GP7 Measures DRAFT - Liquidity Provision

Ecosystem support is critical, but the project must demonstrate that it deserves the liquidity by meeting specific requirements.

  1. Security (How many audits to date? Is the smart contract upgradable? Other security concerns?)
  2. Does it add value to the ecosystem?
    Providing liquidity to an emerging protocol without meeting these requirements is a big risk

I fully agree it shouldn’t be something that is just given, but instead a given set of requirements should be acheived. For this, however, there should be a framework of what, how and when can projects apply for these types of support. If this is seen as too hard/slow and the Foundation just wants to take these decisions unilaterally, then sure, but do so with a serious vote detailing what amount and for how long they’re going to be doing this support. These types of initiatives need checks and balances.

On the other hand, we need to know how these deployments went, and whether they were succesful. Do we really want to just support liquid-governance products? Is that really the DeFi that needs help? Did the AlgoRai liquidity support bring any volume to the platform? The Foundation should make a case for why it believes its unilateral actions were succesful.


How do you plan to make everyone happy? Yes the foundation can split the algos and support EVERY PROJECT (good and bad) out there. But this would just fragment liquidity and this is bad for the long term growth of ecosystem.

It’s given that some projects will benefit more than others - but this is the nature of reality.

How do you make everyone happy? What is your solution?

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We have excellent DEX aggregators, nobody should use a single DEX directly already

And I don’t see a problem if liquidity would be spread across lending protocols honestly


Frameworks, and a clear concise rule of play.

It’s not like I’m/We are asking for a lot. It’s either:

-Tell us how this program works, what its limits are and how to apply openly (ideally with a review of applicants and why they got approved/disapproved after the pilot is ran), i.e. create a framework around it

-Keep that behind closed doors (pretty bad, imo, but if that’s their predicament then so be it), but limit it to a set of time and amount of algos.

But both options require us to have at the very least a set of KPIs to look at and measure. We still don’t even know the results from this original unilateral liquidity provision, nor what the foundation was looking at when making this decision.


I do not support this. From your experiment we can see following:

Main reason is: You have moved corruption from the algorand foundation to specific projects.

First you have pumped few projects with the liquidity, and you say you give them 5 mil. algos to distribute according to their liquidity. The experiment in G7 showed: Projects tends to create unfair system for their distribution.

Let me explain with Pact.Fi example i had. First they contacted me that they will do distribution and that they will award projects which will “partner” with them and will do also the token distribution. I have read their proposal and proceed according what they wanted. My requirement at the start was that we distribute our token fairly… We are distributing fixed APY on hourly basis because we believe that it creates fair distribution of the token to the market. From their communication they said that they cannot do fixed apy distribution, so our DAO held a question to at least target our APY. I had also suggestion that they should announce rules prior the algorand governance starts because users owning our LP tokens cannot move their tokens after this point. Later they changed the rule that they will select only one token which will get boost by this program. We have deposited our tokens to them for distribution. Then they decided they do not want to support us because i started to complain that even after the launch of the algorand governance there are still no clear rules.

I am sorry, but this is not fair.

And even with this experiece i believe that pact distribution is one of the most clear one. Others does not even publish information on how they distribute the tokens from the foundation. You are basically creating corruption at the foundation with decision who gets the algos, and then in those companies. This is not good.

But let me show you alternative. What if you would support DeFi in the way that every account which holds any AMM LP token receives on hourly basis algo to their account with equasion (Algo distribution per period) * (Account LP algo value) / Sum(LP algo value)?

Or if you want to support not just AMMs: (Algo distribution per period) * (Locked usd value @ account) / Sum(Locked usd value) … You can calculate USD price of LP tokens, or USD value locked in smart contract and can sum this up…

This way you would support fairly DeFi. It can be automated, and whole crypto ecosystem will drive their funds to algorand defi.


I appologize guys, i meant this to be written for 5 Mil algo DeFi program which subsidize protocols, not for Liquidity incentive. I do support the liquidity program by the foundation, but i would like to see it fair, with public oversight.


It’s about giving algos to the right and best projects. The projects with real passionate builders with long term vision which are aligned with the foundation and ecosystem long term growth.

Projects which have a proven track record.

Like look at Yieldly and prismatic (prismatic never even launched)… Yieldly never followed thru with their roadmap. And prismatic, the founder is defichick (her twitter handle) she never launched anything. But she speaks a lot.

We need to give algos to people and teams that walk the talk. Teams with proven track record.

Give funding and Liquidity to the best projects. It’s very simple.

If you want to be fair and give everyone equal opportunity - you will be wasting more algos because you will only attract scammers.

Ok, can you share me some projects you feel which deserves liquidity? I wanna check them out too…

A family of 4 without a leader, will only lead to chaos. Imagine if raising a family based on your ideas - that family will be doomed. There needs to be some sort of head of family that provides guidance to keep everyone safe.


Look at prismatic for instance - they came to Algorand, talked a lot but never built anything. Are you saying they deserve funding and liquidity too? They have no proven track record.

If your project and team has a proven track record and something to show for - then sure, you should get support from foundation.


I am not saying: Give everyone equal money.

I’m saying:
-Either create a clear path for projects to apply for liquidity boosts and the requirements they need to fulfill to get it.


-Create a discretionary liquidity boost program with a limit on time, amount and a clear set of KPIs we, the community can audit/hold the Foundation accountable to.

I don’t know if the current deployment was succesful, yet I’m expected to vote on letting them do it again, with no real knowledge on the amounts to be redeployed or the time this boost will be deployed for.


Prismatic is a bad example imo since there is nothing to add liquidity too because they didn’t deliver (or did they and I just don’t know about it?)

Imo Humble, Algofi and xBacked could benefit from more liquidity.

xBacked is a rather new project but their stablecoin solves an important problem: redeem ability of decentralized stablecoins. but it didn’t get any Aenas funds because it was too late to the party and now suffers because of this. It already has the problem that it didn’t get the support by AF like for example Gard and therefore has seen way less support in the ecosystem

Humble is the only DEX that offers decentralized farms that every project can launch directly on their website. Nothing like yieldy or cometa needed

Algofi shouldn’t get ALGOs to allow more leveraged ALGO commits (that’s a mistake AF made with FF) but it could benefit from for example liquidity in their lending pools which combine DEX and lending market liquidity which allows for way better capital efficiency. This is something Innovative on Algorand which could be something AF could market to people outside of Algorand to show the strengths of it’s blockchain which gets enabled by the low tx fees and the composability possible on Algorand. FF will launch them soon to which shows how goof that idea is

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Makes sense. I can fully agree with you here!

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They provided liquidity because community asked it for many many times. I even proposed liquidity boost, because liquidity was too shallow. So this was not random act.

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corruption… like wtf. if you keep throwing this kind of false accusation you will lose rest of your credibility pretty fast. We all know you try to push your own agenda, but aggressive and accusing stance is not good way to go.

Also if Pact wanted to do something differently does not mean they are wrong nor did anything bad. They just do things differently. Algorand does not spin around you.


i am usually using arguments in my conversation, if you want to discuss with me, please do not use emotions but use arguments pls

i have stated that i like what they did. i have expected little more professionality from pact when they did it… but i hope to the future that they will learn and improve

@lobo @Rambutan @BunsanMuchi @oysterpack @Maial.algo and others.

I am not a saint, but can we place church in the middle of the village before we are like modern day politicians and can’t agree on anything. The truth is usually somewhere in the middle.

First I want to say, I think Algorand Foundation tried to do what community asked them to do. Provide more liquidity and use AF funds that now just sits in the wallets. They did it like they saw best.

Going forward, what if we ask them to use following metrics (please modify or replace with yours):
-These are wide frames-

  1. TVL
  2. Social engagement (social media engagement, events, educational material etc).
  3. How much specific project needs help to get over that critical mass.

Terms projects have to be met:

  1. Project must be on mainnet/ongoing/some organic TVL.
  2. Team must be audited or some other way to be verified.
  3. Project has to be teams main project (full focus on Algorand).
  4. Algorand liquidity boost can’t be too risky. Just allocating capital without risk of losing funds (Always there is a risk, but have to be minimal).

I also think that Algorand Foundation can lend much more capital (something like 100M ALGOs), but focus max 10ish main projects. They can keep their funds in these projects as long as needed (this is of course excluded from DeFi boost calculations). We should let AF decide how long and how much specific project needs boost and let them reallocate funds if needed (by following previously mentioned metrics). I think sometimes AF knows better because they can communicate with projects directly and in much deeper level. They also have better view how things work and what is best for the Algorand.
Before allocations Algorand Foundation should publish note, where it tells how they came up with their decisions.

Is this proposal something we all can agree on? or even close to it?

(I apologize my English, but I hope you can understand what I try to say)


Any type of subsidy just create asymetry on the market…

If you support AMM project A, and do not support AMM project B, even though the project A is worse the project B, project B has low intention to stay on the market.

If you would not support anybody, it would be more fair.

On the other hand, if you would not do grants but rather investments and allow anybody to pitch the idea, perhaps the best idea would win and the foundation might get shares of the project which brings it future income for network stability and potentialy more investments.

I think with “Liquidity provision” algo distribution is the best to give the algos directly to endusers as i described before because it is the most fair and efficient.

If someone needs to support individual projects, please allow anybody to attend public pitch competition and get chance to receive funds to best projects. There is already ongoing ARC34 submission… Just move this funds to the grants program and let DeFi project compete with others if they need extra cash.


To support my statement with few economists:

  1. Milton Friedman: Friedman, a Nobel laureate in economics, argued against interventions and subsidies that distort market mechanisms. He emphasized the importance of free markets in allocating resources efficiently.
  2. Friedrich Hayek: Hayek, another Nobel laureate, advocated for free markets and warned about the unintended consequences of interventions. He believed that subsidies could disrupt market signals and lead to inefficient resource allocation.
  3. Ludwig von Mises: Mises, an influential economist and proponent of Austrian economics, criticized subsidies as they can distort price signals and hinder market efficiency. He argued for the elimination of interventions to allow for spontaneous order in the market.
  4. James M. Buchanan: Buchanan, a Nobel laureate in economics, studied public choice theory and highlighted how subsidies can lead to rent-seeking behavior and distort the allocation of resources.

I agree. The discussion is getting too political.

The Algorand Foundation clearly outlined the objectives:

… 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.

Folks complain about low liquidity. The Algorand Foundation supplies liquidity. Folks complain about the liquidity … I don’t get it.

The bottom line is the more liquidity the better - end of story. This is simply about finance and economics. People need to calm their emotions and keep politics out of it.


I complain about the same thing I complain always about when it comes to AF: communication.

According to Benedetto CEO of FF it took them 3 whole months before the liquidity provision was approved and they apparently didn’t think about just communicating this and allow open discussions and being transparent about the how much and why this would be beneficial. It wouldn’t cost them anything to just say they got approached because of liquidity issues and they think because of the following reasons… they Instead keep it secret and make deals behind closed doors and announce it after they supplied liquidity and their liquidity is already stuck.

It’s about economics here and not about emotions: they are hurting the open market on Algorand and short term thinking of “more liquidity is better regardless on how this is achieved” will hurt us in the long term if we don’t discuss this today


Politics have taken people off track on the main topic of discussion. The purpose here is not to debate or complain about Algorand Foundation communication. The purpose here is not how to figure out the best strategy to deploy liquidity. The purpose here is to answer a very simple question that the measure is asking:

Should the Algorand Foundation continue to provide liquidity to DeFi protocols to enhance the operation of the DeFi ecosystem?

Understanding that liquidity is the lifeblood of DeFi, then the answer is a no-brainer YES.

The next step is to discuss and brainstorm ideas on how to deploy liquidity to maximize ROI and ecosystem growth.