Algorand Community Governance:
Period 4 Voting Measures
The two measures below are meant to provide extra rewards for joint participation in Algorand’s governance and its DeFi ecosystem, and to make it possible for DEX liquidity providers to participate directly in governance. See more details and discussion at https://forum.algorand.org/t/feedback-requested-on-proposed-q3-2022-governance-measures/7587.
Voting Measure 1: Designating 7M ALGOs from the Q4 2022 governance rewards to DeFi governors
This measure provides extra incentives to governors who are DeFi users. It is meant to grow DeFi participation on Algorand, thus promoting the ALGO and therefore benefiting all the Governors. These incentives are limited to 7M only, and only regard DeFi players who, consistently with Governance rules, commit Algos for a Governance term. DeFi platforms on Algorand must apply to the Foundation with their Governance solutions to be included in this program, so that their users who participate in governance will be eligible for extra rewards.
Implementation: Governors' commitment and voting procedures are unchanged. DeFi platforms that are included in the extra rewards program are tasked with maintaining lists of the valid Governance wallets that they manage, and the Foundation will verify these lists.
At the end of the governance period, all governance wallets (both DeFi and not) will share 63.5M ALGO rewards, distributed proportionally to their ALGO commitment as usual. The remaining 7M ALGOs are distributed only among the governance wallets on the DeFi lists, proportional to their ALGO commitment. All rewards will be distributed directly to the governors' wallets.
Governors should decide between the following two options:
- Option A: Allocate 7M ALGOs from the rewards pool of Q4 2022 to DeFi governors as described above.
- Option B: Keep the status quo and distribute the entire pool of 70.5 ALGOs among all governors.
The Foundation supports the more inclusive option: Option A. We remind the community that the Foundation does not vote in Governance.
Example: Suppose that the total ALGO commitment in the next governance period (both DeFi and not) adds up to 3.175B ALGO, and the total commitment of wallets on the DeFi lists adds up to 700M ALGO. In that case a non-DeFi governor will receive rewards equal to 2% of their ALGO commitment, and DeFi governors will receive rewards equal to 2% + 1% = 3% of their ALGO commitment.
Voting Measure 2: Allow DEX Liquidity Providers that contribute ALGOs in pools to participate in governance for Q4 2022
Liquidity providers in DEXes cannot ensure a stable ALGO balance, due to rate fluctuations causing impermanent loss. However they can use their LP tokens to prove onchain that they are not deliberately reducing their ALGO commitment. This measure will allow them to participate in governance by counting and monitoring these LP tokens representing the Algos committed. They will also be included in Measure 1 distribution if both measures are approved.
Only LP tokens of DEX pools including ALGOs vs Assets with a substantial, active open market are eligible. The foundation will publish a list of eligible pools at least one day before the voting session.The initial list will include only pools that had a balance of at least 10,000 ALGOs as of August 15 2022. Changes to the list in the future will follow community feedback and proposals. The Foundation reserves the right to disqualify any of these pools at any time, autonomously or upon alerts from the community, if it finds evidence of significant rate manipulation.
LP tokens can be committed to Governance during the sign-up window with the same zero-ALGO transaction mechanism as used for ALGO commitments. The LP-token balance of governors will be tracked just like the ALGO balance.
The governance weight of participating LP tokens will be determined by taking a snapshot of all the relevant ALGO-vs-Asset pools at a single round in the day after the close of the sign-up window for the Q4 2022 period. At that unique round, we calculate for each LP token the number of ALGOs that the liquidity providers would have received, had they returned their LP token at that time.
To be eligible for rewards, governors will have to vote, and to keep their balance in each of the LP tokens that they committed to (in addition to whatever direct ALGO commitment that they made from the same wallet - if any).
Governors should decide between the following two options:
- Option A: Enable committing Algo LP tokens to governance according to the rules above.
- Option B: Keep the status quo without including DEX LP as above.
The Foundation supports the more inclusive option: Option A. We remind the community that the Foundation does not vote in Governance.