The Algorand Foundation recently piloted a deployment of 42MM ALGO of treasury liquidity to Folks Finance, Pact, AlgoRai Finance, and Tinyman with the objective of contributing to ecosystem liquidity, supporting TVL growth, and strengthening dApps’ critical mass. dApp selection for this deployment was based on avoiding liquidation risks (e.g. using Algo/gAlgo to borrow/lend), impermanent loss, technical risk assessment, as well as regulatory, legal, and policy considerations.
We will continue to review and monitor this deployment to evaluate its effects and, as with ALGO held directly by the Foundation, will abstain from voting. If the effects are positive and the community votes to keep this liquidity provision in place, the Foundation and DeFi committee will continue to examine additional protocols (e.g. bridges) and pools where further extensions of liquidity may be of benefit.
If this measure does not pass, the liquidity already deployed will be gradually withdrawn, on a measured basis.
Measure 1
Should the Algorand Foundation continue to provide liquidity to DeFi protocols to enhance the operation of the DeFi ecosystem?
Option A - Yes
Option B - No
The Foundation supports Option A.
(1) which protocols
(2) which amounts
(3) which purpose
and these are the points that matter. The Algorand Foundation is not supposed to act as a Central Bank to inject liquidity in their favorite projects and for the reasons they believe are important!
And you are sabotaging people if that proposal will launch that way. They can only vote yes or no and so they might just vote yes because Liquidity is better than having none
I probably sound like a broken record … Liquidity is the lifeblood of DeFi - period. The more liquidity that the Foundation can provide, the better.
Seeing the Algorand Foundation participate in DeFi shows a strong vote of confidence in the projects and the entire DeFi ecosystem. In addition, it generates an organic revenue stream for the Algorand Foundation, which helps support its operations.
Providing liquidity for bridges is also a no-brainer. Deep liquidity on bridges and DeFi protocols are low-hanging fruit for attracting new liquidity. I would focus on supporting liquidity in the following core assets ALGO, USDC, BTC, ETH.
Having a vote post-fact seems very disingenuous, specially without having either the results of the deployed liquidity or a more detailed flow-chart as to why some protocols were chosen over others and under what conditions. Did these protocols approach you for this deployment? Was it a unilateral decision? It just all seems very obfuscated, and that’s not a good look, at all.
Worst is that the way this proposal is phrased, it seems to me like we’re basically voting on whether we give the Foundation carte blanche or not to carry on doing this. We can’t do an informed decision on this proposal, since we don’t even know the results of the liquidity deployment, without even opening the can of worms of whether this deployment gave unfair competitive advantages to some protocols.
In my opinion, a better proposal would either detail a liquidity provision framework, with a budget allocation, a protocol’s requirements for consideration and a detailed application process. Or if the Foundation finds it too cumbersome to have this framework created, then at least make the proposal more tangible, i.e. "Should we allocate X ALGOs to the foundation to deploy as liquidity to protocols as they see fit? " At the very least, this gives some checks and balances.
One big question I have about this: how much of this liquidity is being borrowed and immediately put into goverannce?
As yeah I feel there’s no point in offering liquidity if it’s just going to get immediately hoovered up and put in governance and then sit there for 3 months doing nothing else productive.
It’s great to provide liquidity if there’s projects that really need it to do actual, useful, economic work.
Liquidity should be provided on in the form of Liquidity pools. Algo should not be used in Lending protocols because this liquidity just ends up locked in governance through leveraged commit. Cheaper Algo is not what we need right now.
Perhaps it makes sense for at least some of those in charge of governance to… I don’t know… maybe have a smidge of experience with being a creator/builder in this space? We will continue to get quarter after quarter of questionable decisions so long as the same team is in place.
anon
Just to explicitly add that the previous replies from @lobo1, @Swaggelwander2, and @BunsanMuchi3 all raised excellent concerns with which I agree.
Besides these points, in order to make an informed decision about this measure, it is necessary to know where are these funds coming from and what measures will be taken e.g. in case of a hack and a subsequent loss of funds.
“Treasury liquidity” is a very vague term. From what portion of the treasury is the liquidity being deployed from? Is it from the portion that is meant to be distributed as Governance rewards in the future, the funds meant for Foundation operation, its investments in the ecosystem, or something else? Despite the change in the format of the latest transparency report, which does not differentiate anymore about the future allocation of funds, it is prudent to state who/what/how would be affected if the deployed funds are lost.
This is an OBIVOUS YES. Algorand itself is still in its early infancy stage. Defi on Algorand, is in an even more of an infancy stage. Thus providing liquidity is important for growth of the ecosystem to further attract users and people with influence and money into the Algorand ecosystem. It’s a simple concept - Money makes money. If there is little or no liquidity in a defi protocol, their is no chance new users with lots of money will enter.
Algorand foundation cannot make everyone happy. Actually even you or me can’t ever make everyone happy - it is just not possible, its the reality.
To conclude, liquidity needs to continue for now, at least in the infancy stage. Later once the market is more mature, then we can discuss again.
Give liquidity to whichever projects you feel (the foundation feels) is most genuine, contributing to society, hardworking, and passionate about the long term growth of the Algorand Ecosystem and their Platform - You cannot make everyone happy. Remember this.
if the Algorand Foundation wants to help the ecosystem with liquidity and the governors ssupport this then it should propose general and objective criterias under which ALL projects can be EQUALLY evaluated. some points to consider imo:
projects should propose to the community and not to AF if they see the need for liquidity. this should be an open discussion and not sth you decide behind closed doors. in particular, we need to know why this would help the ecosystem and what problems it solves
dont help with ALGO liquidity in lending protocols until the sign up period ended, all these ALGO just get borrowed to put them into governance again and lie there doing nothing for 3 months. that doesnt really help the ecosystem. additionally, AF shouldnt contribute to ALGO lending pools (Algofi pioneered them, FF will follow soon) until the sign up period ended for the same reasons.
dont be the main liquidity provider to a protocol: you were injecting more than 60% of the non gALGO TVL to Folks Finance which is unacceptable, protocols are not supposed to be that dependent on AF. therefore there should be a limit in terms of TVL of the protocol AF can inject (maybe 10-20%?)
if you lend ALGOs to VCs to inject liquidity, it should be communicated in the same way when you do this. VCs are not supposed to help you circumventing these points
make clear which parts you can help with: can you supply ALGO-USDC for example yes or no? could you borrow USDC from a lending protocol with ALGO as collateral to then supply ALGO-USDC or other important ALGO-ASSET pools by borrowing that ASSET? that way you wouldnt need to sell any ALGOs
we have excellent DEX aggregators on Algorand like vestige, alammex and defly (both using the deflex protocol), that means you can split your liquidity and either put the same amount in every DEX or weight it based on existing TVL on that DEX. ofc something like the gALGO-ALGO stableswap on pact is way more efficient than normal AMM pools are and this should be part of the evaluation to determine which DEX gets what but to be fair you shouldnt ignore other DEXs completely
This was great thing and Algorand Foundation should provide even more liquidity. This is nobrainer. AF can allocate its ALGOs in efficient way without giving them away. This is just efficient capital allocation.
Algorand Foundation did exactly right thing when they targeted and chose small group of most important projects/platforms. If liquidity is spread too widely it will not serve the purpose and offers wide but shallow liquidity. Also you can not make everyone happy, because there is always someone complaining and wanting more and they feel like they are special. AF, we trust your judgement on this one and I think you chose the right platforms.
Question to those who oppose this; are you happy if Algorand liquidity is lower and more shallow? What is the point? How is this good? AF didn’t spent any of its funds, just allocated them, so nothing lost or gone. So why have to vote on this? is it better to do nothing? I understand that we have to vote if AF spends funds, but this is not spending. just short term capital allocation without any downsides.
I hope people will think what is best for Algorand ecosystem and not just for themselves. Sometimes this means, always all candies will not go even.
If they provide that liquidity like they want to and remove equal opportunities for projects in the ecosystem in the way they did then no liquidity is better yes.
Long term this imho destroys the Algorand ecosystem because it will be all about trying to befriend AF because they decide who gets supported and can make it. If we allow AF controlling the ecosystem this way we have a centralized economy on Algorand. They should ensure to be absolutely neutral and encourage this way new devs coming to Algorand because everyone gets treated the same and if they deploy liquidity they do it based on objective principles and allow open discussions about this together with the community
Nice communist take. Using metaphor, you say it is better if we all have Ladas rather than some having BMWs and some Ferraris. Equal misery is must… Ok. How this work when we have thousands of projects. Each and everyone will receive couple algos? Impact is gone… I am sorry but this kind of ideology has never worked and will not work in the future. I hope this community will not cry after their own projects directly and use short sighted views. In the long run, we all will benefit if Algorand ecosystem grows.
Together we grow stronger, not through jealousy, but thru collaboration and supporting each other.
Totally agree with you. AF should provide a larger percentage of liquidity to solid projects and a smaller percentage to emerging protocols. The only two key parameters to consider are:
It’s not about communism lol. Yes we need to grow together project independently but AF needs to ensure every project has the same opportunities to do so
Use sports as an analogy. You play to win by putting your best players on the field. It’s not about giving each player equal time or equal pay. Your pay to keep or acquire the best players and coaches to give the team and its fan base their best chance to experience victory.
That’s a dumb analogy. You’re implying the Foundation should pick winners and losers, you’re also fine with them doing so with no oversight or due process. If you want that, then invest in a bank.
What @lobo is talking about isn’t far-fetched, the foundation should encourage ecosystem support, and that implies hedging as well as giving a base to attract newcomers. Who’s gonna wanna build on a chain where X protocol has a blank cheque because of arbitrary reasons?
You can come up with whichever analogy you’d like, but what matters is what’s actually happening. Algorand is becoming a decreasingly attractive destination for new and existing builders, unless you’re already part of the select few winners that the Foundation has picked.
I fully agree it shouldn’t be something that is just given, but instead a given set of requirements should be acheived. For this, however, there should be a framework of what, how and when can projects apply for these types of support. If this is seen as too hard/slow and the Foundation just wants to take these decisions unilaterally, then sure, but do so with a serious vote detailing what amount and for how long they’re going to be doing this support. These types of initiatives need checks and balances.
On the other hand, we need to know how these deployments went, and whether they were succesful. Do we really want to just support liquid-governance products? Is that really the DeFi that needs help? Did the AlgoRai liquidity support bring any volume to the platform? The Foundation should make a case for why it believes its unilateral actions were succesful.
How do you plan to make everyone happy? Yes the foundation can split the algos and support EVERY PROJECT (good and bad) out there. But this would just fragment liquidity and this is bad for the long term growth of ecosystem.
It’s given that some projects will benefit more than others - but this is the nature of reality.
How do you make everyone happy? What is your solution?
It’s not like I’m/We are asking for a lot. It’s either:
-Tell us how this program works, what its limits are and how to apply openly (ideally with a review of applicants and why they got approved/disapproved after the pilot is ran), i.e. create a framework around it
-Keep that behind closed doors (pretty bad, imo, but if that’s their predicament then so be it), but limit it to a set of time and amount of algos.
But both options require us to have at the very least a set of KPIs to look at and measure. We still don’t even know the results from this original unilateral liquidity provision, nor what the foundation was looking at when making this decision.
I do not support this. From your experiment we can see following:
Main reason is: You have moved corruption from the algorand foundation to specific projects.
First you have pumped few projects with the liquidity, and you say you give them 5 mil. algos to distribute according to their liquidity. The experiment in G7 showed: Projects tends to create unfair system for their distribution.
Let me explain with Pact.Fi example i had. First they contacted me that they will do distribution and that they will award projects which will “partner” with them and will do also the token distribution. I have read their proposal and proceed according what they wanted. My requirement at the start was that we distribute our token fairly… We are distributing fixed APY on hourly basis because we believe that it creates fair distribution of the token to the market. From their communication they said that they cannot do fixed apy distribution, so our DAO held a question to at least target our APY. I had also suggestion that they should announce rules prior the algorand governance starts because users owning our LP tokens cannot move their tokens after this point. Later they changed the rule that they will select only one token which will get boost by this program. We have deposited our tokens to them for distribution. Then they decided they do not want to support us because i started to complain that even after the launch of the algorand governance there are still no clear rules.
I am sorry, but this is not fair.
And even with this experiece i believe that pact distribution is one of the most clear one. Others does not even publish information on how they distribute the tokens from the foundation. You are basically creating corruption at the foundation with decision who gets the algos, and then in those companies. This is not good.
But let me show you alternative. What if you would support DeFi in the way that every account which holds any AMM LP token receives on hourly basis algo to their account with equasion (Algo distribution per period) * (Account LP algo value) / Sum(LP algo value)?
Or if you want to support not just AMMs: (Algo distribution per period) * (Locked usd value @ account) / Sum(Locked usd value) … You can calculate USD price of LP tokens, or USD value locked in smart contract and can sum this up…
This way you would support fairly DeFi. It can be automated, and whole crypto ecosystem will drive their funds to algorand defi.
— EDIT
I appologize guys, i meant this to be written for 5 Mil algo DeFi program which subsidize protocols, not for Liquidity incentive. I do support the liquidity program by the foundation, but i would like to see it fair, with public oversight.
It’s about giving algos to the right and best projects. The projects with real passionate builders with long term vision which are aligned with the foundation and ecosystem long term growth.
Projects which have a proven track record.
Like look at Yieldly and prismatic (prismatic never even launched)… Yieldly never followed thru with their roadmap. And prismatic, the founder is defichick (her twitter handle) she never launched anything. But she speaks a lot.
We need to give algos to people and teams that walk the talk. Teams with proven track record.
Give funding and Liquidity to the best projects. It’s very simple.
If you want to be fair and give everyone equal opportunity - you will be wasting more algos because you will only attract scammers.
Ok, can you share me some projects you feel which deserves liquidity? I wanna check them out too…
A family of 4 without a leader, will only lead to chaos. Imagine if raising a family based on your ideas - that family will be doomed. There needs to be some sort of head of family that provides guidance to keep everyone safe.
Look at prismatic for instance - they came to Algorand, talked a lot but never built anything. Are you saying they deserve funding and liquidity too? They have no proven track record.
If your project and team has a proven track record and something to show for - then sure, you should get support from foundation.
I’m saying:
-Either create a clear path for projects to apply for liquidity boosts and the requirements they need to fulfill to get it.
OR
-Create a discretionary liquidity boost program with a limit on time, amount and a clear set of KPIs we, the community can audit/hold the Foundation accountable to.
I don’t know if the current deployment was succesful, yet I’m expected to vote on letting them do it again, with no real knowledge on the amounts to be redeployed or the time this boost will be deployed for.
Prismatic is a bad example imo since there is nothing to add liquidity too because they didn’t deliver (or did they and I just don’t know about it?)
Imo Humble, Algofi and xBacked could benefit from more liquidity.
xBacked is a rather new project but their stablecoin solves an important problem: redeem ability of decentralized stablecoins. but it didn’t get any Aenas funds because it was too late to the party and now suffers because of this. It already has the problem that it didn’t get the support by AF like for example Gard and therefore has seen way less support in the ecosystem
Humble is the only DEX that offers decentralized farms that every project can launch directly on their website. Nothing like yieldy or cometa needed
Algofi shouldn’t get ALGOs to allow more leveraged ALGO commits (that’s a mistake AF made with FF) but it could benefit from for example liquidity in their lending pools which combine DEX and lending market liquidity which allows for way better capital efficiency. This is something Innovative on Algorand which could be something AF could market to people outside of Algorand to show the strengths of it’s blockchain which gets enabled by the low tx fees and the composability possible on Algorand. FF will launch them soon to which shows how goof that idea is
They provided liquidity because community asked it for many many times. I even proposed liquidity boost, because liquidity was too shallow. So this was not random act.
corruption… like wtf. if you keep throwing this kind of false accusation you will lose rest of your credibility pretty fast. We all know you try to push your own agenda, but aggressive and accusing stance is not good way to go.
Also if Pact wanted to do something differently does not mean they are wrong nor did anything bad. They just do things differently. Algorand does not spin around you.
i am usually using arguments in my conversation, if you want to discuss with me, please do not use emotions but use arguments pls
i have stated that i like what they did. i have expected little more professionality from pact when they did it… but i hope to the future that they will learn and improve
I am not a saint, but can we place church in the middle of the village before we are like modern day politicians and can’t agree on anything. The truth is usually somewhere in the middle.
First I want to say, I think Algorand Foundation tried to do what community asked them to do. Provide more liquidity and use AF funds that now just sits in the wallets. They did it like they saw best.
Going forward, what if we ask them to use following metrics (please modify or replace with yours):
-These are wide frames-
TVL
Social engagement (social media engagement, events, educational material etc).
How much specific project needs help to get over that critical mass.
Terms projects have to be met:
Project must be on mainnet/ongoing/some organic TVL.
Team must be audited or some other way to be verified.
Project has to be teams main project (full focus on Algorand).
Algorand liquidity boost can’t be too risky. Just allocating capital without risk of losing funds (Always there is a risk, but have to be minimal).
I also think that Algorand Foundation can lend much more capital (something like 100M ALGOs), but focus max 10ish main projects. They can keep their funds in these projects as long as needed (this is of course excluded from DeFi boost calculations). We should let AF decide how long and how much specific project needs boost and let them reallocate funds if needed (by following previously mentioned metrics). I think sometimes AF knows better because they can communicate with projects directly and in much deeper level. They also have better view how things work and what is best for the Algorand.
Before allocations Algorand Foundation should publish note, where it tells how they came up with their decisions.
Is this proposal something we all can agree on? or even close to it?
(I apologize my English, but I hope you can understand what I try to say)
Any type of subsidy just create asymetry on the market…
If you support AMM project A, and do not support AMM project B, even though the project A is worse the project B, project B has low intention to stay on the market.
If you would not support anybody, it would be more fair.
On the other hand, if you would not do grants but rather investments and allow anybody to pitch the idea, perhaps the best idea would win and the foundation might get shares of the project which brings it future income for network stability and potentialy more investments.
I think with “Liquidity provision” algo distribution is the best to give the algos directly to endusers as i described before because it is the most fair and efficient.
If someone needs to support individual projects, please allow anybody to attend public pitch competition and get chance to receive funds to best projects. There is already ongoing ARC34 submission… Just move this funds to the grants program and let DeFi project compete with others if they need extra cash.
Milton Friedman: Friedman, a Nobel laureate in economics, argued against interventions and subsidies that distort market mechanisms. He emphasized the importance of free markets in allocating resources efficiently.
Friedrich Hayek: Hayek, another Nobel laureate, advocated for free markets and warned about the unintended consequences of interventions. He believed that subsidies could disrupt market signals and lead to inefficient resource allocation.
Ludwig von Mises: Mises, an influential economist and proponent of Austrian economics, criticized subsidies as they can distort price signals and hinder market efficiency. He argued for the elimination of interventions to allow for spontaneous order in the market.
James M. Buchanan: Buchanan, a Nobel laureate in economics, studied public choice theory and highlighted how subsidies can lead to rent-seeking behavior and distort the allocation of resources.
The Algorand Foundation clearly outlined the objectives:
… the objective of contributing to ecosystem liquidity, supporting TVL growth, and strengthening dApps’ critical mass. dApp selection for this deployment was based on avoiding liquidation risks (e.g. using Algo/gAlgo to borrow/lend), impermanent loss, technical risk assessment, as well as regulatory, legal, and policy considerations.
Folks complain about low liquidity. The Algorand Foundation supplies liquidity. Folks complain about the liquidity … I don’t get it.
The bottom line is the more liquidity the better - end of story. This is simply about finance and economics. People need to calm their emotions and keep politics out of it.
I complain about the same thing I complain always about when it comes to AF: communication.
According to Benedetto CEO of FF it took them 3 whole months before the liquidity provision was approved and they apparently didn’t think about just communicating this and allow open discussions and being transparent about the how much and why this would be beneficial. It wouldn’t cost them anything to just say they got approached because of liquidity issues and they think because of the following reasons… they Instead keep it secret and make deals behind closed doors and announce it after they supplied liquidity and their liquidity is already stuck.
It’s about economics here and not about emotions: they are hurting the open market on Algorand and short term thinking of “more liquidity is better regardless on how this is achieved” will hurt us in the long term if we don’t discuss this today
Politics have taken people off track on the main topic of discussion. The purpose here is not to debate or complain about Algorand Foundation communication. The purpose here is not how to figure out the best strategy to deploy liquidity. The purpose here is to answer a very simple question that the measure is asking:
Should the Algorand Foundation continue to provide liquidity to DeFi protocols to enhance the operation of the DeFi ecosystem?
Understanding that liquidity is the lifeblood of DeFi, then the answer is a no-brainer YES.
The next step is to discuss and brainstorm ideas on how to deploy liquidity to maximize ROI and ecosystem growth.
For Prismatic, I was referring to the funding aspect, which I mentioned as well, not liquidity.
Yeah I guess you are right as well. I have used Humble and Algofi. Not bad at all. I guess I would go back to what @BunsanMuchi wrote as he summarized it quite nicely :
“I’m saying:
-Either create a clear path for projects to apply for liquidity boosts and the requirements they need to fulfill to get it…”
I guess it’s safe to say that there are some projects which bred alongside during the development of the Algorand Blockchain (i’m not certain but I would assume so). Like the creators of “Algorands Official Wallet”, which is now Pera Wallet, have also assisted in the creation of Tinyman etc. Hence, logically and automatically these inhouse bred projects over time would be given priority as they have a proven track record and something to show for. I have to say, they have done an excellent job in delivering.
We have to come to terms with this fact.
Not to say that Humble or Algofi etc don’t deliver, I myself use both of them dapps and they work pretty well in their own manner. I guess for new developers, I would agree with @BunsanMuchi and you as we definitely need to attract more devs into this ecosystem. But projects should not compare with other projects.
I dont agree. For example algoexplorer is shuting down APIs, probably algoexplorer explorer will be turned off within next month. I tried to contact them to take it over without any response.
We should not consider it as a fact that algorand brewed projects are the best and that they deliver.
The pera is very strongly boosted by the foundation as they have metrics on the events in the count of new downloads of pera wallet. Pera wallet does not even support multisig…
I think Pera will or should implement multisig soon. I personally fee the wallet works really well. Tinyman also works really well. Swapping tokens on Pera directly is amazing without needing to access Tinyman directly.
Regarding Algoexplorer shutting down - this is a huge surprise indeed. It’s pretty weird to be honest… I hope the foundation will come out and speak about it more and let us know what will replace it or why someone else like you can’t take over it so it continues to operate.
Algoexplorer - Very, very weird situation indeed. @Adri can you give the community some concrete reasons as to what is going on with Algoexplorer? What will replace it? This is terrible for the Algorand ecosystem.
You build a project, operate it, users get use to it, then you shut it down lol Come on, the @Algorandnode-mod@Algorand-support@algorandfoundation can do much better.
Algoscan.app is not open source as well… Right? Even DappFlow was open source and current development probably done by the foundation (because they link it to algokit) is closed source… @JohnWoods May I suggest that it is the CTO decision to make all core infrastructure open source?
Assuming the Algorand Foundation can only provide liquidity in ALGO, people will continue to complain about liquidity, because that’s not the liquidity we need. We are severly lacking in liquidity for the most traded pairs in DeFi globally, e.g. BTC, ETH, USDC, USDT, etc. This means there’s little to no incentive for people and cross-chain arbitrage bots to bridge over to Algorand → no volume → no money to be made → no liquidity.
Can’t really answer this question without knowing the how. I’d say yes as long as the provision is based on merits and equal opportunity rather than your relationship with the Algorand Foundation.
I have the feeling that those who are complaining want to carry water in their own mill. AF explained that other projects may receive the liquidity provision and hopefully follow the criteria I mentioned:
Security (How many audits to date? Is the smart contract upgradable? Other security concerns?)
Does it add value to the ecosystem
I second your " the more liquidity the better"
I would tend to agree with many of the comments already voiced - that a “pilot” of such a large number of algo without a vote beforehand seems a bit disingenuous. I like the idea of the Foundation supporting the ecosystem, but perhaps those things need to be voted on earlier. Maybe there should be measures like this that are not part of the general vote every quarter but are are “special” votes for Govs only in between reg sessions - if needed.
