Evolving Algorand Governance

At a high level my main point was that if the current Algo holders were primarily investors and market speculators, they would be financially incentivized to try to drive up the price of Algo (in hopes of cashing out at some point), and such incentives are not automatically the same as what is in the best long-term interest of Algorand. (If by long-term interest we think of Algorand’s wider adoption for the purposes it was initially created for.)

I was also trying to show through the analogy that there may be other groups of (potential) Algo users who may not be large Algo holders at the moment, but who would have significant real world use for a widely adopted and technologically advanced crypto like Algorand, and who therefore are incentivized to act in Algorand’s best long-term interests (rather than treating it as a speculative asset where the underlying technology is secondary to the market price of the asset).

The conclusion therefore was, that relying on the market forces of current algo holders via “1 algo = 1 vote” may not actually be optimal, and can lead to governance decisions that sacrifice Algorand’s long-term interests in favor of decisions that increase it’s market value in the short term.

Unfortunately I don’t have any better solution to suggest either. At least none that wouldn’t make governance political (where people rather than algos vote), and I’ve come to accept that very few people in the crypto world want to go to that direction. Therefore “1 algo = 1 vote” may just be the most “democratic” form of voting that there is. Though I would also hope that before “1 algo = 1 vote” fully takes over, the ownership of Algo was much less concentrated than it is now, and that most of the Algo holders were also using it for something other than just for market speculation.

My general issue with both proposals is that they seem to overly reward being rich. These proposals seem to be rewarding the richest with responsibility, instead the other way around.

I’m all for a rewards model that compensates for the level of responsibility taken and fulfilled. To the degree that there are different levels of responsibility (DeFi, Relay Nodes, Passive holders), there could easily be different reward tiers.

It feels like this proposals allow for a wealthy person uncommitted to the ecosystem to enter and co-opt the xGov tier., make self rewarding proposals, and then get extra voting seats to approve them.

Is this incorrect?


iirc from the xGov proposal was that xGov cant vote on the finished proposal. so they could theoretically put forth something that they like and then pump it up so that it goes to a vote, but then they cant vote on it on governance.

I agree, and I think it’s paramount that the transition to community governance is done in the most careful and responsible way possible. In this fast-moving space, you cannot make the most informed decisions on a particular topic if your efforts are split elsewhere. Like you said, it’s evident that something is not going as smoothly as we’d hope for at the Foundation in regard to governance. Just voting away the questionable measures won’t fix that underlying issue, and will likely continue down the path of disorganization and head-scratching proposals (and decisions) in the future.

One possible solution is to lock the governed algo for some time (longer than the gov period to avoid cheating short-term, eg. if unlock happens exactly when the gov period finishes the whales could coordinate a last minute vote-swing and then dump algo because they expect the result to drop the price). However even when algos are locked there should be an option to participate in the next gov period (just extend the lock time in this case). The longer they’re locked the more it incentivizes long-term decision making.


One additional advantage of locking staked algos is that exchanges can’t vote, at least not with the majority of their coins unless they want to risk running out of algo and hurting their reputation. Which in turn also means regular stakers get more rewards

Thanks for the link to the blog post. I apologize for the late reply. What I had in mind is an actual research paper with math showing why this works just as well if not better. For instance, let me point out some logical conflicts I see from the option A. I will compare Algorand consensus and governance. I’m aware the two play different roles, but they share the same environment. Let’s first agree, that both consensus and governance operate on the same assumption “the majority of money is in honest hands”. They also both recognize 1 ALGO as a citizen with a power of 1 vote. This means their definition of an Algorand citizen with a vote is the same.

From what I understand, the Foundation claims to have found a better definition of a citizen, meaning more inclusive and thus more decentralized, by recognizing some other (defi) assets as citizens as well. I agree with the part of the blog post that suggests that the more citizens we have, the better. However, if option A is in fact a better citizen definition, since both the consensus and governance operate under a definition of a citizen, by implication it would mean we should use the “citizen definition” described in option A on the consensus level as well - because it improves inclusion and decentralization. This would mean that defi participants could participate in the consensus with their own VRFs weighted by their TVL or whatever way the votes are evaluated. I’m fairly sure this won’t happen at the consensus level and my question to the Foundation is, why not?

My best guess would be because option A’s new way of labeling citizens worthy of voting in fact comes with new potential security holes and trust assumption as was already discussed above in depth which would be extremely dangerous for the chain survival if we applied these definitions to the consensus. This then begs the question… are we saying we can tolerate less security in governance to resolve some other governance related issues e.g. clashing of defi and governance as described in the blog post?

For what it’s worth, I actually think this is an honest attempt at improving governance, but it seems to me it slightly lacks solid grounds. If the grounds were in fact very solid, the same logic of who is a citizen of Algorand should be considered at the consensus.


I think this is a very important point!

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I actually disagree with this conclusion, and think that if consensus and governance currently operate under the same definition of a “citizen”, it is merely a coincidence rather than something that should always apply.

In my opinion, one’s impact on consensus must always be directly proportional to the number of Algos, exactly as it is now. This is because consensus is about validating current transactions only, and any attempt to “attack” the consensus would impact the value of the holdings of the current algo holders. Therefore even if all algo holders act in a purely selfish way and try to maximize the value of their own holdings, that leads to behavior that is identical to acting in what is the best interest of the blockchain too. So, for the purpose of consensus, there is no better way than all current algo holders given a weight that is proportional to their algos.

Governance, on the other hand, is not about the current state of the blockchain, but about it’s future development and long-term direction. And as I have argued before, this is where it no longer applies that the self-interests of current algo holders are necessarily one and the same as what is best for Algorand in the long term.

I agree it may not strictly need to be the same, but it’s definitely not a coincidence. They both have the same goal which is to make a decentralized decision. Decision on what? Both the consensus and governance make a decision on the “next step”. Consensus’s next step is the next state update while the governance step is the next world logic update. So in consensus, just like in governance, the main idea is that the whole (or the majority of) population agrees on the next step. The difference between the two is that since the consensus steps are very frequent (4.4s), you can’t effectively coordinate an agreement between the majority of the population this fast. This leaves you with no choice but to select a random sample of the population and coordinate on a smaller scale e.g. select a subsample of 1000 random citizens. If governance had votes every 4.4s, it would need to do subsampling as well. It’s the same idea, but since the time window to communicate votes in governance is much larger, it doesn’t need subsampling and can wait for every member of the population to cast a vote. We call this “slowed down consensus” governance, but the two do exactly the same thing which is to ask the population on what is the next step.

It’s not clear to me why this wouldn’t also be true for defi tokens as well. If you voted in consensus with defi tokens, which were locked for a certain time, and defi token holders attacked the consensus, it’s likely your defi token would lose value as well since it lives on the chain, no? I’ll admit I haven’t done much thinking in this direction because I don’t think mixing defi with consensus is a good idea.

You make a good point that one is for the present and the other for the future and it may thus not be the same, but at least currently the main function of both is to answer a single question “What does the population think the next step is?”. The only difference I see is how they define who the population is and what voting weight they are given. The fact that one “next step” is for the present and the other for the future doesn’t change the fact that you’re asking the question and thus getting an answer from the current population. There is no locking in place today so there are no guarantees anyone will be a part of the population tomorrow.

I’m still learning about the details of how things work so I expect errors on my end in which case I hope you, or anyone else, corrects me.


I can only agree with the suggestion of supporting proposals with more math… The original purpose was not changing the definition of citizens or of security, but including in governance new citizens that already exist, and rewarding them for their commitment. Citizens in DeFi run risks that can involve other assets in DEX or lending Algos (rather than selling) to borrow other assets, and they can have also have losses that are not related to any lack of commitment. With a bit more math, we can take this into account without breaching the really fundamental principles. Thanks for your contribution!


“ALGO, ALGO, ALGO, ALGO…and maybe little more that we all think is good for the ecosystem”
It’s only Algos that secure the system trying to support other tokens would be bad as they don’t have an economic interest in securing the platform. Any other asset, be that a dollar or a memecoin, takes its own responsibility to give its currency value. The only responsibility Algorand governance has is to Algos.

“Render unto Caesar the things that are Caesar’s, and unto God the things that are God’s” - Matthew 22:21

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One of the concerns i have had since the beginning of governance and even more so with the last vote, is that what is stopping someone from having a few thousand different wallets and diluting the voting pool. A hundred “whales” with a few hundred wallets each, could sway the vote in thier favor. Take this voting period, wouldn’t take too much to pollute the purity of governance. I bring this up cause no matter how this session’s vote turned out, this is a possibility. Ive been an algo believer since i stumbled into the space nearly 2 yr ago. Dont know how much devs keep up with these forums but an email from a person with more knowledge than me would let me put my mind at ease. (KYC isnt the answer, thoes can be forged from all the failed projects in the past)

Your weight in the vote is your committed amount of Algos.
A wallet with 10 Algos count for 10 votes.
So having 2 wallets with 1 Algo is the same as having 1 wallet with 2 Algos.

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Now i just feel dumb because i do remember reading that somewhere

Curious what people think about these claims, specifically relating it to Algorand’s current governance structure:

Chris Blec on Twitter: “@bantg It’s a battle between people who believe that the DAO should operate more like a company vs. people who believe that the DAO should operate more like a DAO. Whether we should maximize efficiency or trustlessness.” / Twitter

hexonaut.eth on Twitter: “@ChrisBlec @bantg A better characterization is micromanagement by shareholders vs domain experts running operations. There is no such thing as a flat structure, and we should accept that reality.” / Twitter

The Sustainability Checklist — polynya (mirror.xyz)

Also, what does everyone think about the Governance #3 outcome, for Measure #1 not going through? One would assume the Foundation thought it was a good enough proposal to even add it as an option, so now the majority of the community is against the Foundation’s intended momentum?

Btw, why did the Foundation offer the measure as “two” options when the other one is just, “stay in status quo”? Wouldn’t it have been more efficient for you guys to actually provide two different proposal of the governance structure going forward, instead of just (poorly formed) one to debate for 3-months, in the case one fails like the current outcome?

tldr; I believe Governance system is something a network must equip to steer towards further decentralization, but another layer of high-level decision makers need to be created imho to prevent these inefficient fallouts, having to back trace and/or waste time for no apparent reason while the market’s keep moving.

Regardless of what I think of the measure itself, I saw it as a positive outcome that the community voted against the Foundation in a measure that seemed controversial.

The reason why I thought this was a good thing, is because it proved one of my fears about this governance system wrong. I had been concerned about the oversized influence the foundation would have if people simply “vote with the Foundation” in order to get their rewards, leading to the Foundation having enormous voting power even when they are technically not voting in Governance. Had that been the case, it wouldn’t be decentralized governance at all. And therefore I am glad to have been proven wrong.

(This doesn’t completely eliminate my concerns though. For example if in the future we had a lot more measures to vote on, it would also increase the number of governors choosing to “vote with the Foundation”. This in turn would create the possibility that the foundation could include their own politically motivated measures in the mix, hoping they would not get too much attention and would pass quietly due to people voting with the foundation. Not saying it’s likely, but possible.)

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