Feedback request on proposed Q4 2022 governance measures

Governance
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For the latest info, read these updates too.
Update 2, posted on Dec 3, 2022
Update 1, posted on Nov 26, 2022

— Original post —
The Algorand Foundation seeks community feedback on the proposed ballot measures for the upcoming Governance Period 5 voting session, scheduled to open at the end of November.

Our CEO, Staci Warden, has shared the foundation’s broad proposals for the 2023 governance program in a post published on our website last Friday, 11 November. We recommend you read Staci’s post, alongside the proposed measures below and invite your comments.

Our focus for next year will be:

  • Continuing deliberately on our path toward decentralization;
  • Rewarding a wider range of ecosystem participants; and
  • Holding ourselves accountable in the way that we spend resources to make sure that those resources are deployed most effectively in support of our mission and our community.

Accordingly, we plan to continue to allocate substantial funds to governance rewards for Algo holders, at roughly half of the current rewards level, while increasing our support for DeFi governors. We will also start allocating funds to other activities, two of which are included in the current voting measures: community grants, and support for creators.

Measure 1 - Allocating 90MM Algo to governance rewards for the next two Governance Periods.

We will continue to allocate governance rewards in the same form as is currently conceived: that is, a) rewards based on a three-month lock of Algos and participation in voting (“General Governance”) and b) rewards based on participation in governance via DeFi dApps (“DeFi”).

Both General Governance and DeFi rewards are being continued for the next two periods, but the rewards rate is being moderated and distributed on a more targeted and impactful basis, compared to 2022. We propose to allocate the following amounts for the next two governance periods:

Options

A. 60MM Algos to General Governance and 30MM to DeFi
B. 70MM Algos to General Governance and 20MM to DeFi

The figures above cover the allocation for the next 2 periods (i.e. 30MM / 15MM in each period under Measure A). During these two quarters, we will assess the impact and gather community feedback.

The Foundation supports Option A.

Measure 2 - Allocating Algo for Community Grants via community proposals and xGov process

We propose to test a pilot allocation of Algo for Community Grants, to be distributed by the upcoming process for community proposals and xGov moderation as described in Measure 2 of Governance Period 3.

These Algos will be distributed over time to projects that are upvoted by the xGovs. If this measure is passed and the pilot is successful, the Foundation would anticipate bringing further measures to expand the scope of this program in future.

We will consult with the community over appropriate safeguards and rules, and would foresee these including the following:

  • Must contain milestones and deliverables;

  • Must comply with the mission of the Algorand Foundation to develop the ecosystem, and must adhere to non-discriminatory principles;

  • Must be built on Algorand and contribute to the overall health of the ecosystem.

Options

A. Allocate 1M Algos to xGov Community Grants
B. Allocate 2M Algos to xGov Community Grants

The Foundation supports Option B.

Measure 3 - Allocating Algos to direct purchase NFTs from Algorand’s creator community

We propose to allocate funds to support creators on Algorand and to establish an Algorand Foundation art collection.

By purchasing digital assets created by Algorand’s NFT community, we aim to support NFT creators, communities and projects; build a collection that can be showcased at both in-person and virtual events; and provide stimulus to Algorand’s burgeoning NFT ecosystem.

We envisage that the purchase, sales and/or donations of specific works will be determined by a community-led curatorial board, and that purchase, listing, and sales procedures would be developed by the community.

Options:

A. Allocate Algo 300K to a Creator fund for establishing an NFT art collection
B. Allocate Algo 600K to a Creator fund for establishing an NFT art collection

The Foundation supports Option B.

We welcome your comments ahead of the this period’s voting session set to start on November 29.

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Good job.

I definitely agree with the shift towards DeFi rewards and I think the allocation is balanced (I’m going with option A on this one), I’m a fan of putting your ALGO to work for higher rewards. May I ask what’s the rationale behind reducing the overall pool from 141M to 90M in the next semester? Anyway, there’s a 51M ALGO gap which could be used to further incentivize nodes or other ecosystem projects in the future

Regarding measure 2, that’s definitely a good proposal, some other competitors have been using similar models to support community projects and I’m looking forward to see how the pilot goes. Is there going to be a dedicated website to submit project proposals and to upvote/downvote?

Regarding measure 3, I’m not so sure, but since it’s not a very significant amount of ALGO I think we should give it a try. However, I don’t think this fund should be exclusive to NFTs and art, some of the ALGOs could also be distributed to content creators (youtube, tik tok, twitter and so on) as a reward for videos and other types of content (like educational content) to spread awareness around the Algorand ecosystem.

Good luck on the new role Adri

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First off, welcome! These all look to be quite interesting proposals. I’d like to dive in and ask a few questions and give my first impressions:

Measure 1 seems easy enough to dissect. However, this is going to piss some people off. So we should definitely come up with some maths or reasoning for these exact amounts, if already done please explain how we reached these numbers? That being said, I am definitely in the DeFi camp on this one. My bigger question on this measure would be if this includes the LP commitment voted for in last governance as being lumped in with “Defi” or are we strictly speaking of DeFi Governance committed Algo and leaving it at that? I know the LP system was difficult to get right from multiple angles, and curious if Foundation is seeking to pursue this or try a different strategy.

Measure 2 certainly seems like a step in the right directly as far as xGov is concerned, but quite a few community members are still somewhat unclear on how xGov process will work. The proposal mentions an Algorand portal for upvoting, DAO voting procedures, and xGov tokens but really fails to present how this process works in a cohesive workflow. Could we please get more information on who are xGovs and how this process will work before we start handing out grants? This seems like it might have the most potential for abuse out of all the measures listed here and the community should definitely be aware of the inner-workings of this program before allocating funds or power to it. Assuming, nothing objectionable on that front arises, I would support the Foundation in this measure.

Measure 3 seems a bit like a wildcard, though I the only possible harm I can think that might come from it is if the Foundation becomes a crutch for the NFT community to lean on to hold up floor prices. I think there should definitely be a maximum number of pieces from any 1 collection that the Foundation should purchase in addition to a maximum Algo value per purchase. This would ensure that the Foundation could not be seen as manipulating the market or profiting off of market conditions while being subsidized by funds that could have gone elsewhere. With proper safeguards in place, and something akin to a museum curator or board of directors responsible for selecting pieces (xGov subcommittee?) I would be happy to support this measure.

Those are my initial thoughts. Curious to see what others’ think.

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Hard agree with 3rd point here Nautilus. Would like to see this as more of a “community support fund” to be dipped into on discretion for various misc. incentives that fall outside the general scope. Folks Finance shouldn’t be the only ones rewarding people for educating the masses about their product. If this fund were used to promote artists, content creators, and various community engagement initiatives that would be a slam dunk vote.

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Exactly, you’ve explained it better than myself. It should be like a community support fund instead of being an NFT fund only

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measure 1: I think that the vote really should have been to ask if governors are OK with changing by a significant amount (45M token distributed instead of 70M each period) the tokenomics of the whoole protocol. Not discussing this changes really makes Governance like a joke, sorry to be blunt. The real decision has been made by the foundation, we are just left to discuss about the really secondary aspect of the measure when in fact a decision has already been made. And no acknowledgement of this is given.

Measure 2 I’m all for it.

Measure 3 I’m all for supporting creators and organizing events, but I find a literal waste of money building a collection. I’m fine with using even 1M ALGOs or more if it helps supporting projects, but buying NFT art should be a collector’s job, not an artificial way to prop value. Give creators the tools, let the market decide if their art is wort it, without buying it ourselves.

Measure 4: Saldy, no measure 4. Participation nodes will get their only rewards for securing the network axed (again). Best case scenario, if measure 1B passes, rewards for running a node (which only amount to Governance rewards) will be cut in half, without an hint of regard for it. For a vote that was touted by Staci (whom I actually happen to like very much) a vote for Decentralization, this is a HUGE step back. A good citizen stays a good citizen only as long as he doesn’t realize he is being made a fool of. My node will probably shut down december 31st., since I will now get probably 5x or more the rewards for simply lending my ALGOs in any of the protocols that support liquid governance. And before people get to my throat, I know that AlgoFi supports nodes (and it is really a great feature), but do we really want to push all the nodes to one single provider? Does it matter if its name is AlgoFi, AWS or Google Cloud services? I know that this is unlikely, but spare a moment to think about how you want to help to truly decentralize the stake of Algorand.

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Please give the community a chance to vote on their preference between allocating more to Defi versus more to funding community projects. Ideally combining measures 1 and 2 into a single choice, while keeping the 60MM Algo allocated to general governance (if that much is needed at all).

Options
A.

  • 30MM to DeFi
  • 1MM to xGov Community Grants

B.

  • 1MM to DeFi
  • 30MM to xGov Community Grants

I know I would vote for B, because that would provide tons of oxygen to the community and especially the builders to engage with the community. Think about it, new project ideas sprouting up, drumming up support from the community, brining new people in, voting on what’s best – the levels of engagement would be huge. Compare to one click extra yield DeFi, fire and forget until next governance.

We need to engage the community and bring new people in, and putting in more rewards towards DeFi would only serve to satisfy existing yield farmers.

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regarding measure 1:
as far as i know these rewards are supposed to be a replacement of Aenas rewards (correct me if i am wrong). but if thats the case i think those Defi rewards should get split further into two categories

(1) liquid governance solution like gALGO, vALGO, gard
(2) LP farms

and then giving away specific amounts to those two categories like (1) gets 10M and (2) 20M. my reasoning is that people using liquid gov solutions is great, they boost TVL and they can use those liquid solution to participate further in Defi. but they dont really need to borrow against them, provide liquidity on DEXs or other stuff they can just commit to governance via this solutions and earn more APR without really helping that protocol besides TVL. additionally, big players like VCs are the ones who profit the most from those solutions since (they also risk a lot by using them ofc) they earn a big part of these rewards

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This seems like a very bold re-imagining of these proposals. I’m sorry, I have no sympathy for vanilla governance. Defi is adding to TVL (regardless of whether you care about that), which is a metric some people look at (hopefully not the only one). So for you to argue that the only ones benefiting are currently defi yield farmers is not exactly true. Measures like this have the potential to entice others’ into the ecosystem such as this past governance when TVL for Algo shot up (only to be slaughtered by DefiLlama’s change of how they count TVL but that is another story). Not to mention, it is forcing people to engage with actual products on Algorand rather than suck at the fat teat of the Foundation. One is a burden on the blockchain, the other promotes growth.

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regarding measure 4:
i think you buying a few NFTs to showcase them sounds great, algorand has amazing NFT creators who work hard for their projects and they deserve more attention. but i dont think buying NFTs with that fund really helps those creators when 5% of those sales to go the creators (thats the best case probably on algox you can set lower amounts). so the people that could benefit most from AF buying NFTs could actually people trying to get rid of some of their NFTs. i propose changing those funds into

(1) buy NFTs to showcase them
(2) give grants to creators so they can build exciting stuff

and allocate specific amounts to those 2 things like (1) 100K and (2) 200K

another idea:
Ventral from CGF - Crazy Goose Flocks also had the idea that project creators could lend NFTs from their collection to you so you can showcase them. so those funds could be used to fully support creators via grants. i actually prefer this idea even more than my split

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I don’t agree with the split, there are different strategies and risk profiles in DeFi governors, and people will act accordingly. I believe that the reward pool should be distributed to everyone as long as they have their stake ‘at risk’, ie, using a DeFi product.

If someone wishes to simply put their ALGO in liquid governance, it may not be as good as providing liquidity from an ecosystem growth point of view but they’re still having an important contribution to DeFi’s growth. But when you do liquid governance you have every incentive to borrow against your ALGO and loop it, which drives lending markets liquidity too, people will supply and borrow more, and so on.

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Measure 1: I am always in when it comes to awarding DeFi users more. However, I would like to understand the reason behind that huge drop from 70M to 45M? If that measure passes, will these 25M be reallocated elsewhere or what will happen to them?

Measure 2 and 3: Seem very reasonable to me.

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I agree with much of your sentiment here. I like algofi because I can put my ALGO in vault and support the ecosystem via consensus. It requires you to use a specific defi provider, so it has it’s drawbacks.

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“NFT Art” Is a very broad therm. Who will be the curators, jurors, experts, buyers that will decide what NFT acquire, which artist support? Names of the art world or art galleries should be used? Regular, renowned, artists or the ugly reptiles and apes illustrators that everyone should like but I personally despise? I don’t think that a community-driven effort will be different than that the most succesful ntf projects rn will have just more money. Maintaining the status quo. They don’t need our help rn.

Lot to unpack here. There should be an option to allocate NONE for this. This could really be an absolute waste of money. Pretty pissed off that the only NFTs to support are those silly ones. What about Opulous and other ventures that strive to use them for good?

Maybe connect with real world galleries and host a NFT show for a renowned artist. Convert some of his/hers works to NFT and create an online bidding occasion for them. The artist get paid and get exposure, NFTs and Algo get to be seen by rich, real world, collectors in exchange.

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Love that you edited and provided a solution. I like the way you’re thinking. Thanks.

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  1. What is the rationale behind reducing rewards? We haven’t received a new transparency report from the foundation this year but there has been a rapid increase in the Algos entered to the market by the foundation. Is the plan to reduce rewards and pay for the foundation costs? If not what is the overall plan for participation rewards moving forward?
  2. Option 2 should be postponed to when xGovs are elected or at least the process is established.
  3. For any measure there should be a third choice: None of the above.
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regarding your third point in general yes, there should be normally an option to choose none but i dont think that would help here. people would probably vote none because they would get more free money by just voting once every month. and even if they dont do that in this stage this is not really decentralized governance, its the foundation that wants to do stuff to help Defi or other important parts of the chain and we vote on how exactly. until xGOVs are a thing and the community actually can propose measures it will be just that and therefore its in my opinion ok to let the foundation decide on how their funds should be used roughly and let us determine the amounts

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  1. The amount has already been defined and the rationale for the cut is unclear.
  2. The foundation has lost a lot of money recently and we haven’t received an updated transparency report yet. I’m personally concerned with the increase in the rate of costs by the foundation particularly as we don’t have any visibility to the next few years budget outlook.
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For Point #3 I would like to see a portion of this ALGO go towards community tools that both creators and collectors can enjoy. An easy answer would be to pick up the hosting costs of NFT Explorer and making the holder collection data available to everyone for free. It is such a vital part of our ecosystem and without it, things would not be the same.

In addition, I think having tools that can port collections from EVMs to Algorand would be really neat to gaining traction on the chain and/or having collaborations with xChain series. Being part of the thurstober tinyhorse/STUPIDHORSE team, we have dedicated a portion of our profits to creating free open source tooling for creators to use. It has been a hit and has made creating on Algorand an easier experience. Having the Foundation continue on this working model will help out everyone.

I like the idea of having a collection of NFTs, but there should also be a focus on supporting everyone.

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I’m disappointed that the community don’t get to vote regarding the reduction in vanilla gov rewards? Not everyone is wanting to risk their capital in Defi. You’re taking a huge chunk of rewards away (leaving only 45m per quarter) and not asking the governors? Measure A: Crap. Measure B: Vote A Measure 3: Vote A. Why cant you do a vote regarding the reward size rather than force it on us?

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