Becoming a Governor
Becoming a governor on Algorand is a process that involves holding a significant number of ALGO tokens. Governance rights are granted based on the quantity of tokens held, which serves as a measure of an individual's stake and commitment to the platform. This approach aligns with the decentralized ethos of blockchain, ensuring that influential decisions are made by those with a genuine interest in the platform's success.
How to participate in Algorand Community Governance; Step-by-step
- Commit Algos at the start of a governance period
- Participate in all the voting sessions in this period
- Maintain eligibility by holding the amount committed for each address during the entire period.
- Governance Periods start at each calendar quarter - Jan, April, July and October.
Several ways to commit ALGO tokens
Before decentralized governance was introduced in Q4 2021, the sole method to become a Governor was by committing and holding a substantial number of ALGO tokens in each address balance, known as vanilla governance. One drawback of vanilla governance is that, for instance, if the maximum amount is committed, it may lead to the address balance falling below the committed level, rendering the governor ineligible for rewards. Personally, I refrain from using vanilla governance except on a few additional addresses to farm Algorand Governance NFTs by Pera.
The goal of Governance is to become a real decentralized governance system, and to quote Alogrand Founder, Prof. Silvio Micali.
We believe in a fully decentralized ecosystem, where everyone can impact monetary, technical, and other policy decisions.
Algorand Foundation's Targeted DeFi Rewards initiative
Before each period begins, each DeFi platform publishes its distribution plan for Algorand Governance through the Algorand Foundation's Targeted DeFi Rewards initiative. Presently, the DeFi rewards far exceed those of vanilla governance. Even though Period 10 has not concluded, it is advisable to start planning for Period 11. Here are the plans for Period 11 for the DeFi platforms in which I am currently invested
ALGO Liquid Governance
In order to be a governor, the current Algorand Foundation model requires users to commit their ALGO for a 3-month period. During this time, users must maintain their committed ALGO address balance in their wallet in order to be eligible for rewards. This means that users ALGO are illiquid and effectively locked if they plan to earn rewards.
Folks Finance Liquid Governance solves this problem by introducing a new token called gALGO, minted one-to-one with committed ALGO used in governance. Users can access their gALGO freely and utilize them as they wish within the Algorand ecosystem e.g. as collateral on Folks Finance or as liquidity on a DEXs. When minting gALGO, the liquidity remains on Algorand, and the yield from governance is distributed to the wallet used to mint it at the end of a governance period. In the week after each period has ended you can redeem ALGO one-to-one using your gAlgo.
Cross-chain ALGO Liquid Governance
xALGO is an cross-chain liquid staking product bringing Algorand Governance rewards to the BNB and Avalanche Chain via Wormhole technology. xALGO brings Algorand governance yield to other chains, allowing for a continuous governance commitment without periodic burning.
Commit eligible LP tokens
Governors also have the option to commit eligible LP Tokens by providing liquidity to ALGO/Token pairs of your choice. This can include utility tokens such as Defly and Vestige, stablecoins like USDC and EURS, and community tokens like COOP and ORA. Choosing the ALGO/gAlgo pool is an excellent alternative to mitigate impairment loss. In addition to benefiting from Governors and DeFi rewards, liquidity providers are also entitled to a portion of the trading fees.
This concludes Part I. Here is a link to Part II
