Lowering Goverance rewards to fund communtity voted projects

Governance
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Hi,

Seeing as there was a quite a bit of debate for the last vote. Here’s an idea that I think would be better solution longer term then if option A was to pass and giving Defi users more rewards from governance.

How about we take a small portion of the total rewards from governance i.e. 1/4 or whatever figure ( can also be adjusted as we grow just a random thought) we can agree on and place that towards funding additional projects that community could get to vote on? I think this would be a great way to increase TVL because:

A. Rewards will be less and defi would have less competition.
B. This also would also bring more projects and usage for our chain. I think this also a great way to get more community activity.
C. From a greedy price point of view. More people using the chain = more demand for Algo.

I did mention this in the previous chat, however with how many comments that were made, it would be hard to read every idea. I was originally waiting for the xGov system to propose this but it seems this is hot a topic currently.

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I don’t believe a portion of rewards should be set aside for anything else other than the staking for governors. If it is important to the Algorand community to set aside money for DeFi then that should be a separate topic and should be funded separately.

Encouraging and supporting the DeFi community is important for the Algorand ecosystem, but I believe each part should be held separate. imo

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I also made this point in the main thread on the Defi proposals for period 3. I can be sympathetic to the economics where currently there isn’t a ton of incentive to use Defi when you have a stable 8% APR in governance. If governance rates were lower it would hopefully drive some better engagement in Defi.

I also made the point of stating why not drop standard rates low, but then allow people to lock up longer (say a year) and as a result then increase the APR.

I would even be ok revisiting the Option A we just shot down, as long as it was a 1-1 vote based on Algo’s held by the Defi institutions. As with most things in life there are likely several potential improvements, hopefully the community and the foundation can come together to find them.

I do think this is worth discussing and trying to refine an idea, so that when the xGov system is in place a lot of the issues/complications could already be worked out.

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I understand your line of thinking, and the creative solution you’ve considered. However in my view Algorand’s DeFi lacks sufficient variety & competition in its current state. Competition drives innovation. I’d like to see the Foundation support the expansion of DeFi, whether that’s builders creating new protocols, or bribing successful protocols from other Ecosystems to expand into Algorand. But i’m also not sure if that’s within the remit of community Governance to propose.

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Algorand has supported defi for the last several years with “strategic investments”, TDR, grants and loans. Not sure how much more they can do.

The foundation has held DeFi’s hand and has reduced competition by doing so.

Defi platforms don’t do anything for themselves which is the bigger issue. Which is why we have an over saturated market. It’s time the market decides

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6

I’m not sure i agree with this to be honest. Algorand’s DeFi suffers not for lack of effort from the protocols, but the lack of retail volume in Algorand. As Algorand is so cheap, any protocol which earn revenue from transaction fees (so anything DeFi-based) requires high volume, which isn’t present currently.

The difference with Solana for example, whilst Algorand were focusing on building tech and RWA commercial rails, Solana was all in on marketing and uplifting their DeFi. This ensured DeFi’s profitability on Solana, despite their poor tech and low fees.

In the long term i firmly believe Algorand have taken the right approach, but the time has come for an attention pivot from commercial deals to retail marketing, with a comprehensive and coordinated strategy and support for the DeFi ecosystem, which to-date has been ad-hoc and reactionary at best.

This will take time, and may result in more time, possibly months or years’ worth of financial support until retail volume is high enough that the Algorand DeFi ecosystem is independently profitable - which is one of the reasons why the Foundation has emissions until 2030.

I’m actively coordinating with some DeFi protocols for a proposal in GP12 which may help accelerate this.

Bear with it a bit longer, it won’t be like this forever.

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This is purely the wrong stance based on statistics. If you actually believe this then you should do some research on the protocols which fail at every level of progression. The proof is literally everywhere. Algorand as a chain always needs to improve but they have handed money to each defi platform on a silver platter. 99% platforms don’t do anything for themselves.

You are saying that the foundation should still give out money to support them with ZERO accountability.

I just don’t understand what you’re trying to argue because it’s based on opinion and not the actual facts. I really don’t want to post screenshots and give you the information as it will take up my day.

If you are coordinating with DeFi I would love for you to expand on what your doing as anything they have don’t has been a slap in the face to the foundation and the time they have given the low effort protocols.

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Another way to look at it. When you assess other ecosystems with strong DeFi, what sets them apart from Algorand? A comprehensive and coordinated strategy, fully supported and coordinated by the team and key partners. This is not the case with Algorand. For as long as I can remember, whenever you see someone from the Foundation in any interview or AMA, their talking points are always around the Tech, and the commercial rails. Negligible if any mention of the DeFi.

The Targeted DeFi Fund was a way for the Foundation to divest responsibility from themselves to the community, but as we’ve seen, there’s little consistency or coordinated strategy with this method. Throwing money at a problem doesn’t provide solutions. So it’s why I consider the source of the issue not with the DeFi protocols, but with a lack of strategy and tangible support. And as I previously stated, fiscal sustainability for DeFi requires volume due to how cheap Algorand is.

What I’d much rather see is for the Foundation to pivot their attention from the commercial rails to the DeFi ecosystem. Conduct an audit (for want of a better term) of the ecosystem as it stands, identify the problems, and create targeted solutions to address those shortcomings, taking control of the strategy back from the community. One way they could do this is for product specific hackathons, for example, a DEX Aggregator. I’d also like to see the Foundation support wrapped Algorand versions in other ecosystems such as Arbitrum, Solana, Osmosis.

Another thing I’d like to see is an XP campaign (XP tokens non-tradeable), in part facilitated with SocialFi protocols such as Galxe, Intract etc. A minimum set number of requirements, augmented XP points when in an LP, lending collateral, but loses the augmented boost when exiting their position. At specific positions those XPs earn rights to NFTs, those NFTs earn rights to ecosystem airdrops. There’s more to work on, but thats an outline I’m starting with.

These are some of the kinds of things Algorand DeFi needs, so I’m working with various protocols to present something for the Foundation to consider. I’ve already provided assistance with new product ideas for some protocols, that’s just the start. But the Foundation proposal probably won’t be for GP12 now as we need clarification on what’s happening GP13 and beyond.