can be put in pools…. Maybe that’s another 3%. So we get the best of both worlds and still get a good rate.
Strictly giving the majority share of rewards to participants is a weird way to run a blockchain and is short sighted.
If we want to incentive defi the foundation can launch a stable coin program or fund more devs etc. which is not what is being discussed here.
post by permarugbear on May 3, 2022
Fix issues with hardware wallets so DeFi can be safer, no Algonaut that treasures ALGO will use ALGO DeFi without better risk management.
Foundation needs to actively promote to crypto community and not to the general public that knows nothing about crypto. Marketing needs to be targeted, with finite resources adoption needs to be now not 10 years down the line. It’s a noble act to educate the general public and university but remember this is a dog fight. There are L1s popping up every day which claims to be better and adoption NOW is key.
Work with whales (early investors) not to dump tokens - yes, believe or not price action is important. No investor wishes to hold an asset that is risky and has negative absolute returns. Any savvy investors looking at the ALGO chart knows to stay away. If the Foundation are the ones behind selling large amounts of ALGO, they need to think about cutting costs because literally no APY is going to compensate for 90+% drawdown against ETH.
Until those issues are solved changing the current structure is kicking the ball down the line and should be rejected. The Foundation is deflecting the lack of adoption and basically saying its because the APY is too high without comparing to other APY in the crypto market. Yes, 7% is high for traditional investments but believe it or not, crypto is still a risky asset with 50% drawdown (especially for ALGO) time and time again. The Foundation should really do its job and grow demand not by changing the current incentive structure and benefits of token holders but by managing the Foundation and Inc better.
The brutal truth is that Silvio and the tech team has laid the foundation for the team to build on, if there is a lack of adoption it is because current management - don’t try to blame it on anything else.
Hire better economic advisors, change the marketing team from old dinosaurs to ones with crypto experience. Anyone in the Foundation who hasn’t figured the above themselves should also think about going back to traditional brick and mortar business because this is a high growth industry. Other L1 understand it is cut throat competition and has already rolled out killer apps with high APY to attract users. ALGO now voting this ridiculous change taking 6 months to implement and another 6 months for adoption will spell the death of the chain.
post by Iluvmnts on May 3, 2022
Tiered rewards have merit…Exchanges need to be kicked out of governance however possible, if defi provides that path than so be it, their long term interests are not aligned with the success of Algorand. Perhaps the long term rewards and Algo distribution schedule could be reworked. Are we at the crux or some crucial moment in time in the race to being a major L1 with the MC to back it up? We had better figure this out soon with all the light the World Cup will bring and potential lookiloos exploring the system. But I support reworking the system to require greater participation and however possible to get the exchanges out of deciding it’s future
post by defidaddy on May 3, 2022
permarugbear](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Yep. This is just noise. Drone racing, expensive yacht clubs, chess tournaments, Times Square, dumping 14 million in Algo (for the environment, so fucking dumb btw), most of the non dev salaries…. Dumping against the new adoption. The only thing good, because it involved adoption, was this FIFA deal.
post by permarugbear on May 3, 2022
1
and here they are trying to change the incentive structure for current tokenholders, tbh they just need they need to do a better job and stop the dumping. even if they increase the APY to 100% but your token dumps 50% it still makes no sense holding ALGO. fix the fundamental problem of supply and demand, its just maths and I m sure Silvio can figure it out.
artifically pushing people to DeFi is not going to improve the situation if the Foundation and whales keep dumping. build some demand not by just increasing APY but actually doing some real marketing with immediate effect.
FIFA is a good start and even if they dump tokens to sponsor it, it still makes perfect sense. But SailGP, Woman Soccer what is the KPI for measuring the $ spent? Do they even have one?
Turning lights off at Times Square created literally 2 days of discussion then tailed off. How much did that cost and did the number of wallet grow exponentially? So where is the effect of throwing millions on these “advertising” apart from the team taking photos and Algonauts discussing it internally? The media basically moved on to other news, money wasted to satisfy and to prove Algorand is doing marketing. Crazy whoever thought about this concept and the people that approved funding for it.
post by LogioTek on May 3, 2022
4
The Foundation should maintain a Qualifying DeFi List and corresponding smart-contract addresses for each governance period. Qualifying DeFi projects that launch during the period should be updated on the list and their participation should be rewarded at the end of each period.
It’s extremely important to have a path to get multiple seats or increased weights for every type of Algorand user:
passive governance staker: should be able get multiple seats or increased weight if they commit their ALGOs for longer periods of time (1 seat for 1 period, 2 seats for 2 period, 3 seats for 4 periods) - these participants take ALGOs out of circulation and should be rewarded for longer commitments
node operators with sufficient uptime during the period: participation: +1 seat, relay: + 2 seats
Vote weight should be time prorated for voters that casted votes but then disqualified themselves before the period officially ended.
For DeFi participation you could integrate balances over time (i.e. every 24 hours) locked into approved smart-contracts, the balances (i.e. valued in ALGOs based on average price derived from qualified DeFi LPs). You could use a formula something like: (seats/weight) = PerDeFiSum(PerDeFiIntegral((balance sample), (time period)) / ((starting balance) * (period duration))) / (total sum of balances participating in DeFi), this also helps steer people toward legitimate DeFi LPs and staking because if you were for example in LP that got rugged (higher level degen), your balance drastically decreased and you lost your weighting/seats. Yea it gets complicated but if you want to encourage participation you need some rigid rules that are harder to bend.
There are multiple ways to go about it: You could have a single governance rewards pool but each user claims a different weighted share of the pool based on their level of participation OR you could leave the existing 280M/year pool for governance AND allocate additional funding for the ecosystem rewards with least amount of disruption to existing model - yes it would cost more BUT it’s least-intrusive AND it can be stopped when ecosystem matures enough so it’s temporary. The 2 rewards systems would be mutually exclusive and a way to get both with the same ALGOs would be to use governance by proxy in dApps like AlgoFi, Folks Finance, GARD, etc. thus accomplishing the same thing: pushing users to participate.
If possible, I will edit more things as they come to mind later.
I understand what the Foundation is trying to do and agree that increased rewards should be given to users that participate deeper in the ecosystem BUT at the same time a change like this needs to be thought-through really hard and ironed out because it could really back-fire as it would basically reduce expected APY for passive whales that’s why it’s important to give them a path to full expected APY in exchange for longer commitment. If they don’t like the proposal they wouldn’t allow it to be passed at best OR at worst they would liquidate parts/all of their ALGO stake if they can’t get APY they counted on culminating in ALGO price crash.
post by LuisERodriguez on May 3, 2022
Riley](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I agree with this, I am happy to have small portion of my capital participate in DEFI, but I have lost funds several times on DEFI apps. So if rewards from Governance are too low, I would probably just sit on my Algos and only risk a small amount on the new DEFI apps. We should not assume Algos not participating in governance will immediately participate in DEFI. I think the solution is too allow for Governance to count all Algos regardless of what contract they are opted in to, and to whitelist certain ASAs as well. 1 Algo 1 vote without it having to be locked in a Governance contract.
post by joseph.leelloyd on May 3, 2022
Riley](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I think I get the idea of what you’re saying, but how does the upward pressure, as you put it, increase the incentives provided to the ecosystem and drive increased utilization of DeFi apps? Are you saying that increased hold time in governance will have upward pressure on price and FOMO will increase demand for DeFi apps?
post by fifth.race on May 3, 2022
fifth.race xGov Councillor 2025
Thank you for carefully considering this issue. One thing that concerns me personally as someone who would like to participate as an xGov is the difficulty of classifying defi usage and regular gov participation. For instance, during gov1 and 2 I used a ledger backed account to participate and needed to keep some algo back in order to interact with defi. That’s two distinct accounts that I think should be considered for my personal participation in the xGov program. I have been involved with yieldly, tinyman, algofi, pact.fi, gomint and others from day one, but I use separate accounts on each especially during the inception in order to test and become comfortable with the platform.
I think there should be a way for a user with multiple accounts to “claim” ownership of a group of accounts for consideration.
post by joseph.leelloyd on May 3, 2022
So its almost like we need a way to go to a portal and connect wallet or account under each category of Defi, and then it can verify that wallet or account for the activity related to that category. Works for one wallet or account, works for multiple. Integrate with Governance, DEXs, Pera Wallet, My Algo, NFT marketplaces, .algo Domains, Github, discord, twitter, etc. We could even integrate with this forum(add connect wallet to track and reward participation like reddit karma points).
post by rbu on May 4, 2022
here’s what I’m thinking … no need to draw it out in a long response.
Provide DeFi protocols with $10M+ in TVL with 50% of the governance rewards, split pro rata, to distribute as they see fit. No need to complicate this with seats and tiers etc…
More importantly, I would propose an allocation of the governance rewards be provided to DeFi protocols, that meet certain criteria, for the sake of paying for rolling audits. Perhaps the Algorand team could also be considered an auditor so that these protocols would just pay back the foundation (but not obligated to use the foundation’s team).
Security should be focus #1 today!
post by evolutionary-coder on May 4, 2022
As regards to Governance a couple of ideas which come to mind could be :
(A) Reward based on Contribution
The best would be to have different reward tiers for governance, e.g.
Node Operators, dApps developers, DeFi = receive X Algo rewards
Ambassadors, Evangelists = receive Y algo rewards
Passive Stake Hodlers = receive Z Algo rewards
So like this it is an inclusive system, rewarding every participant. The reward will be based on the level of contribution.
(B) Governors vote on Projects
To include governance further and allowing governors to have a say in the Algorand ecosystem, the foundation can also publish a set of projects which requested funding and governors can vote on these.
post by Kentmug on May 4, 2022
Sorry but i dont like this idea AT ALL. Who says that participating in Defi should be the ‘blessed’ activity. This is GOVERNANCE we are promoting here…THAT IS ALL. If an activity such as a certain Defi platform cant garner attention on its own then that is its problem. Bestowing some great benefit to a random utility breeds all sorts of corrupted systems and will only lead to another corrupted way of doing business where a few ‘chosen’ businesses get an unfair advantage…and dont get it twisted…all these dapps are BUSINESSES. Their stock is simply in the form of their own tokens (cover your ears regulators). It is up to governance to guide the algo PIPES not pick winners and losers. Fellow algonaughts KEEP GOVERNANCE PURE.
post by Kentmug on May 4, 2022
fifth.race](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Or we just abandon this silly convoluted idea of ‘participtation’. You should only be rewarded for GOVERNANCE. If you govern properly people will find the infrastuture attractive to build on and winners win on their own merit.
post by Kentmug on May 4, 2022
LogioTek](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Keep ecosystem rewards out of governance. I dont even like this system of picking winners and losers and considering some ‘worthy’ and others not.
post by evolutionary-coder on May 4, 2022
Blockchain philosophy is all about incentive alignment. So if we get it right for Algorand governance, i.e. all parties are fairly incentivised, that will be a big win for Algorand both as a technology platform but also as a powerful community model for incentive sharing.
post by evolutionary-coder on May 4, 2022
Kentmug](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I partly agree regards the fact that dApps need to survive, thrive, evolve or die on their own use case, but if there are no dApps on the Algorand protocol then the protocol is useless. Also business people taking risks of building dApps on Algorand need to be helped, in a structured way. Then they need to stand on their own 2 feet or die. Other protocols offer grants and incentives to developers and entrepreneurs to take the risk and build on their protocol. If Algorand does not help these builders they would build on other protocols. Web3 is the future but it is risky, so any help dApps developers can get is important to kick-start and popularise the protocol. The protocol and dApps success cannot be seen in a decoupled way but the success of one feeds the other. So we must see how we can have the best incentive alignment strategy for all parties involved, whether they are node operators, passive stakers, dApp developers, ambassadors, etc, obviously with the proper checks and balances.
post by No-Cash-7970 on May 4, 2022
Kentmug](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Agreed. The incentives for participating in DeFi and participating in governance are dangerously misaligned. Participation in DeFi, as it is now, is mostly about yield-chasing, not about governing Algorand. On the other hand participating in governance is almost entirely about governing Algorand, and the governance reward system is supposed to incentivize for that purpose.
Also, who says that participating in DeFi is active participation? Much of DeFi participation is staking with some platform, just like so-called “passive” Algorand governance.
post by thezec on May 4, 2022
While I think that rewarding DeFi participants is important, I also would say that one thing that makes governance great is the fact that it is absolutely risk free. I would never trust all my Algos to be committed in DeFi as every DeFi project is still in its infancy and exploits could happen. Nor should a blockchain that wants to be decentralized makes its user having to trust a third party in order to participate - a point that Silvio makes every time he speaks publicly. What I think is a better solution is NOT a reward for DeFi users, but making harder requirements to participate in Governance or decrease rewards - or both.
What I’ve been thinking lately is that with the addition of xGov it could be implemented a system with 2 separate reward pools. 1 lesser pool for Governors who only have to vote and who have the same requirements as of right now, and 1 pooll with xGov. For xGov the only requirements would be to run a node - either a participation, an archive or a relay node. This way nearly everyone who wants to commit to the protocol could set up a node, and node runners would be rewarded. I also would strongly advise the Foundation to develop installers to make it easier for everyone to get a node up and running. That way everyone gains - the users who are involved get better rewards, the network grows more decentralized, the individuals who like the low effort - high security rewards still get some.
I don’t think that rewarding DeFi users is the Foundation job - this has already be done with the Aeneas programm. At the end of the day DeFi projects must find a way to entice users, and the only thing that the Foundation can do to help is making it a little less enticing to simply commit to governance, while still rewarding users who actively help the network grow.
post by umr on May 4, 2022
1
I support the idea of rewarding the users of dApps. To be a good governor, one must also be familiar with the Algorand ecosystems such as dApps.
- Passive governor: 1 seat
- Governor that participates in one of the approved dApps: 2 seats
- Governor that participates through dApp, e.g. Algofi Vault, Gard: 3 seats.
3 seats for this option because there is more risk involved. Also this will increase the TVL dramatically.
We need to figure out a way to exclude the centralized exchange wallets from the governance. Only the exchange benefits, not the Algo holder.
post by Michele on May 4, 2022
michel](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
This is probably the best option.
I would propose to reward people staking assets on defi protocol instead of just rewarding liquidity for example
post by RonanLJH on May 4, 2022
Hello there. Thank you for the interesting feed. For background, I am a Algo user. I am mostly using Algofi and Lofty, also Folks Finance to a lesser extend. I am participating in the liquid governance of both Algofi and Folks. Developing DeFi and the ecosystem in general is a key step for Algorand development. Right now Algorand promote participation in three ways : participation rewards (to be discontinued very soon), governance rewards and Aenas rewards.
With the suppression of participation rewards, gov rewards are what is the closest to company dividends. In that regards, if we look at algo holders as shareholders, I believe that we should stick to the scheme 1 committed algo = 1 vote = 1 reward. To my knowledge, most of PoS blockchains work like that (via a delegation system, for intsance) and it is not preventing the development of the DeFi.
Allowing algos in DeFi to be committed is a great idea. Algofi (vAlgo) and Folks Finance (gAlgo) offer products that solve this issue. Imposing one standard directly at the level of the protocol seems to be going in the wrong direction to me.
That being said having some particular accounts play a particular role in the governance system seems also natural. Going back to the shareholder/company analogy, there are also corporate executives (in our case the Algo foundation) and non-executive directors. Those non-executive director are not directly link to the management but they are often consulted on some issues, have a voting power and receive a sitting fee.
From my understanding, this is what the xGov proposition is about even though the exact implementation is still unclear to me. Could it be possible to automatically allow to DeFi protocols a certain number of xGov seats (or another kind of special governor seat) ?
Determining which protocols have access to it is of course difficult. There should be of course some minimal requirements, for instance that the team has had some kind of doxxing, that it respects some good practice (open source), being on mainnet since n numbers of months and so on.
Then the seats could be attributed based on a percentage of the TVL rather than a hard cap but there should also be away to avoid very small protocol to get dust.
If this works correctly this could later be generalized to other ppl (developers, node runners, creators and so on).
post by Massimo on May 4, 2022
michel](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Thanks Michel! A few numbers: 10.5% was the APY in Q1, 7.5% is the APY now, 4.5% would be APY if all users not yet in DeFi were Govs. We can direct some governor incentives straight to DeFi without killing Governance, which is our path to Decentralization, and without squeezing Governor hodlers.
A very basic example: even just devoting 1/10 of 280M Gov rewards to DeFi Govs means approximately +30% APY to current Defi Govs, and +10% APY even if they triple. We can discuss here to come to a solution which is fair to everyone.
post by D3G on May 4, 2022
1
permarugbear](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
+1 ser, what I’ve seen in the last year was foundation spending massively on worthless partnerships, grants, parties and so on. It was like these were promoted just so we can pomp a few pennies so the whales unload even more, and everyone can track easier this correlation by looking at the charts. Imo the foundation job should be to incentives the built and migration of dapps to Algorand, for this they need to engage with crypto communities more actively and stop the dumb promotions as carbon negative to attract devs and investors. A part of these 280m allocated yearly for gov can be sacrificed for defi dapps. Let’s not forget that Algo is advertised as a Futurefi blockchain and not just as the greenest gov chain. I personally, I considered useless this passive income with the depreciation of Algo 70% over a year, and when you’re seeing even VCs as Scarammuci promoting Algo as a blue chip but on the other hand saying that his holding only 100m from 250m in couple a months, than we have a serious problem around.
Yes Fifa it’s a corrupt system in some ways, but it’s the biggest partnership I’ve seen in 2 years pulled by Algorand and I do hope it’s not just another worthless sponsorship and some usecases will pop up from this one. The impact of this news and the hype it’s in charts and mc, lame if you’re asking me, and it only shows u that what happened in 21 wen Algo pomped without no news, was VCs and early backers game to get their AV faster in a bull run, and it also shows the level of confidence in Algo from investors.
Decipher, Miami, 500m fund announced by Borderless Capital and Co, and still nothing pooped on chain from these, what’s telling u? So, maybe the Foundation should change their approached audience if they really want to achieve dapps and users adoption. Otherwise, we will keep empty the treasury bag by promoting green horses on the walls for whales exits.
post by permarugbear on May 4, 2022
Like Silvio said, all you need is to be good at one thing so the team should focus on 1 fundamental issue to tackle. If it is DeFi then they need to know it requires retail, then focus on retail marketing and promotion but not with the current dinosaur marketing team.
Bottom line, stop spending on promotion from CBDC to Institutions to The World Economic Forum etc. It hasn’t worked and they need to draw the line, asking tokenholders to kiss their reward goodbye is just deflecting the underlying issue. Focus on a topic like DeFi and really work on it because every other L1 has and Algorand is already 12 months behind.
post by D3G on May 4, 2022
I think Foundation and everyone else, should realize eventually that “the tech doesn’t sells itself”
post by Gary1 on May 4, 2022
The “Defi” protocols shouldn’t get more support from the Foundation until they are actually decentralized.
post by pmd on May 4, 2022
Hi all,
I’ve been an ALGO holder and DeFi user for a year. I’m a strong believer in the tech. I also strongly believe that the governance incentives in place completely miss the point.
From a general standpoint, what are we trying to achieve?
We want to create an incentive structure that incentivises ALGO holders to help the ecosystem flourish.
What can it mean? Voting on decisions, participating in DeFi, running a node, creating NFTs…
Where should the focus be?
The main objective is to grow the DeFi TVL since is an obvious correlation between TVL and token price.
The focus should not be on incentivising voting, running a node, or creating NFTs since there are no real problems there. At the moment, the only problem to solve is DeFi TVL.
Should governance be rewarded?
In my opinion, governance should not be rewarded. The reward is the possibility to give an opinion.
What should be the guiding principle for DeFi incentives?
As much as possible, we should rely on the main DeFi players to create the correct incentive structure to grow their TVL. As always, competition will make wonders!
My proposal
- We replace entirely the current governance incentives with DeFi incentives.
- All trusted and big enough (I like the 10mio threshold) DeFi platforms receive incentives correlated to their TVL. They choose entirely how they allocate them to their users.
- These platforms allow users to participate in governance (it’s already the case).
- Since governance is not incentivised anymore, we can simplify the rules around voting. No need for a 3 months balance commitment, we can simply have a rule that prevents users from voting multiple times, such as: you must maintain you balance after the vote for it to be taken into account.
post by permarugbear on May 4, 2022
D3G](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
basically if the tech sells itself then why do you even need the marketing team in the first place. not that the current marketing team has done anything significant for the last 3 years until yesterday.
post by jtinvestsinyou on May 4, 2022
michel](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I agree with Michel!
post by just_a_guy72 on May 4, 2022
Unpopular opinion - but I think someone should say it
I think the foundations proposal to evolve governance is a good one, as we do need a more equitable way to reward active participants in the Algorand ecosystem as compared to passive holders, but I think the focus is too narrow in scope. DeFi and NFTs are two use cases for blockchain that have caused multiple coins/tokens (layer1s and defi projects) to gain significant value in the last 18-24 months, but the use cases have downfalls that Algorand has successfully, thus far, avoided.
We should be focused on attracting the “right” users as opposed to the retail mainstream users who hop from protocol to protocol looking for the highest yield (this is an over-simplification but helps underscore my point). High yields are unsustainable, and when the liquidity programs, governance programs, staking programs, etc run out, you have an outflow of users and capital to the next “hot” layer 1. DeFi is not a long term sustainable model at this point in crypto’s evolution as most users are focused on yield farming and alpha generation as opposed to the financial inclusion and efficiency principals that it touts. This coming from an active DeFi user on multiple Layer 1’s, and as someone who has moved capital from protocol to protocol to capitalize on the highest rewarding liquidity program.
If we want true long-term value to be attributed to the Algorand ecosystem (and thus the ALGO token), it is my opinion that Algorand needs to differentiate itself as an institutionally friendly blockchain and do more to support entrepreneurs and projects that are building new use cases as opposed to use cases that were introduced on Ethereum (NFTs, DeFi, etc) and then copied to other layer 1s. Even though crypto is in a “cool down” period at this exact point in time, institutional interest and adoption has never been higher. People are starting to see past the “crypto = Bitcoin” narrative, more and more intelligent entrepreneurs are starting to build in the space, and more institutions are starting to dip their toes into investing. We are at a critical turning point that will allow layer 1s to differentiate the value add they provide to the broader ecosystem and Algorand has the ability to lead the way due to its ease of use and exceptional tech stack.
Instead I think the foundation should focus on rewarding (i) entrepreneurs and innovators who are challenging the status quo of projects built in the crypto ecosystem, (ii) Active developers who contribute to open source protocols/new use cases, (iii) non-crypto oriented institutions (read: not exchanges) who are focusing on building in the decentralized ecosystem, and (iv) community participants who actively help the brand of the Algorand ecosystem through contribution efforts (almost in a DAO type model). Rewarding DeFi holders and NFT creators, while important, should not be the main focus as we will become susceptible to the same hype cycles that are ongoing within the other layer ones (look at Terra - what use is there for UST besides anchor protocol). These are temporary cycles of prosperity; not necessarily leading to long term accretive value.
Instead lets focus on building an institutional brand around Algorand, focus on promoting entrepreneurs who are exploring new use cases that can benefit from a decentralized model and diversify the participants and capital allocation within the Algorand ecosystem, and focus on getting more participation from current, actively involved community members through workstreams/projects that can be rewarded with ALGO.
The NFT hype train and DeFi hype train are great for short term value addition, but do not equate to long term user attrition, developer attractiveness, or institutional adoption. In my opinion, those will be the key fundamental value drivers that will create ecosystem value.
This is where I would put a bunch of rocket emojis
post by Algorand411 on May 4, 2022
jaclarke](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
+1 couldn’t have put it better
post by Conscious on May 4, 2022
Conscious xGov Councillor 2025
1
I’ve written a long proposal viewable and formatted better here:
post by KennyG on May 4, 2022
Riley](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Great comment! How can we include Governance in TVL? My suggestion was to run Governance through DeFi platform vaults. Then holders can participate in DeFi if they chose and the Dapp registers the TVL.
post by JonP on May 4, 2022
I’d love to see some progress evolving governance.
Firstly the foundation is spending 70,500,000 Algo to ask 57,221 Governors an A or B question, that’s on average 1,232 Algo per Governor, it would literally be cheaper to pay a human to go to their house and ask them in person, it feels like a very inefficient system for that reason.
Secondly I agree that having a risk free rate of 7-10% drowns out the possibility of defi competing. What I’d love to see is a system where you can be both a governor AND use your tokens for defi simultaneously.
Thridly a suggestion I’d like to make is giving people 0.001 “Gov tokens” each time they make a transaction. That way the people who use the network can be the ones who vote on what happens to it and no locking is required.
Good luck with working on it
post by oysterpack on May 4, 2022
Heading link High Level Design Proposal
Design Goals:
- Link Governance rewards distribution to DeFi KPI metrics
- Empower and incentivize DeFi projects to innovate, grow, and add value to the Algorand ecosystem
Heading link New $GovALGO Reward Token
Two tokens are used for Governance seats with different weights: $ALGO and $GovAlgo. For example,
- 1 $ALGO = 1 vote
- 1 $GovALGO = 10 votes
$GovALGO is modeled as a loyalty reward token, e.g., airline miles rewards that can be redeemed. In this case, $GovALGO is redeemed for votes and Governance rewards.
Heading link High Level Design
- DeFi projects reward participation using $GovALGO.
- Governors can commit $ALGO and/or $GovAlgo to Governance
- When $GovAlgo is committed to Governance, then it is returned back to the pool.
- Governance commitment is a hard commitment enforced by smart contracts. Governors can withdraw with the following penalties: All $GovAlgo rewards are lost. A 10% $ALGO exit fee is applied and added to the Governance reward pool.
Heading link Benefits
- No change is required to the reward pool size. DeFi projects are free to innovate and integrate with Governance, e.g., AlgoFi vaults, Folks Finance liquid staking, AlgoGard vaults.
- This process aligns Governance rewards and voting power with the level of DeFi activity. Active and engaged defi Governors will be rewarded with greater voting power and with a greater share of the Governance rewards.
Heading link DeFi Project Roles and Responsibilities
- Projects must apply to be accepted into the $GovALGO program. They must be approved by Governors with a 2/3 majority vote.
- Each approved project is allocated a base budget. The project’s budget will be aligned with KPI metrics: TVL, on-chain value, accounts, transaction activity, etc. In turn, projects may delegate to their project Governors how to best make use of the $GovALGO budget to promote growth.
- Proposals may be submitted to expel projects from the Governance rewards program. A 2/3 majority vote will be required to expel projects.
- Projects are required to be fully transparent. Standardized reports on KPI metrics and $GovALGO distribution must be published quarterly.
Heading link Final Thoughts
The proposed high-level design is simply that. It is a starting point to model a solution. There are many details and specifics that require more thought and a deeper dive. The devil is always in the details.
post by KennyG on May 4, 2022
just_a_guy72](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Why can’t we do both? In my opinion, the Foundation has mostly been focused on institutional investment. I would say in the last 9-6mo they started focusing on Retail. Why? Retail investors do more that just hype the best yielding L1. They bring awareness, which brings innovation, growth and most importantly talent. Hivemind may be a good example, and what are the focused on? Gaming. I understand your long term point of view, but maybe we are in a race to capture innovative talent. Its not coming from institutions. Talent is leaving institutions to come into a retail driven space.
post by KennyG on May 4, 2022
oysterpack](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I like this and think it would be a great starting point. While I worry about creating Tiers, these ideas are more acceptable. Nice! thank you
post by pmd on May 4, 2022
michel](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Fully agree with @michel.
A very basic example: even just devoting 1/10 of 280M Gov rewards to DeFi Govs means approximately +30% APY to current Defi Govs, and +10% APY even if they triple. We can discuss here to come to a solution which is fair to everyone.
I really don’t think it’s the right way to think about this issue. The point is not to be “fair to everyone”. It’s to allocate our resources where they will have the most impact.
The fact that we currently incentivise governance should not be taken into account. We should not be driven by inertia.
Governance is an interesting concept and one we should keep. The question is: should it be rewarded?
My conviction is that rewarding governance is useless and that we should allocate 100% of governance rewards towards DeFi.
post by oysterpack on May 4, 2022
michel](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I agree with everything you said, except for the part about doing away with on-chain Governance.
I don’t think it is hard to align Governance financial incentives with DeFi ecosystem growth … high level design proposal
post by AlgoTrillion on May 4, 2022
1
Hello everyone,
This may echo some existing comments but these are my thoughts on the general governance questions.
Governors should be primarily motivated by the role of governance, not attractive low risk returns.
If they are participating in governance primarily for financial return then how much serious consideration will they give to voting and proposals, as opposed to not voting, voting with the foundation or the simple majority. This is not effective or nurturing of robust governance.
Additionally, I was concerned by the potential consequences of having xGov status that is basically “pay to play”, the more ALGO I commit the more weight I have to control the narrative by setting voting topics. This structure does not honour the principles of decentralised governance and particularly the ethos of Algorand’s model.
For these above reasons, I think that governance should be:
- A longer commitment (1yr)
- A fixed ALGO commitment per governor
- Penalties for breaking governance
- Fixed annual reward which represents attractive compensation for the job
This will dramatically reduce the number of people interested in governance but my expectation is there will still be a very healthy number of people, myself included, who would like to maintain the status of governor and actually do the job of governance.
Under the above model, the current resources allocated toward governance rewards (280M/yr) would be largely intact to be deployed in other ways. I believe there should be a number of areas:
Node operators – we should be incentivising the continued decentralisation of the Algorand network so resources should be allocated to reward node operators. Perhaps weighting rewards to new nodes coming online and then tapering off so the cost of setting up a node can be recouped over a realistic time period.
De-Fi participation – Growing TVL through active De-Fi participation is hard to argue with and the bulk of the existing governance rewards should be routed in this direction to reward the most committed De-Fi users. However, I have a few caveats.
Firstly, who decides which De-Fi platforms will be allowed to participate in this because having these rewards will act as “king maker” in what should be a free market dynamic.
Secondly, having these rewards to offer will increase the success and therefore the profitability of these De-Fi platforms which are privately owned enterprises. What commitments will they need to agree to in order to participate, for example, providing grants that give back to the community development or ensuring added security through insurance provision, bug bounty schemes, treasury accruals etc. - this shouldn’t be a free lunch for the De-Fi platforms.
Finally, resources should be retained to promote these rewards outside of the ALGO community. My impression, at least early on, with the Aeneas program is that it has mainly shifted the existing users around as they look to mop up the available rewards. Any new long term reward scheme has to make attracting new money its first priority and that means investing in proper promotion to other chains and off chain.
Passive ALGO holders – if an elegant solution can be found which offers a sufficient APR that bears comparison to other chains then rewards for passive holding of ALGO should be returned. If there are not sufficient resources to provide an attractive APR then we should not do something that can be used as stick to beat us with.
post by LuisERodriguez on May 4, 2022
myshkin](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Agreed on this. Participation on DEFI should not be forced. But governance should not override incentives to participate on DEFI. So the solution should be to count all ALGOs in governance including ALGOs held in other smart contracts, or ASAs.
post by ARO on May 4, 2022
I have used AlgoMint, Algofi, TinyMan, etc., and I have helped out with beta testing some projects. I’ve also been involved with governance since the beginning, and I’ve been an Algo holder far longer than that. That having been said, I am concerned about what is being proposed.
First of all, what is governance supposed to actually be? The governance page states “Earn rewards for your participation in the decision making.” Not, “Earn rewards for participation in DeFi.” So I think that we are possibly fundamentally straying from the purpose of governance with what has been proposed, and instead we are developing another Aeneas Program that is blended with voting.
I think that before we can address your question, we first need to clearly explicate what the ultimate goals of the governance program actually are. Do you just want to get as many votes as possible? Why do you want voters who are active DeFi participants? Personally, I would rather have a smaller number of thoughtful voters who are active on boards such as this determining the future of Algorand, versus 100,000 users pressured into DeFi and clicking “A” or “B” just to receive payment. If the reason is simply ecosystem health, then maybe we have to question the fundamental idea of locking Algo for voting, versus an active incentive program. Again, without clearly seeing a list of all of the major goals of governance listed in one spot, I have a hard time saying what I think is the best course of action.
I strongly urge the foundation to pause the drive towards these changes, and instead have a thoughtful, honest conversation with the community that doesn’t just ask for rules, but actually lays out clearly stated goals of governance and challenges that we now face. Then, we should have a serious conversation about how to best achieve those goals, and whether governance is even the appropriate mechanism for achieving some of the objectives.
post by jackiealley2 on May 4, 2022
jackiealley2](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
thinking I need to learn more about, thank all of you for all your work
post by michel on May 4, 2022
pmd](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I agree with @pmd, the discussion should focus on how inflation should be allocated into what can generate the most impact towards Algorand adoption. Any solution where not a single Algo is going towards inactive, non-value add stake is a much better one to the current system.
post by TJay_Sez on May 4, 2022
Hello everyone, I’ve never been a part of any governance before so this is a really cool experience and I’m no big bag holder by any means but I plan on being one day! That being said, I think it’s awesome that I was even eligible to be a part of this. I will say a lot of the stuff I’m reading here is EXTREMEMLY insightful and I can tell these are things that have been weighing on every one of you. So far I have to say I agree with the ideas that are trying to get AWAY from anything involving rewards to zero-value add stake. Adoption is key and if we can implement the ultimate hedge against inflation while also incentivizing active participation in the ecosystem; that’s what I’m likely to be supporting.
post by nsalgo on May 4, 2022
As someone who falls in the middle I feel we need to come to beneficial compromise. I came for the staking rewards and ventured into DEFI, but not risking my entire bag to hacks and rug pulls. I do both at a responsible level. We need holders and risk takers to make this work.
post by GoalDarn on May 4, 2022
While I agree that the current Governance rewards structure doesn’t incentivize active participation beyond voting, I don’t like the idea of DeFI participation being linked to rewards (‘official’ rewards—of course you can still get yield).
I do like the idea of incentivizing active participation in Algorand, but I don’t think focusing on those who add liquidity to DeFI is the answer. I think it could have unintended consequences and lead to neglect in other areas, and might lead to a very unnatural DeFI ecosystem where instead of cause (adoption) leading to effect (healthy DeFI/TVL metrics), one tries to mimic the effect and hopes it somehow brings about the cause. I would have no problem taking some significant Governance rewards away from Governors (that’s me too!) in order to aggressively advertise specific dApps to parts of the public, or to help assist in developing useful dApps to begin with so there exists something to market, but choosing “any DeFI with over $X TVL” as “the winner” doesn’t resonate with me.
Also, there is still no motivation for people to run consensus nodes beyond pure altruism, which seems important, so is there a way to add that requirement to Governance on top of the locking and voting requirement?
post by Conscious on May 4, 2022
Conscious xGov Councillor 2025
nsalgo](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Read my proposal here: I think you would like the strike in balance between DeFi and holding Algo in the wallet.
post by HolisticNicole on May 4, 2022
AlgoTrillion](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Excellent points. I especially like your ideas regarding governance model adjustments. I don’t feel like these adjustments are massive breaks in the overall spirit or idea of Algorand, but they adjust current function to address flaws in the system as it operates right now. This is a concept that I believe could be worked with. Thanks for posting this!
post by HolisticNicole on May 4, 2022
This. This is the center of this issue. Your entire post is 100% spot on. We aren’t discussing just altering governance with this proposal. We are discussing a fundamental break with the core objectives of governance. This is serious, and I think it warrants much more thought than 2 weeks, last minute, as a substitute to whatever they had planned for a vote prior to this.
Kudos on such an excellent, well articulated post.
post by TJay_Sez on May 4, 2022
I agree 100%. Governance is important for trust in this space and the only way forward (that benefits holders) is a REAL discussion on weather the original intent of governance in the first place is even still in sight here. We need not focus on how high of pressure we can put on the defi space to bolster our price. We need faith, security, trust, and true governance by and for the community if Algorand is going to be the stated currency it was intended to be.
post by jmob on May 4, 2022
I agree with Michel but I have some reservations. Yes, it’s hard for defi to compete with no risk holding through governance. However, I am in governance because defi has so many problems. Mainly, they get hacked a lot. I’ve invested a lot of money in Algorand and to think that an error in a smart contract could wipe me out is just unacceptable,
Frankly, it’s a big ask when you consider the poor price action algorand has delivered thus far. It’s a catch22. People, are in fact holding and not taking risks.
What I want to see and what I want to feel is certainty.
If you want people to participate in defi, you have to foster a space that can be trusted. Stop verifying ASA’s that are rug pulls. KYC should be mandatory for verification. Until that happens there is no way in hell I would ever participate.
That being said, I love Algorand.
post by oysterpack on May 4, 2022
HolisticNicole](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I think folks are missing the big picture.
Heading link What is the mission?
The mission is to maximize ecosystem growth and decentralization.
Thus, the question boils down to: Should more $ALGO be allocated to Governance rewards or DeFi rewards? The question is then: What creates more value for Algorand? What is more aligned with the overall mission? DeFi economic activity creates significantly more economic value. Thus, financial incentives should be significantly greater for DeFi vs Governance.
Heading link Simple Solution: Less Goverance Rewards and More Aeneas Rewards
Let’s lower Governance rewards by 75% and moving those funds to the Aeneas Liquidity Program … and call it a day. As a positive side effect, this reduces the wasted rewards that are sent to centralized exchanges.
Note: this has nothing to do with xGov. We should proceed with xGov as planned.
post by majicman42 on May 4, 2022
jaclarke](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
John, just wanted to say that I really love using Algofi, such a great platform. Have you guys considered incentivizing ACATs In transfers to Algofi from other chains with additional rewards or a one time bonus payout depending on the amount and time period (eg. 3 months) for the funds transfer? I think this would be a great use of some of the Governance rewards pool if it was used to bring more people into the Algorand ecosystem.
post by javier0rosas on May 4, 2022
michel](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
@michel could not have said it any better. Deploying governance rewards through DeFi to reward developers and true believers who are willing to take smart contract risk for high APYs (also known as degens) is the right move. This will increase TVL and incentivize more developers to come into the ecosystem, creating a self-reinforcing network effect and hopefully causing more demand for $ALGO, which has been underperforming over the past 6 months relative to the Altcoin benchmark.
For some context, here is a graph of ALGO-PERP vs ALTCOIN-PERP over the past 6 months.
\ Screen Shot 2022-05-03 at 10.09.43 PM1920×1200 114 KB](https://us1.discourse-cdn.com/flex016/uploads/algorand/original/2X/2/285064df13cd21c0d2a9a38afef376da3132f34e.jpeg "Screen Shot 2022-05-03 at 10.09.43 PM")
Clearly, $ALGO has been underperforming the benchmark and this is unnacceptable given our superior-tech and novel consensus mechanism. Web3 developers should be flocking our ecosystem like crazy, but they are not (partly because Algorand is not EVM compatible), but partly due to the lack of governance & stablecoin incentives that other blockchains like Terra are hammering down on.
post by HolisticNicole on May 4, 2022
Yes. But I don’t believe sacrificing governance is a good idea, and if we transfer the algo distribution to effectively just pick winners and losers, are we really creating more decentralization, or less? Honestly, I think the answer (at least in part) is that governance needs to be given more to do, and have more “stroke” over decisions and direction. Maybe ultimately this will happen, but right now I think it’s largely unimportant… which is really too bad. I think instead of tying governance PARTICIPATION to DeFi, maybe we should look at tying the REWARDS to DeFi. Rewards issued through a defi platform smart contract, staked or providing liquidity and locked for a pre-determined amount of time (6 months? 12? I mean, maybe even longer! I’d lock my rewards for 2 years.) before they can be claimed. That gives you 280 million coins/per year that are REQUIRED to participate in DeFi, without altering anything else - including the vision or roadmap of governance. It would also prevent taking rewards and immediately dumping them - especially by exchanges.
Totally. And I think something needs to be done about this issue. I don’t think anyone is under the illusion that exchanges are going to vote with the best interest of Algorand in mind. For the love… Coinbase won’t even display $algo on a Top Movers list or post news/announcements (ZERO mention of the FIFA deal, which had to be one of the biggest announcements in crypto of late). Is there some way that Exchanges could be made ineligible altogether? Ultimately, they’re really a big part of our problem in a lot of ways.
post by fig on May 4, 2022
1
First off, excited to see folks jumping in here.
Algorand is in need of greater discussion surrounding governance and more visibility among the wider Web3 ecosystem - this is a great first start.
Passion is important but I would caution against a complete redesign of token economics. This change can be messy and complex, including arduous smart-contract work.
While the original sentiment is well-intended @michel a high reward on Governance is a great way to onboard new users to the network. It is similar to the other L1 incentive programs outlined by @jaclarke
I do agree however it may throttle and deter use across Algo-native DeFi protocols. Exploring a solution seems beneficial. Let’s look at some data to inform our decisions:
A whale, as defined by the top 0.5% of all accounts, participates at lower levels in DeFi.
95.5% of whales have not swapped on DEXes. Please see the distribution below:
\ 1416×964 50.7 KB](https://us1.discourse-cdn.com/flex016/uploads/algorand/original/2X/6/64219115e5de044e644c004c021df05ebaa73a80.png "")
You can take a look at the in-depth analysis here: Flipside Crypto - Algo Whale Swaps
Second, let’s look at rewards distributed via Governance for Period #2: Flipside Crypto - Governance Period 2 Payouts - Daily (unable to include embed because user level )
Looks like the average reward is 10-50 ALGOs, with 10,571 wallets receiving this amount.
Have we thought about 25% of total governance rewards being distributed to DeFi protocols? Based on past rewards this would be around 12,000,000 ALGOS. 50% would be 2x this number.
Returning to the OP - my fear is an approach like this seems very game-able:
It is reminiscent of “airdrop farming” - where users enter during a certain block to receive 3x rewards and withdrawal soon after the snapshot or time of capture.
This however, is doable, and Flipside Crypto can help with this if you decide to pursue it:
If you want to look into this list as mentioned above, we have the data that could be used to identify wallets that have engaged in DeFi activity.
A guiding question around DeFi participation & risk-reward: Does an extra 5% from staking incentivize one of these whales enough to participate in DeFi and take on smart-contract risk?
Excited to continue this important discussion.
post by Massimo on May 4, 2022
majicman42](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Thanks for the great discussion on this first day. Answering to @majicman42 because you may appear off track, but I think you are not. The main purpose of this discussion is getting as much as possible what @majicman42 is already doing: users talking directly to developers and entrepreneurs to find ways to bring more and more users to Algorand.
We are a decentralized ecosystem and this is what we all want. This is also why we have a Decentralized Governance, that needs to be more and more decentralized. As long as the Foundation has a role, we commit to help. We all agree here that we want Governors that are ready to bring value to Algorand, and reward them consistently, this was the spirit since the very first Silvio’s blog. Fortunately things have evolved since then and we see from this debate that we have different choices, even if I find that attention to DeFi is largely shared. Finding the right balance is the purpose of the initial questions we posted, and for sure @javier0rosas, we want to see the green line back to the right place.
For those who asked about xGovs, we have been working on that as well and will bring them soon to the discussion.
post by No-Cash-7970 on May 4, 2022
just_a_guy72](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
Thank you for saying what I’ve been thinking and been wanting to say but in a far more eloquent manner than I ever could.
post by oysterpack on May 4, 2022
HolisticNicole](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
You gave me an idea … I still favor reallocating rewards from the Governance bucket over to the Aeneas bucket, but I would change Governance to liquid staking (like Folks Finance but zero fees taken). ALGO liquid Governance provides the following benefits:
- It enables the Governance $ALGO to be counted towards TVL
- It unlocks the staked ALGO value for DeFi
post by ARO on May 4, 2022
If @Massimo, @shaih, or anyone else at the foundation has a document that already clearly lists these somewhere within it, please just provide a link and I’ll read through it. Thanks!
post by HolisticNicole on May 4, 2022
oysterpack](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I’ve heard of Folks Finance, but I’ve not made it over to use it yet. Would you mind explaining what makes their approach unique?
post by oysterpack on May 4, 2022
Folks Finance explains it well: Algo liquid governance.
Folks Finance charges a fee for the service - 5% of the Governance rewards goes to the Folks FInance treasury. The Algorand Foundation version of Algo liquid governance would function the same way minus the fee.
post by D3G on May 4, 2022
It doesn’t happen the same thing now with the gov, 100k apes voting for A or B . And imo, the all point of decentralization it’s not to have just a hand of ppl to decide for everyone.
post by Rambutan on May 4, 2022
2
increase lock up period for governance to yearly basis instead of quarterly. Make governers run nodes or participate or do something besides just lock up tokens to get rewarded. - but whatever you ask them to do, you need to provide full tutorial videos on how to do it, step by step and I mean step by step. Like teaching a monkey. Assume users don’t know how to shut down a computer. This level of tutorial is needed if you going to make governers do whatever they have to do.
all liquidity providers on tinyman should get additional rewards. - have different tiers. Someone who has been providing liquidity for 4 months should be rewarded more than someone who has provided liquidity for 1 week. (Impermanent loss is a real issue so rewards for LPs is ideal).
Reward each LP address proportionate to their LP tokens.
Focus on making 1 main defi platform successful to the masses - tinyman is best, easiest to use, safe, secure, solid - we don’t need 5 different defi platforms - this will just lead to fragmentation. Encourage users and LPs to hop on tinyman.
Make tinyman the go to DEX of Algorand for users, institutions, banks etc.
post by ARO on May 4, 2022
D3G](https://forum.algorand.co/t/evolving-algorand-governance/6646 "Load parent post")
I have concerns about the current system too because I don’t like pressuring people to vote. I would like to think that the vast majority of current governors actually do care, but I’m sure there is a percentage who put virtually no thought into the vote and simply click to get the rewards. I fully support making voting as accessible as possible for people who want to do so.
post by dmclancy on May 4, 2022
1
@shaih , how has the Foundation studied other forms of stakeholder governance that leverage dual-class voting structures (ex. founder shares in the US, super voting shares in France, voting shares in Brazil) and the impact on rights to future earnings? Is there something to read about the major influences on the xGov proposal?
My primary concern with further stratifying direct economic incentives to vote is that it would further entrench larger players and that the administration will become increasingly complex. Both could be centralizing forces.
I agree with the DeFi builders in the ecosystem ( @michel) that they should not be forced to compete with the Foundation on yield.
post by GoalDarn on May 4, 2022
Strongly agree with that.
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