I think @ARO hit the nail on the head.
What is Governance supposed to be? What is its purpose?
I feel like Algorand has gotten too ideological too quickly, without consideration of the practical implications.
Communism is a great ideal if we were to look at it on paper. However, in reality, it didn’t work out even once.
Just what is the purpose of Governance? To create more coin inflation? Because currently, that is literally the only thing it achieves.
A few people in the thread mentioned how they were attracted by Algorand’s governance system and don’t want it to be changed. I want you to ask yourselves honestly, do you really care about voting either A or B on a single topic that has not been fleshed out at all so as to be completely meaningless, AND your vote doesn’t ultimately matter anyway because exchanges and the foundation together hold a vast majority of the Algos in governance, and exchanges by default always vote with the foundation…
There are so many things wrong with the way governance works today, so much so that it’s just a complete waste of time for everyone involved. And with the way governance is currently designed, important, specific implementation details would never get put up for vote, nor should it ever get put up for vote either.
The entire governance system as it is, is a huge nothing burger, only creating useless coin inflation while suppressing the other parts of the ecosystem.
The ideas of increasing the voting weight for DeFi users or node runners, is, in my opinion laughable because of the points above; the entirety of governance as it is right now is completely pointless and useless. So what’s the point of giving more voting power to DeFi users or node runners? It’s not an incentive at all.
Additionally, if we go with some of the proposals in the OP, doesn’t that actually create a lot of potential points of abuse and centralization in the governance system? We’d have to trust DeFi protocols to not game the system, fudge their TVL, fudge the numbers they report to the foundation, etc etc etc.
So in my opinion, incentivizing nodes, and incentivizing ecosystem growth makes much more sense. Any potential negative effects of incentivizing nodes, these convoluted governance structure proposals have the same negative effects. However, they have none of the benefits.
That said, I believe that ecosystem growth should be as sustainable as possible; if we were to simply allocate all of the governance rewards to DeFi like the Aeneas incentives, what happens once that runs out?
Therefore, I believe the rewards should be split into 3 streams:
Stream 1: Incentivizing Nodes.
This will be like the “risk-free governance APY” currently. If you want risk-free returns, then at least do something for the ecosystem. And no, taking 5 seconds to randomly click A or B every 3 months is not doing anything useful at all for the ecosystem.
These incentives could further be split between relay nodes and participation nodes.
Stream 2: Ecosystem growth
I think the vast majority of the money should be here. Instead of giving money to people rehypothecating on DeFi platforms, money should be given to developers to attract them into the algorand ecosystem.
Things like the $10 million EVM compatibility supagrant as well as the $10 million developer tools supagrant are great, but we could put a lot more money into similar initiatives. More importantly, by rewarding the developers in Algos as opposed to USD, it gives them much more incentive to stay in the ecosystem and continue developing for it afterwards.
Secondly, we need to encourage new innovations instead of always following behind and copying what Ethereum and Solana has. Thus, incentives could be given to teams that manage to create new innovations on Algorand, or teams that manage to attract a huge amount of TVL, to be determined every year or so. We could even actually have some useful governance, to determine which projects the community feel should receive these incentives by the end of each year.
We also desperately need to pay more attention to onboarding people who matter. There are huge alarms and red flags everywhere, when, in algofam chats, we here teams talking about how they cannot get VC funding despite having personal relationships with the VCs just because they’re building on Algorand; we hear people like Michael Cotton talking about the lack of institutional tooling to be able to safely deploy funds to Algorand’s ecosystem…
There’s also a huge problem with stablecoin liquidity on Algorand because Algorand based stablecoins are hardly accepted anywhere…
These are HUGE problems that need to be solved ASAP no matter how many millions they cost, and I guarantee they will give far more bang for the buck than wasting tons of money putting up 1800s style billboards and banner ads everywhere.
Stream 3: DeFi incentives
Finally, like @jaclarke and many of the actual devs in the ecosystem has so eloquently laid out, if we want to compete with other ecosystems, we need to have similar incentives. Thus, I do believe that in the near to mid-term, some more DeFi incentives like the Aeneas incentives should be given to help grow the entire ecosystem.
If Algorand really wants a governance system, it needs to be seriously reworked from scratch so that people can freely vote on topics they care and know about. And I believe that governance should not be incentivized, because incentivized governance creates far more problems than incentivizing node operators.