I see people saying “let DEFI figure out these problems”, “they already earn on LPs, why give them more?” and “people might be kinda forced because of the rewards to go into possibly risky LPs”.
Why let every DEFI project use their time to try to incorporate Governance in some way and therefore loose time in actually building new exciting stuff, when the foundation can help out in this way? I think the foundation is right to promote DEFI because ofc Algorands tech is great, but who cares about tech when its not getting used? People are building great protocols here on Algorand but have problems to get relevant liquidity because everyone just submits their ALGOs to Governance because its risk free and a decent APR. This has to stop because no one will care about Algorand when there are no protocols here with good liquidity im my opinion.
Yes people earn LP fees for providing liquidity, but they are at risk of making a loss because of for example IP. Therefore protocols often offer some kind of farming where they give out Governance tokens of the respective protocol to incentivize providing liquidity and so that no one looses because of providing liquidity. Now all the protocols just give out Aenas rewards which also come from the foundation but on a 3 months bases. These extra Aenas rewards wont be there forever for every protocol so the procotols must find another way to incentivize providing liquidity to DEXs which will be probably done by introducing their own Governance tokens. But even then, they have to compete with the Risk free Governance APR and additionally people might prefer the ALGO APR instead of the Governance token APR they would get through farming even if its lower…
I would argue that no one is forced in any way to provide liquidity to DEXs just because they would get the additional Gov APR. Every person can decide on its own if its worth the risks. The foundation just would give people the option which is great and the Gov APR is actually not that high that people who are chasing rewards would blindly use the protocols.
Governance proposal is only for the last quarter (Q4).
This will allow for continuous improvement in each quarter by looking at the results obtained.
They APY that is allocated for defi participants is only 10% of the total payout. Slowly increasing the APY for defi participants will give enough time for non-defi participants to understand defi better.
This time we have got enough time to discuss the pros and cons of the proposal. We have heard people talking for and against the proposal which a sign of good community interaction.
The final goal of these proposal is simple. Raise the tvl locked in Algorand defi to $600 million thus becoming top 10 defi chain.
Exactly. That’s another way of saying “liquidity is the lifeblood of finance”.
I think folks on stuck on TVL and TPS metrics that have been manipulated. There will always be bad actors that try to game the system. That is a separate problem. Low liquidity and manipulated TVL metrics are separate concerns. Both are important and both need to be addressed. Not addressing the low liquidity problem because we are afraid bad actors may manipulate the metrics and game the system solves nothing. Let’s focus on solving the low liquidity problem and at the same time design a solution that defends against bad actors, which is exactly what the Algorand Foundation is proposing.
One last thing … let’s try to work with the Algorand Foundation and not against them. I am not saying to follow them blindly, but let’s give them the benefit of the doubt that they are working hard for us and doing what is best for the Algorand ecosystem. Let’s give them some credit and trust they know what they are doing.
@oysterpack I think your outlook is too short though, you’re blinded a bit by what’s called “the permanent present” fallacy where since you’ve experienced the entirety of Algorand’s DeFi history (roughly 8 months), it seems like its been a long time, because you’ve experienced, well all of it. Zoom way out, and into the future. In 2030, DeFi on Algorand will be 10x older than it is now, the first 8 months that you’ve experienced will constitute just 8% of Algorand’s DeFi history. The first 8 months has also seen us experience 1 of 4 crypto winters, and Algorand’s DeFi has grown exponentially during this time despite the downturn. You really must look at where we were on 1/1/2022 when Tinyman launched and was hacked, compared to just 8 months later. It takes time to build the Future of Finance…acting as if we are in a dire situation and we radically need to change everything is short sighted. I think the Foundation’s proposal to sweeten the pot for DeFi a bit is great, but we don’t need to overreact, which is exactly how the Foundation’s proposal comes across to me. It addresses the issue without over-correcting. Now I would agree to a slightly higher percent, but I’m supporting the Foundation’s proposal with anything from 5-25% DeFi share of governance rewards.
If your engine has horrible efficiency you build a better engine, not waste more fuel. In fact, other chains already have better engines which we can’t even copy because we don’t have the ability to do so (in some part because of the novelty of the space, in other part because we’re missing key-components and solutions built now will have to compromise somewhere). There is no pathway to bring in users that don’t use crypto without utility, nor to convince other users to bridge with “me-too” products. What has been done so far is admirable, but they’re all mvp’s, just now are we starting to move away from “beta” releases on most protocols. Just now are we starting to build things that can create a cohesive and well integrate DeFi ecosystem, right now it’s definitely not the time to reward DeFi participation, it’s still not ready. And if we’re interested on opening up the forum for DeFi voices then we should open the forum for all types of voices, like other protocols and chains have done, great ideas can come from anywhere.
Whereas for the manipulation of metrics. If a system used for something of the upmost importance like governance can be rigged then that system straight up needs to be scrapped. Our industry is built on trust-lessness as a core pillar. We have to assume bad actors everywhere, and glancing over these details is always a red flag, so unless the system is air-tight we shouldn’t approve of it just because of its source (and I say this as someone with a lot of respect for what the Foundation is trying to do).
Governance is not “risk free” because we are exposed to the risk of holding ALGOs. And governance is useful to incite new people to buy ALGOs, and it also helps to stabilize the price of ALGO (because governors must keep their stake to earn the rewards).
Like always in a free market, the APY is just what it should be given the risk (if the risk lowers, more ALGOs will enter governance and the APY will also lowers).
So the governance APY is already the right one given the risk. I don’t see why we should need to arbitrarily lower it to subsidize anything else.
We should let the free market decides how to allocate funds. Investors evaluate APY/risks between DEFI and governance and freely choose where to put their money.
When DEFI will provide more real value, the APY will go up and people will naturaly switch to DEFI. But no need to subsidize DEFI.
Governance might not be risk free in the sense you see it but you have to compare it to the other options. With all these options you are also exposed to the price action of ALGO, therefore in comparison i would call governance risk free and then it pays way too much APY
People are already putting their money in DEFI so no need to subsidize it.
DEFI has to provide value by itself. With time it will mature and increase its utility and then more and more people will switch from governance to DEFI.
Governance is a good baseline which has utility (mentioned in my previous comment) and an associated risk, and so gov needs to have an APY (which is the right one given the free market).
And I hate the idea of having a “white list” of DeFi projects chosen by the foundation. This introduces centralization, unfairness and corruption opportunities.
did you take a look at the numbers? like no one is putting money into DEFI in comparison to Governance. you cant make a decent USDC-ALGO swap on chain, you have to use CEXs for this
Governance is good, its the way to decentralize Algorand more but why not take a small cut to allow others to participate in Governance too (measure 2) when they are risking even more to help the ecosystem? I dont get it why I keep always hearing “let DEFI make it worth it”, thats such a bad argument imho. It is hard to compete with the APR of Governance, what do you want DEFI to build to help with it? And if you want to wait for DEFI to “make it worth it” it could be too late, if you make DEFI not worth it on Algorand in the early days people will leave and might never look back
Ok I see your point but how do you fairly and correctly choose which DeFi projects to subsidize?
Based on which criteria?
Who will decide ? (Algorand core principle is decentralization)
Big projects will be favored to the detriment of smaller (and possibly more innovative) projects.
Why not let the projects apply for these rewards? I mean measure 1 is aimed at “liquid Governance” protocols and measure 2 at “DEXs with ALGO-____” pairs (better only specific pairs).
It should be easy for the foundation to just check if one of the following is true or am I wrong? Make the application open to see for everyone so the community can see which protocols applied and if they were granted the rewards correctly so we can oversee the foundation (in the future xGov should decide imo, when they are implement finally). And I mean Aenas rewards (also from the foundation) are just granted after someone applied, so we would just keep it that way.
Foundation should support, in due measure, whatever sector(s) of the chain that will benefit the ecosystem the most. The beauty of this “free market economy” (which it is not, but we’ll not get into that), is that we get rewarded for attempting to make proactive, positive change rather than be reactionary and solely focused on a solitary bottom line.
A long-term strategy is fundamental, but at the same time, we need to know when to adjust and when to be short-term tactical. My goal is to help folks understand the problem with passive Governance rewards. I would like to see passive Governance rewards lowered and reallocated to incentivize liquidity and ecosystem growth. The proposal should not be structured to decide whether or not to do that. The proposal should be structured to decide how much ALGO to reallocate from passive Governance rewards to DeFi liquidity provider rewards. The second part of the proposal should be figuring out how to implement this … the devil is in the details.
but if you would just give the option on how much to give to DEFI that would the opposite of decentralization. if the foundation decides sth this way then this whole governance thing is a joke. they just have to argue better why they want this, why it is kind of necessary and in this way convince people
i think there should be among the proposals to undo a previous decisions, clean up work and revision. Governors can elect a previous decision to be undone. like a referendum or amendment. Additionally, those who go for option do nothing should not get rewarded for anything
I don’t think the situation is as cut-and-dried as thinking that removing/reducing governance rewards will cause the DeFi ecosystem to grow and be a net benefit. From another perspective, it may result in slowing down the growth of new users even more. Native staking rewards are already unappealing because of the fixed 3 month schedule. Reducing the rewards on top of that may cause some existing users to try DeFi, but many who are not willing to take the risk may sell off, and those on the outside may be less inclined to try Algorand. It’s a complex problem and I think trying to gauge the timeline of consequences isn’t nearly as obvious as some believe.
any reason why its not 7M ALGOS as Governance reward and the rest being DeFi rewards? seems the Foundation is trying to encourage DeFi adoption but only allocated less than 10% of rewards to this.
have not explicitly seen any comments on why DeFi is not counted as part of Governance rewards and if so the Foundation should allocate 90% to DeFi instead of passive governance where it provides little value especially when none of the previous approved measures have been implemented.
also are the Whales in on this? Top 37 whale wallets: 50% stake, control vote. there is no point on wasting another “Governance Period” when its just another waste of time exercise for the sake fulfilling the quarterly Governance
Kindly consider the feedback given in this post.
Due to its length, I have rather posted it as a separate thread, not to clutter this one.
Its brief summary:
The post describes solutions how to give DeFi users a voice in Governance. For this, it is necessary to modify the requirements for participating in Governance, which should remain exactly the same for all Governors. The solution is to modify the registration requirement to allow registering of all the stake not held directly in one’s own account, which can be achieved with a decentralized solution akin to ASA Stats. Further, the commitment requirement of holding the stake uninterruptedly throughout an entire Governance period should be modified to require holding of only an average commitment throughout that period. Lastly, the post describes how the issue of Governance hindering the use of DeFi due to attractive risk/reward ratio should be addressed.
I second this–I’d like to see further discourse on XGov more than another rehashing of tiny, temporary solutions to the massive, market-distorting issue of giving away billions of Algo essentially for free over nearly a decade.