Here is a simple DeFi strategy to access Algorand's Governance DeFi Reward Pool. In Governance Period 9 we saw the standard governance reward pool earn an APR of 3.03% while the DeFi Governance APR was 18.75%.
Folks Finance
Accessing this higher reward rate is not difficult as a user can participate in governance through Folks Finance. Folks Finance offers a Liquid Governance solution where users can mint gAlgo (ASA ID 793124631) by committing Algos. You receive gAlgo in a 1:1 ratio to the committed Algo. This allows your Algo to participate in governance while still holding an asset that will allow you to continue participating in Algorand's ecosystem without concern of failing to remain an eligible governor (voting and keeping your wallet balance above your committed balance) to earn governance rewards. By minting gAlgo you automatically qualify for the higher DeFi reward rate.
To take this strategy a step further, to earn even more rewards, we will access target DeFi rewards that have been allocated to Tinyman, an Algorand DEX.
Tinyman
Tinyman is a DEX (Decentralized Exchange) on Algorand that receives Target DeFi rewards. These rewards have been allocated from the 70.5 Algo reward pool for each governance period. Read here about their period 10 allocations. One simple way to earn a share of these rewards is by providing liquidity on Tinyman for the Algo/gAlgo liquidity pool. When you provide liquidity on Tinyman you receive LP tokens that represent your share of the liquidity in the pool, these are another ASA (ID 1002647167). You can then farm your LP tokens on Tinyman; Algo/gAlgo Targeted DeFi Rewards #10 farming program. The easiest way to access LP tokens is to mint half your Algo for gAlgo on Folks Finance and then provide liquidity on Tinyman and then commit your LP tokens through Algorand Foundation's Governance platform. On top of the target DeFi rewards we will also earn trading fees for providing liquidity.
Governance Platform
Since Governance Period 4 measures passed Governors are able to have the Algo portion of the liquidity they provide participate in Governance. This makes sense as you don't want users to have to choose between providing liquidity on decentralized exchanges or participating in Governance. This means your Algo/gAlgo LP tokens can participate through Algorand Foundation's Governance platform.
With this strategy all of your Algos qualify for the DeFi reward rate; 50% through Folks Finance and 50% through LP tokens on Tinyman. While also receiving Target DeFi rewards on Tinyman by farming your Algo/gAlgo LP tokens.
Important note, you must unwind your gAlgo/Algo position at the end of the period and redeem your gAlgo back to Algo. This redeem window is only open, on Folks Finance, for a week after the Governance period ends, but it is why impermanent loss is not a concern when providing liquidity. Since we know Folks Finance will honor the redemption of gAlgo to Algo at a 1:1 rate during the redeem window we are not concerned if we have more Algo or gAlgo from our LP tokens.
DeFi Strategy In Action
Bonus Strategy After A Period Starts
If you are late to the Governance registration window. You should consider swapping Algos to gAlgo on a DEX as gAlgo typically trades at a 2% premium after a period starts, so you can lock in a return. You also should consider lending pools. These LP tokens can't participate in Governance but earn a higher return and are a great option once a Governance commit window has closed.
