A Governor’s Guide to Governance Period #2
Learn what we’re voting on, the pros & cons to each choice, and how to participate to lock in your Governance rewards!
Disclaimer: This is just one opinion and we highly encourage you to DYOR before casting your vote for this period!
Welcome back to the Club, gov!
One of the easiest ways to earn ALGO passively is to commit & participate in Governance. The deadline to vote this period (2/28) is quickly approaching, so today we wanted to cover all things Governance Period #2 for anyone participating in their first Governance.
We’ll review what we’re voting on, the pros & cons to each choice, which way the Club is leaning, and of course how to vote to ensure you lock in your rewards.
Let’s dive right in!
What are we voting on?
The Foundation has proposed to create a new tier of governors named Expert Governors (xGovs). xGovs would be members of a newly created Decentralized Autonomous Organization (DAO) that has the power to suggest topics for each quarterly Governance period, effectively replacing the Algorand Foundation within the Governance voting structure.
Gov Tip: If you don’t know what a DAO is, we highly recommend this breakdown from Binance Academy.
To become an xGov, governors will be required to commit to Governance for a longer period of time (i.e. 1+ years vs. standard quarterly governance period). The voting power of xGovs, within the newly created DAO, will be determined by a combination of their total ALGO staked as well as the number of years they have been an xGov (i.e. 1 year of xGov experience could double a xGov's voting power). This experience timer will go into effect once the xGov program launches (if approved of course).
If the xGov platform is approved, the framework, structure, and rules will be finalized between the Foundation & the community over the proceeding Governance periods. The community will be tasked with voting on the following:
Voting power structure (i.e. experience vs. stake)
Measure testing, editing, and revisions
xGov period durations
As always, the community will have two options to choose from:
Option A: The Governors support the creation of a new DAO-based tier of governance, xGov, with the power to formulate, evaluate and propose measures to be put to vote.
The Foundation supports this option
Option B: The Governors prefer the Algorand Foundation continue in its current role of curating and exclusively proposing measures for community vote, in addition to facilitating the vote itself.
Gov Tip: You can read the original proposal here under the ‘Measures’ section.
Let’s take a closer look at each option and the pros & cons to each.
Option A: Support for xGov platform
Put simply, the goal of Option A is to create a decentralized group of committed governors who will act as the first tier of decision makers for the future of Algorand. xGovs will be in tune with the needs of the Algorand community and will have a long-term (i.e. stake for 1+ years) vested interest in the blockchain succeeding. Granting the community – specifically xGovs – the power to put forth proposals to be voted on within Governance periods is a massive upgrade to the power of the community. This will allow us to shape the direction of Algorand through proposed voting measures.
This new platform is modeled on the current Governance structure by requiring governors have enough skin in the game to ensure they act in good faith when voting on the future of the ecosystem. By requiring xGovs to commit for longer periods of time, the Foundation is proposing a structure that will help establish a framework in which xGovs that support a choice against the greater community is a choice to put their long-term investment at risk.
At launch, the xGovs with the highest stake will be at an advantage when it comes to successfully putting a measure to a vote. However, over time, the xGovs who commit for longer periods of time & have more experience (i.e. multiple years of xGov service) will have the weight of their stake increased to help narrow this advantage gap. For example: 1 ALGO will be equal to 2 ALGOs in the hands of an xGov with two years of experience.
Due to the proposed experience tier above, a one year commitment is required to become an xGov.
We see many positives that can come as a result of Option A winning this period’s vote:
The xGov program will put more power in the hands of the community and provide us with a say on what proposals we want to see on future ballots.
Shifting decision-making power from the Foundation to the most committed governors will lead to a more decentralized blockchain over time.
Building on point #2, the experience tiers can mitigate the whale’s voting power in the xGov program. If it proves successful, we wonder if this can be carried over to the standard governance program and with the xGov structure this is something the community can propose a vote on.
Long-term commitment within xGov can foster long-term adoption of Algorand and provide stability & consistency to the ecosystem in the next decade.
As alluded to, the con that comes with Option A centers around the power of whales within the proposed voting structure. At the onset of the program, power can easily concentrate in the hands of whales especially when you consider the fact that users must commit to the xGov program for at least a year before the experience tier kicks in. This could lead to a scenario in which the xGovs act more like a board of directors invested in their own interests over community interest.
This is definitely something every governor should consider before casting their vote.
Option B: Continue with the Status Quo
A vote for Option B would keep the status quo intact. The Algorand Foundation will continue in its current role and propose voting measures each quarter from the top down. The community will have a right to vote on the measures proposed by the Foundation, but won’t have a role in curating the agenda.
There are two clear pros to consider:
The Foundation can continue to guide the community while in its infancy when the path forward is nebulous and requires clear and strong leadership.
By voting against the creation of the xGov platform, the community can punt the creation of a DAO to a later date when Algorand is in a more decentralized state.
To play devil's advocate on these two pros, the community should consider two key points:
The Algorand community will continue to have little autonomy in the future of the blockchain and will need to rely on and trust a centralized authority.
Punting the creation of a DAO similar to xGOV would be a leap of faith in the hope that there would be another opportunity to create one.
In addition to these concerns, we should take into consideration how a majority of whales currently vote for the Foundation’s recommended option. If we continue with the status quo, the Foundation will effectively not only have the power to propose measures but also indirectly choose the winning option for the foreseeable future. This may not always be a con, but we have all observed whales – especially those uncommitted to the community (i.e. exchanges) – vote with the Foundation twice and we think this trend will continue.
What is the Club voting?
While we haven’t made a definitive decision on which way we are going to vote, we are leaning towards Option A.
We understand and share the concerns from our fellow governors around the concentration of power, but we believe the pros outweigh the cons with Option A. While there will be an initial concentration of power, there are a few key points to consider.
If the first two governance periods have shown us anything, it's that whales have a tendency to drop out of governance due to movements in the market. If this is the case within the xGov program, this may help mitigate the concentration of power in two different ways:
Whales will disqualify themselves by breaking the xGov staking contract and have their status clawed back.
Whales may lock up less ALGO towards xGov to mitigate the potential need for liquidity down the road, effectively decreasing their voting power
We can’t join the Foundation and be involved in these key discussions. However, we have the power to join the xGov DAO, accrue time & experience, and gain more voting power over time. We would prefer to start this process sooner rather than later to ensure we have the necessary power as a community to shape Algorand by the time it rises to prominence in the space.
By starting now, we ensure the most committed of us have the experience and voting power in the future since we’re the ones here building when no one else is.
But don’t take our word for it! We highly recommend you read the expanded proposal the Foundation put out here and form your own opinion. There’s a lot more information to comb through and they provide a fantastic example of how this will come to life (under ‘A Concrete Example’). We highly recommend reading through the example to see how this could potentially work.
How to Vote in Governance
Step 1: Navigate to Algorand Foundation’s Governance Portal
You can reach the Governance portal here. You’ll know you’re in the right spot if your screen looks like this:
Step 2: Connect Governance Wallet
Next you want to connect the wallet you committed to Governance with by clicking the button in the upper right:
Select the wallet you’re using:
And finally confirm the wallet you have chosen:
Step 3: Cast Your Vote
After connecting your wallet, scroll down to the bottom of the screen until you see the options to choose from:
After you’ve reviewed all the necessary materials to cast you vote, simply select the option you’d like to vote for and then click ‘Submit your votes’ (a button that will appear after you select an option):
You’ll be prompted to sign the transaction with your wallet, and once complete you will see the highlighted notifications to confirm your vote has been cast:
Step 4: Change Vote (If Needed)
If you cast your vote today, it’s not irreversible as you can change your vote anytime before the deadline on the 28th. We’d recommend you cast your vote sooner rather than later to ensure you lock in your rewards without having to worry about casting your vote in time.
To change your vote, navigate back to the Governance Period #2 portal here and select ‘Edit your votes at the bottom of the screen’:
Select the new option you’d like to vote for and then select ‘Update your votes’:
Finally, sign the transaction when prompted to lock in your new vote. And that’s it, gov! You’ve locked in your rewards for this period.
As you have probably already seen while you voted, this voting period has a clear runaway winner so far:
We’ll see if this gap closes before the 28th, but this current lead seems insurmountable.
As always, thanks for dropping by the Club. Until next time, gov!