The Algorand Foundation recently piloted a deployment of 42MM ALGO of treasury liquidity to Folks Finance, Pact, AlgoRai Finance, and Tinyman with the objective of contributing to ecosystem liquidity, supporting TVL growth, and strengthening dApps’ critical mass. dApp selection for this deployment was based on avoiding liquidation risks (e.g. using Algo/gAlgo to borrow/lend), impermanent loss, technical risk assessment, as well as regulatory, legal, and policy considerations.
We will continue to review and monitor this deployment to evaluate its effects and, as with ALGO held directly by the Foundation, will abstain from voting. If the effects are positive and the community votes to keep this liquidity provision in place, the Foundation and DeFi committee will continue to examine additional protocols (e.g. bridges) and pools where further extensions of liquidity may be of benefit.
If this measure does not pass, the liquidity already deployed will be gradually withdrawn, on a measured basis.
Measure 1
Should the Algorand Foundation continue to provide liquidity to DeFi protocols to enhance the operation of the DeFi ecosystem?
Option A - Yes
Option B - No
The Foundation supports Option A.
(1) which protocols
(2) which amounts
(3) which purpose
and these are the points that matter. The Algorand Foundation is not supposed to act as a Central Bank to inject liquidity in their favorite projects and for the reasons they believe are important!
And you are sabotaging people if that proposal will launch that way. They can only vote yes or no and so they might just vote yes because Liquidity is better than having none
I think this sets an awful precedence for how governance will work. Will the foundation continously deploy solutions without votes, just to ratify them with votes afterwards? We voted for 600,000 ALGO to NFTs yet we don’t vote for 42MM ALGO towards defi protocols? To me this just seems wild. If things like this should be discretionary for the foundation, why are we voting for this now?
As a builder it is really hard to know where I stand. If I build here will I get access to this money as well, or is it just Folks+pact+algorai+tinyman? Will I have to lobby people at the foundation, or will anyone asking with a semi-real product get liqudity added? This vote answers no questions and I really do fear that I’m not the only builder who gets put-off by this. We are not creating an envirment that looks tempting to build on from an outsider perspective.
I probably sound like a broken record … Liquidity is the lifeblood of DeFi - period. The more liquidity that the Foundation can provide, the better.
Seeing the Algorand Foundation participate in DeFi shows a strong vote of confidence in the projects and the entire DeFi ecosystem. In addition, it generates an organic revenue stream for the Algorand Foundation, which helps support its operations.
Providing liquidity for bridges is also a no-brainer. Deep liquidity on bridges and DeFi protocols are low-hanging fruit for attracting new liquidity. I would focus on supporting liquidity in the following core assets ALGO, USDC, BTC, ETH.
Having a vote post-fact seems very disingenuous, specially without having either the results of the deployed liquidity or a more detailed flow-chart as to why some protocols were chosen over others and under what conditions. Did these protocols approach you for this deployment? Was it a unilateral decision? It just all seems very obfuscated, and that’s not a good look, at all.
Worst is that the way this proposal is phrased, it seems to me like we’re basically voting on whether we give the Foundation carte blanche or not to carry on doing this. We can’t do an informed decision on this proposal, since we don’t even know the results of the liquidity deployment, without even opening the can of worms of whether this deployment gave unfair competitive advantages to some protocols.
In my opinion, a better proposal would either detail a liquidity provision framework, with a budget allocation, a protocol’s requirements for consideration and a detailed application process. Or if the Foundation finds it too cumbersome to have this framework created, then at least make the proposal more tangible, i.e. "Should we allocate X ALGOs to the foundation to deploy as liquidity to protocols as they see fit? " At the very least, this gives some checks and balances.
One big question I have about this: how much of this liquidity is being borrowed and immediately put into goverannce?
As yeah I feel there’s no point in offering liquidity if it’s just going to get immediately hoovered up and put in governance and then sit there for 3 months doing nothing else productive.
It’s great to provide liquidity if there’s projects that really need it to do actual, useful, economic work.
Liquidity should be provided on in the form of Liquidity pools. Algo should not be used in Lending protocols because this liquidity just ends up locked in governance through leveraged commit. Cheaper Algo is not what we need right now.
Perhaps it makes sense for at least some of those in charge of governance to… I don’t know… maybe have a smidge of experience with being a creator/builder in this space? We will continue to get quarter after quarter of questionable decisions so long as the same team is in place.
Just to explicitly add that the previous replies from @lobo1, @Swaggelwander2, and @BunsanMuchi3 all raised excellent concerns with which I agree.
Besides these points, in order to make an informed decision about this measure, it is necessary to know where are these funds coming from and what measures will be taken e.g. in case of a hack and a subsequent loss of funds.
“Treasury liquidity” is a very vague term. From what portion of the treasury is the liquidity being deployed from? Is it from the portion that is meant to be distributed as Governance rewards in the future, the funds meant for Foundation operation, its investments in the ecosystem, or something else? Despite the change in the format of the latest transparency report, which does not differentiate anymore about the future allocation of funds, it is prudent to state who/what/how would be affected if the deployed funds are lost.
This is an OBIVOUS YES. Algorand itself is still in its early infancy stage. Defi on Algorand, is in an even more of an infancy stage. Thus providing liquidity is important for growth of the ecosystem to further attract users and people with influence and money into the Algorand ecosystem. It’s a simple concept - Money makes money. If there is little or no liquidity in a defi protocol, their is no chance new users with lots of money will enter.
Algorand foundation cannot make everyone happy. Actually even you or me can’t ever make everyone happy - it is just not possible, its the reality.
To conclude, liquidity needs to continue for now, at least in the infancy stage. Later once the market is more mature, then we can discuss again.
Give liquidity to whichever projects you feel (the foundation feels) is most genuine, contributing to society, hardworking, and passionate about the long term growth of the Algorand Ecosystem and their Platform - You cannot make everyone happy. Remember this.
if the Algorand Foundation wants to help the ecosystem with liquidity and the governors ssupport this then it should propose general and objective criterias under which ALL projects can be EQUALLY evaluated. some points to consider imo:
projects should propose to the community and not to AF if they see the need for liquidity. this should be an open discussion and not sth you decide behind closed doors. in particular, we need to know why this would help the ecosystem and what problems it solves
dont help with ALGO liquidity in lending protocols until the sign up period ended, all these ALGO just get borrowed to put them into governance again and lie there doing nothing for 3 months. that doesnt really help the ecosystem. additionally, AF shouldnt contribute to ALGO lending pools (Algofi pioneered them, FF will follow soon) until the sign up period ended for the same reasons.
dont be the main liquidity provider to a protocol: you were injecting more than 60% of the non gALGO TVL to Folks Finance which is unacceptable, protocols are not supposed to be that dependent on AF. therefore there should be a limit in terms of TVL of the protocol AF can inject (maybe 10-20%?)
if you lend ALGOs to VCs to inject liquidity, it should be communicated in the same way when you do this. VCs are not supposed to help you circumventing these points
make clear which parts you can help with: can you supply ALGO-USDC for example yes or no? could you borrow USDC from a lending protocol with ALGO as collateral to then supply ALGO-USDC or other important ALGO-ASSET pools by borrowing that ASSET? that way you wouldnt need to sell any ALGOs
we have excellent DEX aggregators on Algorand like vestige, alammex and defly (both using the deflex protocol), that means you can split your liquidity and either put the same amount in every DEX or weight it based on existing TVL on that DEX. ofc something like the gALGO-ALGO stableswap on pact is way more efficient than normal AMM pools are and this should be part of the evaluation to determine which DEX gets what but to be fair you shouldnt ignore other DEXs completely
This was great thing and Algorand Foundation should provide even more liquidity. This is nobrainer. AF can allocate its ALGOs in efficient way without giving them away. This is just efficient capital allocation.
Algorand Foundation did exactly right thing when they targeted and chose small group of most important projects/platforms. If liquidity is spread too widely it will not serve the purpose and offers wide but shallow liquidity. Also you can not make everyone happy, because there is always someone complaining and wanting more and they feel like they are special. AF, we trust your judgement on this one and I think you chose the right platforms.
Question to those who oppose this; are you happy if Algorand liquidity is lower and more shallow? What is the point? How is this good? AF didn’t spent any of its funds, just allocated them, so nothing lost or gone. So why have to vote on this? is it better to do nothing? I understand that we have to vote if AF spends funds, but this is not spending. just short term capital allocation without any downsides.
I hope people will think what is best for Algorand ecosystem and not just for themselves. Sometimes this means, always all candies will not go even.
If they provide that liquidity like they want to and remove equal opportunities for projects in the ecosystem in the way they did then no liquidity is better yes.
Long term this imho destroys the Algorand ecosystem because it will be all about trying to befriend AF because they decide who gets supported and can make it. If we allow AF controlling the ecosystem this way we have a centralized economy on Algorand. They should ensure to be absolutely neutral and encourage this way new devs coming to Algorand because everyone gets treated the same and if they deploy liquidity they do it based on objective principles and allow open discussions about this together with the community
Nice communist take. Using metaphor, you say it is better if we all have Ladas rather than some having BMWs and some Ferraris. Equal misery is must… Ok. How this work when we have thousands of projects. Each and everyone will receive couple algos? Impact is gone… I am sorry but this kind of ideology has never worked and will not work in the future. I hope this community will not cry after their own projects directly and use short sighted views. In the long run, we all will benefit if Algorand ecosystem grows.
Together we grow stronger, not through jealousy, but thru collaboration and supporting each other.
Totally agree with you. AF should provide a larger percentage of liquidity to solid projects and a smaller percentage to emerging protocols. The only two key parameters to consider are:
It’s not about communism lol. Yes we need to grow together project independently but AF needs to ensure every project has the same opportunities to do so
Use sports as an analogy. You play to win by putting your best players on the field. It’s not about giving each player equal time or equal pay. Your pay to keep or acquire the best players and coaches to give the team and its fan base their best chance to experience victory.
The issue is that this space has less than 10 real defi protocols right now. Going all in on these 10 is probably not gonna make us into a top 10 chain. We need to attract builders and builders will not want to build on a chain where certain “superstar projects” are getting TVL injections. To me (and many others that I’ve spoken to, or whom have spoken in here) agree with this sentiment. Why chose algorand over a chain where you actually get help as a new project.
I think liquidity provision makes sense, I think it’s good. But it has to be fully transparent for it to be fair. Having it only be done through backroom deals will never get defi on this chain to be legitimate. We need checks and balances, we need set rules and we need guardrails. And the community has to define these, not the foundation. Lobo has a bullet list a bit up with some good things to consider, and the ideas I feel strongest about is
How are projects selected?
How is the allocation size decided?
How large of a fraction of a protocols TVL can come from the foundation?
What can the community do if it feels the foundation is acting unfairly? Should it ever have a say, or does AF always have the final say?
Once we have some answers to these questions I think it’s a nobrainer for AF to supply liqudity to protocols. Having AF be able to be self-sustaining through on-chain defi is something I’m sure we all would love to see. But it has to be done in a sustainable way that allows everyone in this ecosystem to feel secure, both new and old projects.