Evolving Algorand Governance

I understand the rationale behind Measure 1, but the current framing of Option A or B seems like a false choice that either gives too much power to DeFi projects or keeps Algorand stagnant.

I agree with @robert’s suggestions for incentivizing usage and streamlining governance: Evolving Algorand Governance - #160 by robert

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@shaih

I just want to reiterate, it doesn’t seem like you guys read ANY of the thoughtful replies at all. Not a single person suggested anything close to what you guys have in the proposal; only you yourself in the opening post.

Look, let’s face it. No one cares about voting power. Of all of the people here who supports governance, every single one talks about risk-free returns.

How many people do you think would participate in governance if it gave no returns? Exactly.

Let’s get our heads out of the sand and actually face reality here. No one cares about voting power.

So when all you’re giving to DeFi is voting power, that does absolutely NOTHING to incentivize DeFi. It’s like trying to incentivize a child to do chores with the reward of giving him more homework after he’s finished. It’s ridiculous.

Furthermore, this proposal will add a huge amount of complexity to an already failing governance structure, AND add so much unnecessary centralization risk in regards to which DeFi platforms get selected, whether a few bad actors can game the system by creating a “Defi platform” and funding artificial TVL to get it in the list so they can do bad things…

There is literally not a single benefit to the proposal that was made.

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Hi Shai,

i will not comment whether the option A or B is right, because we have DeFi project in testnet (EVM2AVM multichain bridge) and I am the community relay node runner

I would rather like to ask, how can I help with the algorand governance.

I have created DAO management platform - Vote Coin. It was encode hackathon winner last year, it was participating in encode accelerator, and recently i have received the grant from the foundation to implement encrypted voting. The standard is pretty simple, and right now we are in progress of upgrade to allow NFT DAOs to be managed by vote coin standard. Feat/eligible token list by scholtz · Pull Request #3 · scholtz/AMS · GitHub

The real discussion in this thread is not about the option A or B… It is about having efficient algorand governance… Not to ask one question per quarter, but rather have efficient voting system in place and allow quick and frequent decision making… You can quite efficiently incentivize participation by granting some algo for people that vote, and some people who have set their delegation of voting power… With vote coin standard you can mark some accounts as the Trusted accounts (for example DeFi projects or Relay note runners) and the Algorand DAO may have in constitution something like that 50% of 1 coin = 1 vote voters must vote for the option as well as 50% of all trusted accounts… Everything is running in a single voting session with onchain voting and the cost to vote submission is simply one algo tx. With consideration of the delegation even much less.

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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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Preamble 1: Core values of Algorand

I firmly believe that the two core values of: 1 ALGO = 1 vote (i.e. equality of each and every ALGO) and direct participation should be respected in Governance as it is in the PPoS consensus – the core of Algorand. Consequently, this means that the maximum possible number of votes at any time should equal the circulating supply of ALGO. If there is a disagreement about these core values, it should be put up to the Governance vote in such a straightforward manner. Or perhaps paraphrased as: “Do you think non-ALGO assets on Algorand should get a right to vote in Algorand Governance?” and “Do you think vote delegation in Governance should be endorsed?”. Both of these core values are disregarded with M1 and M2 of G3.

End of part 2/5

Preamble 2: View on long-term goal of Governance

The question came up during this discussion what is even the goal of Governance. That is why I would like to state how I envision the Governance to evolve long-term before I address the current issues in detail.

I think the goal for Governance should simply be to replace the Foundation in making decisions about e.g. fee changes, structure for rewarding relay nodes, grant giving, marketing strategies, etc. The Foundation will still be needed to facilitate their execution. However, the decision making should be decentralized – as it is the case for the consensus. And our current decisions should build towards that goal.

End of part 3/5

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Should voting power for Governance and DeFi mix?

Let me first address the OP’s (@Shaih) initial request:

We ask for your guidance on the fundamental questions of who should be considered an “active participant” for the purpose of governance, how to decide if a specific Algorand account belongs to that set and how many governance seats (and rewards) they should get.

Simply, all of the accounts that commit and vote in Governance are active participants. It should not matter if you participate in DeFi, own NFTs, just skim through the proposals (because you lack the time, knowledge or interest) but still vote, or you thoroughly read through them and engage in discussions before voting. Based on the above stated core values, all should be treated equally simply based on their committed ALGO stake alone, which defines individual’s voting power for Governance.

Now, this is not to say that we should not incentivize a more engaged participation in the Governance. I believe this can be done in a transparent and straightforward manner simply through how proposals are put up for vote (see the below section Update to Counterproposal to xGov).

Why I think allocating voting power for Governance to DeFi might be the wrong approach overall

  1. DeFi does not include only ALGO but other assets as well. If those are counted towards the voting power for Governance, a foreign asset could overtake the Governance while having just a minimal stake in ALGO. Hence, I strongly believe the voting power for Governance should be based only on ALGO stake.

  2. For the majority of DeFi solutions to be useful, the ALGO must be liquid which contradicts the current requirement of Governance to soft lock the stake for 3 months. If DeFi is granted an exception to this rule, which would be if they were to receive their voting power based on their average TVL (of only ALGO to not contradict point 1), the ordinary Governors would be treated unequally, contradicting the core value of equality between ALGO.

  3. Even if we change the Governance system and remove the requirement of soft locking the stake for all, allowing DeFi’s ALGO stake voting power for Governance would still inherently clash with direct participation and equality principles. Consider the following two examples:

  • With lending protocols: Suppose you and I each put 1k ALGO in a lending protocol. Person C brings enough collateral to borrow 1k ALGO and uses it to participate in Governance. You and I want to vote differently on a measure. Each is supposed to own 1k ALGO to use in the vote, but there is only 1k ALGO in the pool because person C removed 1k ALGO from it. How to solve this? Of course you could simply say for the remainder of the pool, the vote is split amongst our contributions to it. But this is delegation of our voting powers. In this case it is simply a reduction of our own voting powers, where the difference is delegated to the borrower (i.e. another user of the DeFi platform).

  • With liquidity pools: Suppose you put 1k ALGO worth of liquidity into YLDY-ALGO pool on Tinyman. I do the same but on Pact. Because of the differences in usage, there will be a difference in the ALGO amount we own at any point of time. Although this difference might indeed be small in practice, we started at the same voting power point (i.e. were equal) but afterwards are inherently treated unequally. Here, we have essentially again delegated a part of our voting power (i.e. the difference in the voting power that you have simply because you are on Tinyman vs. me who am on Pact) to the DeFi platform/its users.

Note that these cases even assume that all DeFi protocols can implement the option for their participants to cast a direct vote without the intervention of the governing body of the protocol (which would otherwise be a point of centralization – e.g. if the governing body were to simply calculate each user’s voting power based on their contribution, and ask them to submit their votes, which would then be casted in an aggregated form through the governing body). The Foundation should not advocate unequal treatment, and definitely not points of centralization, especially since ALGO used in DeFi is expected to grow considerably, posing the danger of DeFi having the majority in Governance.

  1. Lastly, I would like to point out that DeFi does not offer the possibility to participate in consensus (with the exception of Algofi’s Vaults), and I have not yet come across Algonauts having issues with this. I think this just further highlights that Governance and participation in DeFi can be two completely separate topics.

However, if the majority is fine with the abovementioned altering of Algorand’s core values (even though they might be just slight), and considers the benefits to outweigh these values, then fine. But this should be made explicitly clear in such a vote that is submitted to the Governance. Anything else is just misleading.

End of part 4/5

Update to Counterproposal to xGov

The initial Counterproposal to xGov suggests a method on how proposals can be put up to a vote in Governance. Since the Governance is a direct vote by the electorate, the solution essentially mimics a referendum – a completely direct form of democracy. The counterproposal and the refinement described below simply adapts the procedure to the requirements of the Algorand Governance – having quarterly voting periods, a longer time commitment and higher stake for the proposers, aggregation of experience, and anti‑spamming. This is done while keeping the right to propose a measure with all ALGO holders, maintaining the equality among all ALGO.

Mechanism:

The mechanism is modeled after this.

Anyone at any time can propose a new measure. Before that measure is put up to a vote, a predefined commitment limit (CL) must be reached. The commitment does not necessarily have to come solely from the entity that made the proposal. Any other entity can show support by adding to the commitment, thus contribute towards reaching the required CL. It is up to the proposer to find enough of this initial support. When CL is reached, the proposal is put up for a vote in the following Governance period (GP). The commitment consists of a time-weighted stake. I suggest the required CL to be 40 M ALGO in a quarter (for reasoning of this value see Protocol parameters). This means if a proposal gathers an initial support of 40 M right from the start and keeps it for a duration of one quarter, it would be put up to a vote in the next GP. If it gathered only 20 M, the commitment would have to be kept for two quarters before being put to the following GP. Adding additional stake is allowed, which speeds up the process of reaching the CL.

The vote itself has besides the options of “for” and “against” the proposal also an option “against with veto”. The last option is used to express strong disagreement with the proposal in case its quality is unacceptable or the content malicious. If this option wins, the commitment is slashed. I suggest to use a 2% penalty (for reasoning of this value see Protocol parameters). This mechanism prevents spamming of low‑quality or malicious proposals. For the slashing mechanism not to be exploited, only the already existing assumption that the majority of Governors act for the good of Algorand, i.e. without malicious intents to steal the commitments backing good proposals, is needed.

The committed stake is soft locked until the CL is reached. If an entity changes its mind about the support of a proposal, it can remove its contribution (in full or just partially). This would also clear correspondingly that entity’s contribution towards the CL. However, once the CL is reached, the stake is hard locked until the vote passes.

If the proposal is vetoed, the slashing percentage is sent to Algorand Ecosystem Resources Pool (AERP), and the rest returned to its supporters. If the proposal is rejected, the whole amount is returned. If the proposal is accepted, the commitment is locked for three more quarters. This ensures at least a one year commitment of the proposers towards the good of Algorand.

However, while the ALGO is either soft locked for support of a proposal, or hard locked after the proposal has passed, it can still be used to vote in Governance. While the stake is hard locked, it can still be used as initial support for another proposal.

Protocol parameters:

The initial supporters for a proposal take on additional risks – possibility of slashing, longer time commitment and being associated with a potentially damaging proposal. Therefore, they will have to inform themselves well about the proposal. Moreover, in order to ensure the proposal passes, they will try to inform other Governors about it. This additional effort and taking on the risks should be rewarded.

Therefore, I suggest modifying the Governance rewards as follows:

  1. Reduce the rewards for voting to 120 M/year or 30 M/quarter. Assuming the current commitment of ~4B to Governance remains, this would equal a 3% APR. This would be a compromise, where DeFi could more easily compete with Governance, while the voters would still be decently rewarded.
  2. The remainder of the Governance rewards, i.e. 162 M/year (in 2022) should be used to reward the initial supporters of proposals that pass. Since not all proposals that will pass have the same difficulty associated with making them, I suggest to have three reward levels: minimal, middle and maximal. The suggested values for these are: 0.25 M, 1 M and 4 M, which correspond to 2.5% APR, 10% APR and 40% APR respectively with the CL set at 40 M/quarter. When a governor casts its vote, another vote should be submitted that indicates the amount of rewards the proposal deserves based on how thought-out the proposal is. When a proposal is initially set, it should be required to also submit its own suggestion how much rewards it deserves. The rewards for an accepted proposal are split between its initial supporters based on their contributions to reaching the CL.
    Example 1 – Proposal to improve Algorand’s marketing:
    • A proposal to change the shade of green in Algorand’s marketing just because the current one seems a bad choice to the proposer and likes another shade better. There is not much work for the initial supporters besides to consider if they agree or not. The majority of Governors in the end indeed find the suggested shade better and the proposal passes. This should receive a minimum reward since not much effort went into the proposal.
    • A proposal to change the shade of green in Algorand’s marketing, where the proposer did a thorough research and studies that back the change of the shade of green (e.g. something like Facebook did for their blue). The initial supporters have to analyze the studies themselves and present the reasoning to other Governors. This required more effort, and should receive a middle reward.
    • A complete and detailed plan how to improve Algorand’s marketing strategy is made. This requires the most effort both form the proposer as well as from the initial supporters to study and advocate it, thus should receive the maximal reward.
      Example 2 – Proposal to change transaction fees:
    • Simply because the proposer thinks the fees are too high, and suggests a new value that is agreed by the Governors. Minimal reward.
    • A study was conducted among many users that the fees seem high and effects of the high fees studied on chain, based on which a new value is suggested. Middle reward.
    • Besides the work of previous point, a new value is suggested based on simulation of the effect of the fee change. Maximal reward.
      With the suggested reward structure for initial proposal supporters, we could incentivize 10 high-quality proposals per quarter. If more high-quality proposals pass, the rewards would be split among them accordingly. If not all rewards are spent in a GP (e.g. due to not enough proposals submitted or approved), the rest is sent to AERP (which can be used in the next period to e.g. incentivize DeFi or development).

The slashing percentage of 2% is based on the following simplified reasoning. High quality proposals are likely to get enough support quicker, e.g. to reach the CL in a single quarter. In this case, in oversimplified terms of estimating reward/risk ratio as reward percentage vs. slashing percentage is 10%/2% = 5. Low quality proposals will likely need a longer time commitment to reach the CL, e.g. in a year. In this case, again in oversimplified terms, the reward percentage vs. slashing percentage is 2.5%/2% = 1.25, where the potential reward is still higher than the potential slashing penalty.

The value of CL set at 40 M/quarter corresponds to:

  • 0.4% of total ALGO supply (which is in a range commonly used in referendums to reach before a vote is called)
  • 1% of initially committed stake in G3. If 10% of Governors are engaged in the Governance, we can put 10 proposal up to the vote each GP.
  • Retail (here defined as accounts with a stake < 1 M) have 360 M committed in G3. Hence, 11% of retail alone is enough to put a proposal up for vote in the next GP.
  • Just around 30 governors of G3 have enough stake to put a proposal up to vote singlehandedly.

Last thoughts, I think such a Governance structure would be a good compromise between incentivizing more engaged participation in Governance, thus improving its quality, while still keeping the existing holders satisfied. It would also help to skew ALGO dilution into the hands of active participants – where retail can easily participate, while exchanges would be discouraged to participate due to the risk of slashing. Further, it would reduce the barrier for DeFi to compete with Governance on the reward/risk ratio.

Possible additional considerations:

Because multiple proposals are likely to come in a single GP, I would consider adding an “abstain” option for each vote to encourage good decision making, e.g. if one feels uneducated enough to make a good decision, a vote should not be forced. To get rewards during a GP, the governor should not abstain on at least a half of the measures put up to vote.

End of part 5/5

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I couldn’t agree more with your point about rushing out huge changes. I wish there was much more effective community engagement on governance and ideation of solutions.

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TVL - An easily manipulated metric and a horrible choice for granting Governance voting power

TL;DR: I’ve artificially inflated TVL on Tinyman’s testnet by 20M USD with an investment of 10k USD and 3.6 ALGO. The inflation value is arbitrary. Assuming the calculation of TVL is the same for testnet and mainnet (on which I haven’t found any documentation, but didn’t find any indication of them being different), this could be easily reproduced on mainnet. Since DefiLlama fetches Tinyman’s TVL directly from Tinyman, one could have easily overtaken the Governance if M1 of G3 were to pass.

Note: this is not a bug of Tinyman but of the TVL metric itself.

Details of the manipulation:

The procedure is simple and anyone can do it. It is not limited to Tinyman but any DEX.
I have created two assets T1 and T2, each with 10^19 tokens. This cost me 0.2 ALGO.
Then I created 3 pools: T1-USDC, T2-USDC and T1-T2. A total cost of 3 ALGO + 0.3 ALGO for opting-in to each LP token.
I have priced both of T1 and T2 at 0.0001 USDC (for a FDMC of 10^15 USDC for each one), and added an equivalent of 10k USDC liquidity to pools T1-USDC and T2-USDC.
To the pool T1-T2 I have added 10^11 of each token, “locking” an equivalent of 20M USDC. This number could easily be much, much larger.
For all of this, I only needed 10k USDC and have a stake of 3.6 ALGO.

Note: I had to invest an equivalent of 10k USDC liquidity in each of the pools T1-USDC and T2-USDC because otherwise Tinyman considers the liquidity of the assets too low to take into account the liquidity of T1-T2 pool.

Discussion:

First, I would like to address in advance some counter measures against this “bug” people might come up with.
“Ideas”:

  1. Increase the 10k USDC liquidity limit of an asset to count towards TVL.
    Ok, but to what amount? 100k, 1M, 10M USDC? If this were done, a lot (more) of ASAs would fall out towards counting of TVL, minimizing the advocated shift of Governance power into the retail hands and further raising the barrier of entry for new projects.
    Who would decide this amount? Currently, it seems to be the DEX.
    Even if the limit were set high, e.g. to 1M, it is still a low barrier for a whale to come and overtake the Governance.
  2. Include only “verified” ASAs towards counting of TVL.
    Verified by whom? The Foundation? This would lead to centralization.
    Should there be a Governance vote to approve each asset? I think majority of Governors would not want to take the responsibility of advocating for any project since it might still turn out to be a scam/rug pull.
    Even if we were to agree on the “verified” ASAs to include, e.g. Tether could simply issue 1B of USDT on Algorand, create a simple staking contract where only they could participate, and get the majority in Governance.
  3. Include only assets with sufficient activity towards counting of TVL.
    Since transactions on Algorand are dirt cheap, one could easily generate multiple accounts to seemingly generate large amounts of activity, generate LPs on multiple DEXs, etc.
    Since one owns all liquidity, one would not lose (much) on fees. There is also no danger of someone else getting on any arbitrage opportunities that could result during such an activity because you can simply create the asset with freeze enabled by default.
  4. Include only assets that are traded also on big exchanges.
    Again, a lot of ASAs would fall out towards counting of TVL, minimizing the advocated shift of Governance power into the retail hands and creating a barrier of entry for new projects.
    This way, we would also indirectly give exchanges a centralized point of affecting Algorand Governance through which tokens they allow to trade.
    Even if we agree on this, a large entity like Tether could still manipulate the system as explained above.

The point is, the TVL metric is a bad one and easily manipulated, thus it would be dangerous to grant Governance voting power based on it. It is widely used in crypto just because it is easy to calculate. One of its underlying issues is that value is in essence highly subjective and difficult to agree upon (who can say that the tokens I created I do not really value at 1B USDC).

However, all users of Algorand inherently agree on value of one thing - Algorand. That is why it is necessary to base Governance voting power purely based on one’s ALGO stake alone. As in my example of inflating the TVL, it would be possible to get the majority in Algorand Governance with just a minimal ALGO stake. Grating Governance voting power to non-ALGO assets also essentially minimizes the value of Algorand.

Please, show me that I am wrong about the possibility of manipulation of TVL, and that the Foundation has thought of this but just did not elaborate on it in detail in the proposed Governance measure nor during the recent Community All Hands event when addressing e.g. this question. Why I am skeptical of this is the statement that there does not seem to be a risk of DeFi overtaking the Governance, and the following one about how such an issue would be addressed if it were to occur - that any modification would have to be approved by the current Governance structure (which could have already be overtaken by then, never wanting to give up the power).

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The comments above from @anon are extremely insightful. The detailed explanation of how and why the delegation of voting power to DeFi from users would lead to unequal voting powers due to LP / lending mechanisms is something I have not imagined and definitely was not aware of from reading the governance proposal.

I hope more people would read this and hopefully the foundation would reconsider the governance proposal. @shaih

If the proposal is to be kept as it is, my main concern is that during future governance sessions the powerful voters (e.g. DeFi platforms) will never vote for taking away their 2x voting power, which will likely lead to permanent imbalance of voting power in governance, and ultimately creating an unequal “democratic” system.

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This is an enormously important point.

For governance to remain “democratic”, there should always be a mechanism where a vote by a true majority (in the form of “1 person = 1 vote”, or in this case I guess “1 algo = 1 vote”) can always override any decision made by any of the less democratic decision making bodies.

This doesn’t mean that other decision making constructs (such as the xGovs) couldn’t exist, only that there should be a built-in mechanism for “popular referendum” that can be used to prevent the abuse of power when needed (including the ability to abolish xGovs altogether, if the design turns out to be fundamentally flawed).

P.S. This whole thread is an excellent read with numerous excellent ideas and opinions. With a community like that I have faith that Algorand governance can become the best in the field!

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Thanks all, and @anon in particular for all the commitment, the insight, and the very concrete example. We are aware that Defillama TVL is imperfect and can be distorsive, no matter if this is done on purpose or inadvertently. Our intention is not to use TVL from Defillama as it is. We are going to define reasonable policies for TVL to be counted. Not reaching a minimal activity or liquidity could be one of the criteria to exclude an asset, for example. We will introduce the necessary adjustments to TVL in the computation of the governance stake to help minimize the distortions and also be more fair towards new and innovative projects, and towards sectors of DeFi that are put at a disadvantage by using TVL alone as a criterion.

At the beginning the reliance on external measurement will be stronger, while we develop more accurate measurements. That’s the reason why, listening to the strong community feedback, we are considering taking this opportunity to reformulate part of the question. In particular, where it sets too rigid criteria based on TVL. We would like first of all to lower the barrier to entry to 1M TVL, to be adjusted by other criteria such as the actual activity and its persistence. And we would like to make it clear that we will continue the conversation with the community to improve our approach in defining the participation of DeFi users in governance.

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@Massimo Thank you for acknowledging the problem. However, the suggestions do not solve the underlying issue of the possibility of manipulation of Governance by someone who does not have a stake in ALGO, and thus lacks an incentive for its long-term success.

Consider this: Would you let tourists participate in your country’s elections, and decide its future?

Tourists do bring value to your country by coming and spending money, as well as spreading awareness of your country abroad. But they do not necessarily have the best long-term intentions for it. Only the citizens inherently have those because they have a stake by living there, having their families and friends there, their ancestors, culture, etc. That is why it is crucial to religiously hold to the 1 ALGO = 1 vote principle.

Even if the difficulty of manipulation of TVL might be increased, large bad actors will still be able to overcome those. They would require only a minimal ALGO stake to overtake the Governance, do with it what they please and get away with it with minimal consequences to them. Algorand is poised to become one of the top (if not even the top) cryptocurrency, thus many will be incentivized to try to undermine it - due to possible direct financial gains or just to get rid of the competition. We shouldn’t open ourselves to such possibilities, regardless of how unlikely we now think they might be.

If the majority of Algorand holders agree that it is necessary to incentivize participation in DeFi through redefinition of Governance voting, the solution is simple. Only the Total ALGO Locked should be considered, and nothing else. 1 ALGO = 1 vote, directly traceable on the ledger that we all agree on.

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To be frank, I would have my considerations also regarding giving voting power based only on Total ALGO Locked, because it unequally treats different ALGO just based on where they are, i.e. an ordinary Governor would require to have them soft locked while DeFi participants’ stake would be completely liquid. But that is a separate discussion we should have.

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I’m not sure the comparison with countries and politics is apt here. Algorand is not a country, nor is it a political system. I think it’s extremely dangerous to lose sight of what’s actually important because of one’s political ideology.

I think it’s far more important to look at the big picture of what exactly it is we are trying to achieve with governance, and whether we are achieving that.

In my personal opinion, no matter what it is that governance is trying to achieve currently, it’s failing miserably. It needs a complete overhaul.

Or we could stop wasting time pursuing this half baked idea and lay down good measures. No offense but this idea was bad to begin with and is only getting worse.

The foundation now doesn’t want to step on toes or look bad making a last minute change but I think myself and the majority see the foundation still supporting this measure and are for the first time questioning judgement. Not a good look.

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@anon , let’s be constructive. Starting to have rules on which assets are included in computation and which ones are not - rather than just look at TVL - goes in what you also consider the right direction. You can be sure that once we are able to break down TVL there will be only few assets admitted: ALGO, ALGO, ALGO, ALGO…and maybe little more that we all think is good for the ecosystem.

@Massimo - the whole point @anon is making is that TVL is not democratic and to fair. As we were both (me at Evolving Algorand Governance - #160 by robert) highlighting, the DeFi approach could create unhealthy disproportions. Governance should ensure healthy ecosystem and thriving public goods.

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@anon - I have one caveat to your proposal. I think it is too restricted. Having such a long gov periods make the whole process slow and inefficient. In Cosmos, we have:

  • proposals should start with forum discussion
  • no gov period
  • default 21 voting period, however many projects are moving into ~7 days voting period.
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If the goal is to increase TVL by attracting new investment with attractive yield and extra votes, I don’t think this plan will be particularly effective.

  1. Rewards would still be issued on a quarterly basis, likely prompting defi platforms to require locks similar to the current governance soft-lock – not a simple or attractive option for most users, especially if tied to volatile defi pools.
  2. The yield will soon be so diluted by both governance and defi participation that it will not be attractive for either option
  3. Algorand defi platforms have not been particularly good at explaining how existing incentives apply to various pools. How much more complex will their UXs be when accounting for votes and interest derived from any and all defi participation? This will not attract new users IMO.
  4. Governance votes are not a realistic incentive for investors chasing yield

It may make more sense to drop governance rewards completely and use the remaining reward balance for targeted grants and/or general participation rewards.

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I like the analogy, but what about the following counter-example that goes against the point made in your country example:

If instead of countries we look at local governments like cities, counties, etc, where only the current residents can vote in local elections and only current residents have a say in the future of the city, it can easily lead to massive problems too.

Take Silicon Valley or San Francisco (California, USA) as an example, where extreme zoning laws largely prohibit new home construction, which then massively increase the value of existing housing in these areas. Rapidly increasing housing costs are of course benefiting all current homeowners and landlords in the area, and therefore they, and their elected local officials, continue to support such harmful policies. But at the same time a large number of “potential residents” who would want to move into the area for very good reasons (reasons that are at least as valid as those of the existing residents), such as wanting to be closer to work and to reduce their commute by several hours each day, may be priced out.

I think the above example makes a point that is valid for the Algorand governance discussion too, as current Algorand holders could be seen as “San Francisco residents” who benefit greatly from prices going up, and therefore prefer such policies even if it harms the larger economy as a whole. And at the same time a large number of potential Algorand users, who want Algorand to be successful not for it’s investment value but because of the utility it’s technical superiority would bring to the whole economy (faster transactions etc), and whose goals may therefore be even more aligned with Algorand’s long-term goals than the current Algo holders’, have no say in governance if they don’t already hold a lot of Algo.

This is not an argument for or against in the the current DeFi discussion, but just wanted to point out that using “1 algo = 1 vote” for everything may not be as trivial as it seems. Though it might still be the best that we have…

(I also have nothing at all against San Francisco, just happened to pick one city that I know of where housing costs are a major problem due to their zoning laws.)

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