Consensus Incentivisation - AlgorandMining

Hi everybody, algorand published today the paper on consensus incentivization:

How do you like it?

Do I read it correctly that proposers of the block will get the funds from the fee sink in the next block? (plus AF allocation)

How many algos should be allocated to this program by AF? Is governance rewards or defi gov rewards going to be cut?

Btw, i think we should all start to use #AlgorandMining buzzword so that bitcoin miners get more attention.

Also I would like to see some public nodes incentivization where people do not need to move their algos to some smart contracts (for pool mining)… @JohnWoods how do you see this issue? would it be big issue for each node operator to create one algorand address and use it also in the consensus (for node identitification, verification and payouts)?

John, In the video 16:26 you mention that people do not need to run the algod, but they can give someone participation keys and node runner will transfer to them the portion of the rewards. However this is not how I read the whitepaper. The public algod generates the participation key for user account XY, so the algod protects algorand nework with XY current balance. But the proposal of the block is not the participation key, but the account XY, so the user gets the algos, not the runner of the public node…

Also one of my concerns is that the proposal phase to my knowledge is finished when there is certain threshold of proposals. Also verification phase ends when there is certain threshold of verification messages. Does that mean that people with lower network speeds will never get incentivized by this proposals (and according to the video they are even going to pay some fine), and everybody will have to do colocation of their servers next to the relay nodes?

One of my next concerns is the increasing the network fees… I have seen quite a lot of applications (and smart contracts) where the network fee is hardcoded to exactly 1000… I understand the need to increase the network fees to sustainable $0,001 but please be caution with this point and also it would be great to say that if algorand price will 100x there will be some consensus upgrade to lower the fees.


One more question:
How does the incentivisation ensure that enough nodes and in diverse geographical regions run? There is a certain overall computation power and network connectivity/distance that is required for running a reliable, fast and resilient network. I’ve seen the high limit of 2^26-2^27 for the number of Algos for a node but not sure where the limit comes from and in general seems too high. Anyone (or a pool) with this number of Algos should be able to afford running a number nodes instead of only one node.

Hi Scholtz,

My cousin and I wanted to build a mining pool. I asked those questions on the official Discord, and I got roasted :laughing:.

Based on Janotti’s answer (the main dev of the node, I guess, as he is pushing all the commits on GitHub), the voter’s address receives the rewards, it won’t be possible to ask the network to send the rewards to another address. That would require too much complexity, he said.

You’ve got to know they hated the idea of us creating a mining pool; they said it would centralize the network. The thing is, 21% of the global stake is enough to block the chain. Also, Patrick said it won’t be profitable, and he is probably right because, let’s be honest, nothing is profitable right now on Algorand if it weren’t for the Foundation’s boosts. There is a global issue of users and liquidity. Moreover, it feels like participation rewards will be structured/tweaked to make this kind of activity not profitable (incentivized < profitable).

I’m a bit done with Algorand (at the moment) and moved to another chain to build a little something I’ve already received 7.2 ETH to keep doing so :exploding_head:. Still, my cousin is really willing to code that mining pool and to use those two AMD Ryzen he ordered for this purpose, for just a few months at least, to see the results. He already has the front end, and I know he is currently writing the contracts. You can find him on Twitter: @algoproposers.

Good luck to you anyway, you are here since inception and you deserve more exposure :pray:


I thought the mining pool part would be cool too.
Good luck with your friend. You could collect some fees to join/leave pool or a maintenance fee subscription for some profitability.

These are some good ideas ! I like the maintenance fee one. I know there will be a page on the frontend that shows the costs, the current node’s state, the different balances, revenues… Full transparency is required for this kind of app. Also, there will be a rather simple but neat ingredient to boost the rewards of everyone. It is close to one of your suggestions. I won’t reveal it because it’s too soon, it’s not my role, and some tests must be done. But it works on paper, so it should work in real life, and that would be a strong argument to promote the service.

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It is a great adventure to mine a coin. Some experiments could be done with some algorand ASA-s, and mining. But the trouble with classical mining (proof of work) was/is that is cosumes a lot of power. It can be offset by using green prower like solar energy.

I have an idea of using the Algorand chain for making a shared resource like virtual disk store. There already exist such systems, like, but I have a gut feeling that using the Algorand blochain way more efficient systems could be built. And it would be a kind of “mining”: somebody offers part of his resources (disk, CPU, GPU, etc), and would be rewarded for it, with a coin, which then can be sold on an exchange.

@scholtz , what do you think?