Evolving Algorand Governance

I apologize in advance for a very long post, but the topics are too complex to be taken lightly. For readability, I’m splitting it into 5 parts.

Introduction

It is great to see that the Foundation wants to improve the Governance. That said, this discussion and the suggested M1 of G3 clearly mix a couple of important points that should not be mixed – i.e. voting power for Governance and incentivizing DeFi. While I completely agree with the representatives from DeFi (@michel, @jaclarke and @BenedettoFolks) that the current Governance structure makes it difficult for DeFi to compete with it on the reward/risk ratio, the voting power for Governance must remain separate. I summaries my views on this in below section titled Should voting power for Governance and DeFi mix?

Further, this discussion has overshadowed another crucial issue – how new proposals should be put up to a vote. While the idea of having xGovs won with a vast majority in G2, I am of the opinion that a system for putting up proposals must be setup that does not require an intermediate layer as suggested by the introduction of xGovs. Additional layer increases the potential for malicious actions since xGovs present only a subgroup of all Governance stake, thus is easier to overtake. I have raised this concern already during G2, and asked for clarification from the Foundation why it deems necessary to introduce another layer to the Governance when solutions that fulfill the same requirements without the need of adding an intermediate layer exist, e.g. the one I outlined in the Counterproposal to xGov. While the Foundation still has not addressed this particular concern, I find it a step in the right direction that under the new measure M2 of G3 some concerns were taken into account, e.g. that anyone can submit a proposal for consideration and it is up to the proposer to gather the initial support for it. However, I still see the same downside in having an intermediate layer – i.e. a subgroup “who earned by commitment their right to promote community proposals”. That right should be with all ALGO holders. Why I think that should be the case, please see the section xGov – A step away from decentralization of Counterproposal to xGov. In the below section titled Update to Counterproposal to xGov I propose a refined concept, including concrete protocol parameters and their justification, which I believe would simultaneously improve DeFi competitiveness vs. Governance while also incentivize a more engaged participation in the Governance.

End of part 1/5

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