What is Algorand Governance?
With the launch of Algorand Governance, all of Algorand and its tokens effectively became a DAO. Community Governance enables all ALGO holders to participate in the decision making process on the growth and development of the Algorand ecosystem if they so choose. The Governance approach for the Algorand community is designed for simplicity and maximum participation: Four quarterly Governance periods per calendar year where users are incentivized to vote.
How does Algorand Governance Work?
With the introduction of Algorand Governance on October 1st, 2022 the Algorand ecosystem moved to this decentralized model. The Governance approach for the Algorand community is designed for simplicity and maximum participation:
- Four quarterly Governance periods per calendar year.
- Each governor must commit to keeping a certain ALGO balance for each quarterly period.
- There will be at least one voting session in each period.
- Governors must vote in each voting session, but can choose to “vote with the Foundation.”
- Every measure to be voted on will have an information pack explaining it.
- Compliant Governors claim rewards at the end of each quarterly Governance period.
- Reward levels are tied to the ALGO commitment of a governor.
- Specific Rewards pool for each period, decided by Governance vote.
The existing participation rewards program will finish on approximately May 15th, 2022, to be completely replaced by increasing Governance Rewards. As Governance is a much more engaged process, with commitment periods and a vote that all Governors must participate in, it is expected that not all Algo holders will participate in Governance. This should lead to higher Governance rewards levels than is currently the case with participation rewards.
Why is Algorand Governance Important to ALGO?
Algorand Governance had over 50,000 participants in Period #1 alone effectively making it the largest and most active DAO in the world. The Community Governance program is important since it gives decision power about the future of Algorand to the Algorand community. It introduces a form of governance that is simultaneously decentralized, secure and efficient, like the consensus protocol. The Algorand Foundation believes in a fully decentralized Algorand ecosystem. A decentralized ecosystem, in which everyone can impact monetary, technical, and other policy decisions, best enables the Algorand community to shape the shared future of the Algorand network.
What is the Future of Algorand Governance?
With any new product offering there is always room for improvement and the roadmap for Algorand Governance will most likely evolve quickly over the next several years. Some of the most immediate pain points, however, felt by community members participating in Algorand Governance are also being solved by third parties such as GARD. For example, users with ALGOs committed to governance were penalized for dipping below their committed threshold and had to forfeit their rewards. With platforms like GARD, users will be able to borrow against their committed ALGOs in governance and not have to sacrifice rewards for some amount of liquidity.
Over time rewards for those participating in Algorand Governance decrease from period to period. This is natural as when more community members participate in governance the distribution of rewards gets diluted. With the GARD Protocol, users can create clever strategies to get more mileage from each ALGO they contribute through the protocol.
Although we cannot predict the future of what’s ahead for Algorand Governance, we are excited to see how it will evolve over the next several years as well as how new products will play a role in unlocking ALGOs previously ‘locked up’ and committed to governance.
Wrapping Up
Algorand Governance is still fairly young though it is one of the most important updates to the Algorand Protocol. By Period #2 of governance alone ~45% of all ALGOs in circulation committed to Algorand Governance and earning rewards through voting on the future of the protocol. It will be very interesting to see how community members will be participating in governance in the future whether that be through the foundation directly or indirectly through platforms that provide unique value propositions like the GARD Protocol.
One thing is certain: Algorand Governance is making ripples in the crypto space. The ability to continuously shift toward decentralization and democratization of the Algorand ecosystem is an incredible feat to say the least. The fact that almost instantaneously the largest DAO in the world was catapulted into the world is jaw dropping and a framework for the rest of the world to follow. As if having the most technologically advanced layer 1 blockchain wasn’t enough, now everyone who participates in Algorand Governance can have a voice in the future of the protocol.