Feedback requested on proposed Q3 2022 Governance Measures

the way things are going, wouldn’t be surprised if the Foundation needed a vote on the above measures so that they can start processing things more quickly. the Foundation must be one of the slowest movers in the blockchain space took months to decide on pivoting from institutional adoption to retail adoption missing out on TPS, NFT and DeFi hype and the entire bull market where adoption was rampant.

Good point on the time front, its too late to add a caveat that states the 10% to 25% DeFi rewards depending on data points. However, I rather a slower approach with solid data over a quick decision that could be more detremental.

Have we suggested a faster process when voting on governence items in the past? If so, what was the outcome? If not, perhaps thats something to propose.

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no, how can we and via what channel? the foundation have taken 3+ years to roll out TPS upgrade. to change the voting mechanism probably require some community vote which will take 3 months to propose and another 12 months to implement.

with their staff budget and the amount of ALGOs sold to fund their operations (mostly going to JPM bankers Warden hired), I have no idea why they can move at snail pace. probably quicker if everything ran though Silvio himself. For a start up project to succeed and scale (like it or not) it needs to be centralized like AVAX / SOL / NEAR / BNB etc. so the founders can make quick decisions and have it implemented.

ALGO have always been slow, this voting has made it slower (if the measures even get implemented).

I’ve been an active ALGO governor since period #2 and started doing it because I wanted to see first-hand how the DeFi governance mechanisms worked and with ALGO I could do this and collect a little income on my investment as well. I agree with many of the comments I am seeing here such as:

A) Incentivizing the governors too much relative the risks users are taking on the DeFi platforms

B) Speed and cost of decision making - look at the correlation to the governance votes relative to the foundations recommendations – I think every vote sided with the foundation, so those decisions could have been made much more quickly by the foundation and we could be further down the road today as a result with more ALGO in the treasury…

C) Instead of paying the governors, spend the ALGO incentivizing new and uniquely different DApps that will attract new users to the platform… but since governors now have the payment incentive, will they vote their financial incentive away easily or does the foundation need to step in ASAP?

D) Keep Liquidity providing separate from Governance rewards – can anyone provide any good example where being an LP Provider on any platform the last 18 months has resulted in a positive experience? If the future of ALGO is counting on massive inflows of LP’s, I’m not seeing that as a recipe for success, nor is this incentive at all big enough to attract serious money.

E) Lack of central leadership leads to uninformed decisions without vision – The CEO/BOD model has been successful time and time again because these people are seasoned and know the quality of their decisions means they also need experienced leaders to carry out the plans at all levels. Being seasoned means being capable of seeing the unintended consequences before they actually have meaningful impact. The majority of the ALGO governors a) have no skin in the game on overseeing the quality of execution, b) have little to no experience and are generally ignorant to the counter effects of the decisions they are voting on. It’s all about their financial incentives.

Thanks @brook967, after an incredibly interesting discussion till the opening of the vote, which actually affected the way we implemented the proposed measure 2 inclusion of LP in governance, it seemed the level of the discussion had lowered a bit. Your message is instead is very interesting with many relevant critical observations. Here are my first thoughts:

A) It’s 10% of the total rewards, and i do not think risks in DeFi are lower than this. In any case, it depends on participation, and if DeFi keeps growing the incentive reduces automatically. It is also a fairer compensation to DeFi Governors, that are already a reality and contributed a lot to the recent few months of DeFi growth. I think your point below about the total amount of rewards is more crucial.

B) Reasoning does not seem to work. Many - understandably - complained about delay in implementing xGovs and community proposals, that were approved with two votes ending in June. If the foundation approves a choice and the community also approves, that should help speed up! In reality, some passages are just difficult.

C) We plan to devote a good part of the governance resources to funding Dapps. A lot of feedback was in favour of rewards but we do understand the critical voices! The Foundation can do its part, now the governance participation is stable and it’s easier to assess amounts, and community votes need not to be Yes/No like vetoes but choices between different implementations of one consistent strategy.

D) Liquidity to platforms point in time is different from governance staking for DeFi users we are discussing here.

E) I am not so enthusiastic of absolute centralization, otherwise I’d have stayed in banks. Neither I see great results with total decentralization. A balance between central strategy and community contribution to debate, proposal and decision making would be the best balance.

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Hopefully it’s too early to tell, but the current standing is a majority for “Status Quo” on Measure A, and “Adoption” of Measure B. After a long look at the LP’s provided on the list, and the way the list was generated, I can honestly not be more disappointed with the results so far. Measure B will incentivize whale rug-pulls, while leaving newer users that thought they were helping out governance and the community to get wrecked. This list contains some very volatile ASA’s that should, by no stretch of the imagination, be seen to be endorsed by governance.

Extending temporary increases to Defi protocols as a whole is one thing, but when we start picking individual assets to incentivize, it will get messy. I sincerely hope that people are voting with the best interest of the community at heart, because the results right now do not reflect that from my perspective.

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Thanks @averagezen. As stated in the measure, there are just two objective criteria of size and time in existence. The list is also linked in the measure.

“The initial list will include pools that had a balance of at least 10,000 ALGOs as of August 15 2022. The foundation will publish a list of eligible pools at least one day before the voting session.”

Super happy of any feedback, here or at governance@algorand.foundation.

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I appreciate the reply @Massimo. I can understand the reasoning behind the use of those metrics (though not particularly why that date specifically), and I can appreciate the aspect of community engagement as a safeguard relating to removing potential bad actors from this list should the measure be passed. However, it seems like a more proactive approach could be used to thoroughly vet which LP’s will be represented and which provide the most value to incentivize in terms of growing the Algorand ecoysystem and protecting its users. This, in turn, creates an even greater friction point of fronting the backlash of a potentially averted negative event in a particular LP while attempting to create a more trustworthy system. Both approaches seem flawed and an unnecessarily complicated solution to the broader issues of adoption, ecosystem development, and administrative development/implementation on past and future governance proposals.

I am not all-together against Measure 2’s ideals. I am somewhat cautious of the long-term potential consequences that even one governance period with this measure could have, should it pass.

@Massimo If the Foundation really wants discussion of Governance measures to be fruitful and productive, I would urge everybody from the Foundation (including the CEO and CTO) to participate much more actively in them. You can simply see from the ratio of responses from the Foundation compared to others in this thread that it is highly unbalanced. Any discussion needs to be two-way. For example, I am still waiting to see any kind of feedback on the Counterproposal for Q3 2022 Governance Measures, and even the Update to Counterproposal to xGov raised during G3, or more directly addressing the points raised about xGov during G2.

Also note that a lot of discussion is going on via other channels (e.g. the official subreddit), where the Foundation does not seem to participate. It would be useful if the Foundation would either market the Forum much more as the official platform for discussion of Governance or to participate on other platforms as well.

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@averagezen thanks for your feedback. You understand that DEX liquidity provision is a crucial service for a blockchain ecosystem and the purpose of measure 2 is having this activity fully involved. The final snapshot will be taken at the end of the governance period, as explained in the measure. The first purpose of the criteria is being objective and inclusive leaving out opportunistic pools, but we are open to move, with the contribution of the community, towards the best definition of the assets/pools providing most value.

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@anon you are not the first one making this point in these days and I see the point. Often the dialogue of the community is very balanced and clarifications from community members are at least as good as those from the Foundation, and this is super healthy. Your points for example have been relevant in the past and they will be in the future. But I agree that the Foundation should be more present, including Reddit!

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@Massimo In regards to community outreach, does the Foundation have any communication with exchanges, or other “whales” to discuss its proposals and why the Foundation would want to see one side win?

There is a good post on reddit this morning discussing the breakdown of voting results: https://www.reddit.com/r/algorand/comments/x8y042/votingalgorandobserver_governance_period_4_voting/
We are still not all the way through the voting period, but we can see our very large wallets are carrying what could be a “status quo” vote. I wonder how many of these are looking at the proposal from a high level and simply going “Less rewards? No thanks.” rather than understanding the rationale behind the proposal. This is why I ask, as from a discussion standpoint, there is more “bang for the buck” getting those wallets on board if we are being frank. This does highlight the whale wallet issue that has been mentioned earlier, but that is a discussion for another time I believe (and hopefully mitigated by the xGov platform).

I am well aware of the necessity for liquidity providers. I see this as a give-and-take situation (which I am aware a lot of people have complained about), where liquidity providers should have to make a choice whether to continue earning more via LP or to sacrifice some of those earnings for a lower percentage to participate in governance. The decisions made via governance will then, if chosen wisely, exceed the losses taken (if any) for using their Algo in governance rather than liquidity for that period. This should not be an easy choice.

With Aeneas rewards, we already incentivize the most utility-driven LP’s. I sincerely hope that the community’s definition of assets/pools providing the most value will be made with the utmost care should the measure pass, as this seems more like preparation for damage control than incentive. Paired with my very bias opinion (above) on the conflicts of interest that large holders in LP’s may have in voting on any particular measure, and this adds up to a potential PR nightmare.

At the end of the day, I will be more than happy to choose LP’s I am comfortable with, incentivized by this measure or not. But consider how this sort of pseudo-endorsement via governance could easily mislead new adopters on Algorand. The possible backlash does not seem worth one quarter of additional incentives.

[Edited for misunderstanding previous linked context. It happens.]

We seem to have a very creative community with a deep understanding of the system and the potential to both see the problems and perhaps even solutions. Would it make sense to define what the problems that need to be solved are or at least in which direction we’d like to go to and then allow also the community to research potential paths? I’m not sure I’d be able to propose any potential solution towards a path as I’m not that active and I don’t know the details of the system, but it might be something worth considering. This is similar to breadth-first searching so we’d research different solutions first and then potentially combine the best of multiple solutions into something we believe is a good one. The way we approach this today is more depth-first search where a solution is proposed and then we try to even figure out what the problems are and how to improve this solution. Maybe it’s worth researching the breadth first and then proceed from there. Of course the foundation would have a veto and could say “no” to any solution proposed. I’m not saying the solutions proposed now are bad, I honestly didn’t have the time to go through them to evaluate this. It’s just an idea that came to my mind after skimming the thread. Feel free to ignore it.

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Thanks @omniwarp. In fact, I do not like vetoes too much, including having too many Yes or No votes, that look like vetoes. But I think the spirit of your contribution is great. The community, by it’s sheer size, activity, and decentralized knowledge of the whole market and ecosystem, can give an enormous contribution to proposals, and this is why having xGovs is so important. We need to move from foundation proposing and community assessing, towards being much more the other way around. This is the right evolution of decentralized governance.

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I’m voting no on both of these measures mainly because I want to retain the reward pool for more frequent participation in more significant governance of ecosystem direction.

I agree with the general feeling we could do more with our governance rewards, I just do not want to pigeon-hole us into a commitment to DeFi we make now if we come up with more valuable uses of the gov rewards later (which I hope we propose and develop).

After reading the majority of the comments, at first I wanted to vote yes on both; right now, blockchain technologies seem to be bolstered by their crypto element, and so the fastest way to grow Algorand seemed to be by attracting users from other chains, who primarily (?) are using the chains for finance transaction, therefore further incentivizing DeFi. However, I do not think the 7m is a significant enough incentive, more than those inherent to DeFi, to merit such a loss of rewards to Governance.

I want more frequent voting on more real-world applications of the chain. I would like governors to have the opportunities to decide what projects Algorand partners with, what projects it spotlights, and what technologies it invests in building (I do not know all of the possible uses of the blockchain or Algorand resources, so my vision here may be limited). At the end of the day, I would rather more organic, horizontal growth, not just in finance applications, for the Algorand ecosystem, rather than rapid growth and a spike of the ALGO value, but a more narrow ecosystem focus in finance. That said, one of the main reasons I came to Algorand was the democratization of access to resources promised in DeFi, so I do not want to disincentivize this or LP providers.

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Adding to this, the ecosystem is already incentivized through liquid staking and Aeneas/protocol rewards. I’m not sure that taking another 7M Algo to be split thinly among many people who are already double dipping will move the needle. It will likely result in inorganic, temporary mercenaries who dry up the extra Algo before it yields any real benefits.

There are many sensible reasons that one can point to which could explain why the ecosystem hasn’t grown as much as we would’ve hoped for. Personally, one that I think is extremely difficult to overcome is that Algorand came late to the DeFi party. Now, there’s nothing uniquely compelling enough in Algorand’s ecosystem (yet) to make users that are settled elsewhere want to go through the hassle of buying a new coin, downloading a new wallet, and familiarizing themselves with a new ecosystem.

The defi is what gets them here. The transaction speed, finality, and low cost is what keeps them. It worked for me. A temporary increase doesn’t seem like a huge deal to those of us already using Algorand, but it might be enough to FOMO a few fence-sitters. If it does, they will probably become part of the community. Ultimately, unless such proposals are renewed/expanded upon/altered, you’re right, it won’t amount to much, but it’s something.

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@Adri has posted our proposed new measures here (Feedback request on proposed Q4 2022 governance measures).

They are in line with everything we discussed here and they are continuing the path we took with the last votes, but we always want a healthy debate, so please have a look!