# Evolving Algorand Governance **URL:** \ **Category:** Governance Discussions\ **Tags:** defi\ **Created:** [May 3, 2022, 6:58pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646 "2022-05-03T18:58:49Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![HolisticNicole](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/holisticnicole/32/1871_2.png) [@HolisticNicole](https://forum.algorand.co/u/HolisticNicole)\ **Post date:** [May 4, 2022, 4:31pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/83 "2022-05-04T16:31:11Z")
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! ---
**Author:** ![HolisticNicole](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/holisticnicole/32/1871_2.png) [@HolisticNicole](https://forum.algorand.co/u/HolisticNicole)\ **Post date:** [May 4, 2022, 4:36pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/84 "2022-05-04T16:36:37Z")
> [@ARO](#): > > 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. 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. ---
**Author:** ![TJay\_Sez](https://avatars.discourse-cdn.com/v4/letter/t/90ced4/32.png) [@TJay\_Sez](https://forum.algorand.co/u/TJay_Sez)\ **Post date:** [May 4, 2022, 5:15pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/85 "2022-05-04T17:15:37Z")
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. ---
**Author:** ![jmob](https://avatars.discourse-cdn.com/v4/letter/j/8e7dd6/32.png) [@jmob](https://forum.algorand.co/u/jmob)\ **Post date:** [May 4, 2022, 5:20pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/86 "2022-05-04T17:20:07Z")
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. ---
**Author:** ![oysterpack](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/oysterpack/32/1866_2.png) [@oysterpack](https://forum.algorand.co/u/oysterpack)\ **Post date:** [May 4, 2022, 5:27pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/87 "2022-05-04T17:27:59Z")
I think folks are missing the big picture. ## 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. ## 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. ---
**Author:** ![majicman42](https://avatars.discourse-cdn.com/v4/letter/m/e47774/32.png) [@majicman42](https://forum.algorand.co/u/majicman42)\ **Post date:** [May 4, 2022, 5:31pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/88 "2022-05-04T17:31:45Z")
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. ---
**Author:** ![javier0rosas](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/javier0rosas/32/1578_2.png) [@javier0rosas](https://forum.algorand.co/u/javier0rosas)\ **Post date:** [May 4, 2022, 5:34pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/89 "2022-05-04T17:34:56Z")
@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 PM](https://us1.discourse-cdn.com/flex016/uploads/algorand/original/2X/2/285064df13cd21c0d2a9a38afef376da3132f34e.jpeg) 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. ---
**Author:** ![HolisticNicole](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/holisticnicole/32/1871_2.png) [@HolisticNicole](https://forum.algorand.co/u/HolisticNicole)\ **Post date:** [May 4, 2022, 5:47pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/90 "2022-05-04T17:47:48Z")
> [@oysterpack](#): > > The mission is to maximize ecosystem growth and decentralization. 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. > [@oysterpack](#): > > As a positive side effect, this reduces the wasted rewards that are sent to centralized 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. ---
**Author:** ![fig](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/fig/32/1869_2.png) [@fig](https://forum.algorand.co/u/fig)\ **Post date:** [May 4, 2022, 6:13pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/91 "2022-05-04T18:13:40Z")
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: ![](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](https://app.flipsidecrypto.com/dashboard/what-are-whales-swapping-for-_Xv-8a) Second, let’s look at rewards distributed via Governance for Period #2: [Flipside Crypto - Governance Period 2 Payouts - Daily](https://app.flipsidecrypto.com/dashboard/algo-49-governance-period-2-payouts-daily-C8WOMB) (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: > [@shaih](#): > > 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. 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: > [@shaih](#): > > How do we identify accounts that participate in DeFi, and how many governance seats they should get? 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. ---
**Author:** ![Massimo](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/massimo/32/1863_2.png) [@Massimo](https://forum.algorand.co/u/Massimo)\ **Post date:** [May 4, 2022, 7:13pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/92 "2022-05-04T19:13:44Z")
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. ---
**Author:** ![No-Cash-7970](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/no-cash-7970/32/3224_2.png) [@No-Cash-7970](https://forum.algorand.co/u/No-Cash-7970)\ **Post date:** [May 4, 2022, 7:32pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/93 "2022-05-04T19:32:58Z")
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. ---
**Author:** ![oysterpack](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/oysterpack/32/1866_2.png) [@oysterpack](https://forum.algorand.co/u/oysterpack)\ **Post date:** [May 4, 2022, 9:54pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/94 "2022-05-04T21:54:32Z")
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: 1. It enables the Governance $ALGO to be counted towards TVL 2. It unlocks the staked ALGO value for DeFi ---
**Author:** ![ARO](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/aro/32/1893_2.png) [@ARO](https://forum.algorand.co/u/ARO)\ **Post date:** [May 4, 2022, 9:59pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/95 "2022-05-04T21:59:18Z")
> [@ARO](#): > > **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.** 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! ---
**Author:** ![HolisticNicole](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/holisticnicole/32/1871_2.png) [@HolisticNicole](https://forum.algorand.co/u/HolisticNicole)\ **Post date:** [May 4, 2022, 10:19pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/96 "2022-05-04T22:19:14Z")
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? ---
**Author:** ![oysterpack](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/oysterpack/32/1866_2.png) [@oysterpack](https://forum.algorand.co/u/oysterpack)\ **Post date:** [May 4, 2022, 11:10pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/97 "2022-05-04T23:10:35Z")
Folks Finance explains it well: [Algo liquid governance](https://docs.folks.finance/protocol-architecture/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. ---
**Author:** ![D3G](https://avatars.discourse-cdn.com/v4/letter/d/ba9def/32.png) [@D3G](https://forum.algorand.co/u/D3G)\ **Post date:** [May 4, 2022, 11:16pm UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/98 "2022-05-04T23:16:22Z")
> [@ARO](#): > > 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. 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. ---
**Author:** ![Rambutan](https://avatars.discourse-cdn.com/v4/letter/r/b77776/32.png) [@Rambutan](https://forum.algorand.co/u/Rambutan)\ **Post date:** [May 5, 2022, 12:26am UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/99 "2022-05-05T00:26:12Z")
1. 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. 2. 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. ---
**Author:** ![ARO](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.algorand.co/aro/32/1893_2.png) [@ARO](https://forum.algorand.co/u/ARO)\ **Post date:** [May 5, 2022, 1:59am UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/100 "2022-05-05T01:59:55Z")
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. ---
**Author:** ![dmclancy](https://avatars.discourse-cdn.com/v4/letter/d/c89c15/32.png) [@dmclancy](https://forum.algorand.co/u/dmclancy)\ **Post date:** [May 5, 2022, 2:46am UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/101 "2022-05-05T02:46:11Z")
@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. ---
**Author:** ![GoalDarn](https://avatars.discourse-cdn.com/v4/letter/g/a88e57/32.png) [@GoalDarn](https://forum.algorand.co/u/GoalDarn)\ **Post date:** [May 5, 2022, 3:09am UTC](https://forum.algorand.co/t/evolving-algorand-governance/6646/102 "2022-05-05T03:09:27Z")
> [@ARO](#): > > 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. Strongly agree with that. [Previous page](https://forum.algorand.co/t/evolving-algorand-governance/6646.md?page=4) [Next page](https://forum.algorand.co/t/evolving-algorand-governance/6646.md?page=6)