Feedback request on proposed Q4 2022 governance measures

Governance
142

Companies develop on Algorand. I don’t know where to go with that. We sort of need that otherwise the blockchain has nothing on it but Governance. Companies on a blockchain need liquidity. Users on a blockchain who wish to transfer assets, need liquidity available. DeFi is that liquidity solution. Not all of them have tokens, some provide the service of allowing the user to be the liquidity provider. This is called a Decentralized Exchange. I will be happy to link you to more informational resources if you like, but that is really beyond the scope of this conversation.

As to your second quote, what good is the best tech in the world if no one is using it for anything? Is that a sustainable business model? That is like opening a gas station but not allowing merchants to sell their gasoline, soda, and candy bars in your store. That is literally why people go there. I know it’s hard for you TradeFi people to grasp this, but there is more to Algorand than its price action and DeFi protocols provide metrics to base those investors and their investments on.

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143

I have done my homework, and read about DeFi here:

Bloomberg – The Crypto Story by Matt Levine

Let me quote the last sentence from the DeFi part:

Bitcoin and Ethereum and DeFi could all vanish tomorrow without a trace, and most businesses that make stuff in the physical world would be just fine.

And another from “Trust”:

The problem with making every product also a Ponzi is that you can’t be sure if your customers are there for the product or the Ponzi. When it collapses, you can. If they’re still there–if they still use your product without getting rich off the token–then that means your product is promising. If not, well, you ran a Ponzi.
…
if the product is something people want, then the tokens will take care of themselves. Crypto people have a lot to prove on that front.
…
If so many smart finance people have moved into the crypto financial system, if they find it so much more enjoyable and functional and productive than the traditional financial system, surely they’ll eventually figure out how to make it, you know, useful.
…
If the world is increasingly software and advertising and online social networking and, good Lord, the metaverse, then the crypto financial system doesn’t have to build all the way back down to the real world to be valuable. The world can come to crypto.

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144

The article you linked has 3 paragraphs on DeFi, none of them useful or applicable to this discussion except for the section that mentions they use smart contracts. Thanks for taking the time to reply, I’d be happy to discuss more about DeFi with you on twitter if you’d like to follow each other (have it set to DM’s from mutual follows only) and explain more about the intricacies that Matt Levine seems to have left out if you like?

Everything is a ponzi scheme from a limited perspective. This probably isn’t a fair assessment of our situation.

146

Exactly. Not sure why they won’t clearly clarify what the remaining balance will be used for. Do they intend to extend beyond 2030? Will they use them for other stuff? In either case, they should provide the community with a clear & detailed update, and update the tokenomics to reflect the same.

147

@Adri Thank you for the update and taking into account at least some of the concerns raised.
That said, there are still some pain points left that need to be addressed to improve and decentralize the Governance.

The biggest pain point is that there is still no option for keeping the status quo for Measure 1. While there is good intent behind it, this is a step away from decentralization since emission of rewards has already been decided in the past with community agreement (i.e. in Governance period 1 in reference to the Algorand Economic Evolution Report). A unilateral change by the Foundation to the reward distribution should not be made. Instead, the Foundation should communicate the merits behind the change to try to convince the community and let it decide whether to accept the change or not.

Nevertheless, it is true that the Foundation has never explicitly made a pledge to abide by the decisions made by the Governors, thus it has every right to make unilateral decisions. In light of this fact as well as due to the core issues of previous measures (e.g. trying to change who can vote and their voting power) it would be useful to come up with Algorand Governance Constitution to set in stone these basic rules of Governance (as it was already suggested in this thread before the start of Governance) .

Algorand Governance Constitution

The Constitution should define:

  • who has the right to vote, e.g. any account that can issue the registration transaction during the registration period
  • what is one’s voting power, e.g. the committed ALGO amount held in the primary account (i.e. a wallet) or delegated accounts (i.e. amount held in DeFi pools - tracked through e.g. LP tokens) if held throughout the whole Governance period
  • duration of a Governance period
  • time of registration, voting and cooldown windows
  • how measures can be proposed and decided to be put to the general vote, i.e. the xGov (with a detailed description of what that actually means)
  • how the Constitution can be changed (e.g. only with a supermajority support of at least 66% of Governors and the agreement of the Foundation)
  • the form of proposal questions, e.g. that there is always the option of keeping the status quo (blockchains in general, and especially Algorand, are risk averse and have the notion of decentralization at their core; hence status quo is always preferred over a change enforced by a minority/centralized entity because consensus on the current status has already been reached)
  • if a proposal concerns distribution of community funds (e.g. for Governance rewards), it must always be time-limited. If a duration is not explicitly stated in the proposal, it is assumed to be up to the end of the next Governance period. An accepted proposal for a longer duration can be cut short if approved by a Governance vote.
  • the pledge that the Foundation respects the decisions of Governors and does everything in its power to facilitate execution of the passed decisions
  • how Governors can influence the (general) operation of the Foundation. For example, if the majority of Governors think the Foundation inadequately fulfills the role of responsible stewards of the ecosystem or does not abide by the decisions accepted through Governance, the Governors could, e.g. vote to change the CEO, and/or would need to approve the Foundation’s board members.
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148

Still waiting to hear a convincing reason as to what will happen to the leftover millions of ALGO from M1 reduction @Adri

Why does the foundation take unilateral decisions to increase the size of their treasury against the initially stated goal of full decentralization by 2030. I’m glad the other votes have been reconsidered but the resource allocation for the other two votes is an order of magnitude lower than M1. The foundation needs to show a lot more transparency with regards to the outcomes of the M1 vote.

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149

I don’t know what your standards of measurement are for “proven themselves” but I would say that a majority of the people on that list are proven by any measure of anyone in the Algorand community I would ask. I’ve used and continue to use all of those except Xbacked, on that list. Having used them, I can tell you that Tinyman is the worst, imo in terms of approachability, of all of those on that list and that your pick of using Algofi for swaps will quickly lead you broke as they have the worst swaps available on Algorand. Please tell me more about how much you know about Algorand.

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150

Hey @Adri thanks for the thoughtful response.

First Measure

I agree with the rationale and appreciate you guys listening to concerns about governance cannibalizing demand for DeFi. I personally will vote to aggressively reduce governance rewards. However not having a true ‘No’ option is still going to rub people the wrong way. It is total appropriate for governors to believe the best use of capital is to return it to themselves. I don’t agree with that, but the choice should be open.

Second and Third measure

Super excited to vote pro xGov, but appreciate that a ‘No’ option is being added.

Fourth and Fifth Measures

Offering a forum to display Algorand NFTs.The collection would be showcased in both virtual and on-site events, giving select projects/creators the stage and marketing visibility, and showcasing Algorand’s robust range of NFTs to people within and outside the ecosystem.

I’m still strongly against the foundation owning a collection of NFTs. NFTs that are offered as art, collectibles, or other non utility use cases have not demonstrated sustainable ROI. It is not clear that the ecosystem can sustain itself without external funding, since there are no economic incentives to holding these kinds of NFTs.

Providing support to existing creators on Algorand. Purchasing select pieces and/or emphasizing primary sales and shuffles is just one example of this kind of support. Other examples may include providing grants for strategic/high-profile initiatives, commissioning work, providing creators yield via fractionalization and/or collateralization or other support mechanisms.

In my opinion, any support to “creators” needs to be non financial. Using the foundations events and web presence to promote projects is potentially fine, but financial support via grants is a hard no from me.

Onboarding new users into the Algorand ecosystem. For example, running campaigns, shuffles and giveaways to attract collectors from other chains and incentivizing them to create new wallets.

Happy to support initiatives that look more like this.

Finally, we heard many voices calling for a choice on whether to pursue this project at all (the original drafting only contained a choice of whether to fund 300K or 600K Algos). We have responded by providing such an option.

Happy to have a ‘No’ option, however something I think has been missed in interpreting the outrage over this proposal is the lack of faith by many in the community of the long term value proposition of NFT collectibles, art, communities, etc. I think the first initiatives attempted in this area need to prove that this is an area where meaningful transaction volume can even be found. So once again I’ll reiterate alternative measures that are more likely to be successfully voted yes:

  • Buy some valuable NFDs and auction them off to Governance participants and node runners. This incentivizes people to participate in governance directly since holding on an exchange wouldn’t be eligible. These NFTs actually have utility today since they are useable as domains via .algo.xyz .
  • Contests (ex Algorand Mascot contest): Submissions are NFTs sent to a specific address. Governance decides the winner, the winner gets a small ALGO prize. This incentivizes people to make NFTs and engage with the ecosystem without creating any weird incentives. Winners could be showcased at Algorand events
  • Governance votes on a charity every period for a donation. Commission an NFT to minted for each charity that receives a gift, given to all the governors who voted for that charity.
  • Work with Dust Identity (an Algorand partner) to tag a few real world objects. Raffle these objects off to governance participants and give them the associated NFTs. Would be a cool way to showcase how NFTs in the real world could work.
  • Buy an actual piece of art and allow museums the rights to display it when they rent the corresponding NFT.
  • Have a raffle for any wallet that is holding any NFT, regardless of where it came from. Again this incentivizes users to take their Algo off an exchange and use an NFT marketplace to become eligible.
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151

We are making a further revision to this quarter’s governance proposal. We are also delaying the voting period until Monday the 5th to give some time for the community to review the measures.

Last year’s governance rewards program covered the four periods in 2022, meaning that it expires at the end of this year. The measures for this fifth vote were to design a new governance rewards program, for a six-month period, to try a new, more targeted approach and to put the ecosystem on a path of less reliance on “general” governance rewards and increased rewards for additional activities that directly support the health of the ecosystem. Although most of you understood this, some in the community thought that the reallocation of the governance rewards was too sudden and required more lead time to prepare.

Given the confusion, we are making this governance period a transition governance period of three months instead of six months. (That is, a one-quarter vote, as we had last year). During this transitional period, we keep the perceived “status quo” of 70.5 MM Algo in total rewards. The other measures – for DeFi, for xGov, and for NFTs - remain the same, but now they are counted against that 70.5 MM Algo total. That is, we ask the community to vote on five specific measures - one for Defi (DeFi funding choices remain the same); two for NFTs (same choices); two for xGovs (same choices), with the residual rewards going to general governance.

In summary, we are changing two things as compared to the previous proposal:

  • We are reducing the length of the governance period from two quarters to one quarter;
  • We are adding the explicit notion that – after subtracting funds for DeFi, xGov, and NFT measures based on community preferences - any remaining Algos will be allocated to general governance.
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152

Thanks for the update. It shows that the foundation is trying to listen even though it may not still satisfy everyone.

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153

this seems a waste of money. Allocating funds to more defi that will just create inflationary tokens and to meaningless NFT that only creators benefit to earn money won’t make the price appreciate.
Unless you create a dex that really helps burn algos.
I would prefer to burn those algos or create something new compared to other chains that will make algo better and attract more money.

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154

I think you’re right. Burns are the best way to fairly and equally distribute value to all Algo users and holders.

155

Your points are well taken. I’m leaning more toward Pact lately compared to AlgoFi or TinyMan. One thing that may be helpful is to develop objective metrics for evaluating projects and their relative impact. This would reduce the impact of subjectivity in analyzing projects and make asset allocations more efficient, driving greater value growth for the network.

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156

Don’t forget that Foundation funds were raised by the Foundation, and the management of them is ultimately the responsibility of the Foundation. These funds have nothing to do with the Algos that you and I hold in our own wallets.

If you want direct control over the direction of things, and the spending of resources, you can start up your own chain and raise funds for your own foundation. This will give you 100% control.

Not to say that we can’t advocate for improvements in the governance system, but the Foundation is not obligated to give us control over its funds. They give the community a measure of control, which is very nice, and the xGov system will increase the measure of that control.

However, I for one place more faith in Harpal Singh and his team to responsibly manage Foundation resources than I would place even in myself. I participate in governance because I love Algorand and care about its future, but I’m happy that there are true experts at the helm to guide its progress over the long term.

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Now I’m confused lol and sad. I was looking forward ls to 6 month Governance terms.

But I don’t exactly understand what this meant then:

We are reducing the length of the governance period from two quarters to one quarter;

159

I was referring to the fact that we were planning to announce the total amount of ALGO available for governance rewards every 6 months instead of 12 months. Since then, we decided to announce it quarterly, alongside each period’s measures.

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160

I think I was right, price was 60% higher than now

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161

Absolutely 0% correlation.

162

yeah sure, all rewards dumped

163

Agreed. I think you were right too.