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Algorand's latest governance mechanism and follow-up trend analysis



We call all rewarded 3.2 billion Algo Algorand Ecological Resource Pool (AERP).

The new governance system will be deployed in two phases.

Initial Phase: Starting in Q4 2021, some aspects of this will be implemented off-chain.

Complete system: It is expected to be ready in early 2022, and all aspects will be fully chained and controlled by smart contracts.

Once the plan is approved by the community, the 2 billion Algo in AERP will be locked immediately, and the foundation cannot use this fund. When the initial phase is over, smart contracts take over, and the on-chain governance system is established, the control of these 2 billion Algos will be migrated to the system.

The remaining approximately 1.2 billion Algos will still be available for ongoing activities during the initial phase, but once the on-chain system is ready, these Algos will also be locked into the same smart contract. At that point, the entire AERP is controlled by a smart contract and can only be unlocked by a vote of the governors. All accounts can vote in this decision-making process, become Algorand's governance, and participate in the upcoming decisions.

B CapitalGroup has closed its US$250 million early-stage fund and will focus on emerging themes such as Web3: Jinse Finance reported that according to a statement from the company, B Capital Group, a venture capital firm headquartered in Singapore and the United States, has closed its US$2.5 billion early-stage Ascent Fund. Fund II. Ascent Fund II is B Capital's first early-stage focused fund, investing in pre-seed Series A rounds globally, with a focus on start-ups in the US and Asia.

In March, B Capital reportedly raised at least $1.1 billion for its third global growth fund from 101 investors, according to a filing with the U.S. Securities and Exchange Commission (SEC). The fund is targeting $2 billion and B Capital manages $6.5 billion in assets. The company has also made a number of senior appointments in recent months to help manage its expanding portfolio. In February alone, it appointed three partners, Matt Levinson for fintech, blockchain and real estate investments, Karan Mohla for early-stage bets in India and Southeast Asia, and Adam Seabrook for late-stage investments in digital health and related areas. [2022/7/20 2:24:28]

Governance Proposal

Asset management platform Cloudwall completes $6.3 million in seed round financing, led by LocalGlobe and Illuminate Financial: On June 1, Cloudwall Capital, a digital asset risk management platform headquartered in Singapore, announced the completion of $6.3 million in seed round financing. This round of financing was led by LocalGlobe and Illuminate Financial led the round, with participation from IA Capital Partners, Eberg Capital and Nemo Ventures, as well as a group of angel investors from the DeFi and traditional financial sectors.

The digital asset security product Serenity developed by Cloudwall Capital can effectively construct investment portfolios and manage the inherent risks of digital assets, allowing investors to pool their investment portfolios and access DEX and chain resources, and then better analyze and invest in the digital asset market , its proprietary statistical and machine learning algorithms can also help investors conduct simulations and stress tests on investment portfolios to understand investment performance. (Techinasia)[2022/6/1 3:56:15]

Each term of the governor is one quarter (three months), and he invests in the Algos he holds and receives rewards. The voting will use the governance shares of the participants as the weight (such as the number of Algos invested).

Cross-chain bridge Wormhole adds support for Algorand: According to news on May 17, the cross-chain bridge Wormhole adds support for Algorand blockchains. Wormhole has previously integrated networks such as Avalanche, Terra, and Polygon. (CoinDesk) [2022/5/17 3:23:05]

The foundation will establish votes, but will not participate in the governance program. Other Algo holders can choose to announce in advance the number of Algos they want to invest in this plan. The governance plan will place decision-making power over the use of AERP in the hands of the community.

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AERP consists of 5 separate funds, which are planned to be put into circulation between now and 2030.

Participation rewards: rewards can be obtained by holding Algo tokens, which will be replaced by governance rewards in 2022.

News | Algoz will provide UltrAlpha users with trading strategy services: Digital asset management platform UltrAlpha has reached a cooperation with Algoz to accept its long/short trading strategy services. This service uses statistical correlations and differences between different cryptocurrency pairs to Identify market trends, determine where to invest, and hedge risks. (Finance Magnates)[2019/10/18]

Innovation Fund: Supports high-quality projects in Algorand.

Algo ecological rewards: support the development of Algorand ecological infrastructure and concept application cases, and demonstrate performance.

Research and Social Good Program: Aims to support initial research in key areas of blockchain development and generalized cryptography. It also supports partnerships that enable inclusive and transformative ecological visions for the global community.

Reserve Fund: For foundations and governors to respond to unexpected trends or needs.

Governance will increasingly assume responsibility for major economic and strategic decisions.

Through regular voting to complete the decision-making, the foundation will strictly implement the decision-making results based on the decisions of the governors, and protect the interests of the entire ecology.

News | Algorand CEO deleted the statement that "team tokens are not locked" and said that "team tokens will be held for a long time": Algorand CEO Steven Kokinos deleted his statement on June 8 that the team tokens of the project are not locked warehouse, and published a new article, changing the statement about "the project team's tokens are not locked". The new article stated that "team tokens will be held for a long time and will not be sold", and that they will use team tokens to participate in consensus and help protect network security, but will never represent more than 49% of votes, and team tokens will also support And encourage the development of the ecosystem. But in an article published on June 8, Steven Kokinos stated: "We have been asked several times whether the founder token will be limited, or will be locked. In short, our answer is no Yes. Algorand has made a conscious decision to allow our tokens to be freely traded as a way to support the early liveness and security of the network and support the ecosystem.” The previous statement made the market generally interpret that Algorand’s team tokens will not be locked, but in the newly updated article, these statements are no longer mentioned. (Chain News)[2019/6/12]

The Foundation is committed to simplifying the voting process as much as possible and providing a simple interface;

Only one vote will be scheduled per governance cycle;

The governor can choose whether to follow the foundation's position each time he votes.

The amount of governance rewards is based on participation shares. There is a quarterly participation entry, and participants can join the program and invest in Algos throughout the governance period.

Governors participate in quarterly voting to determine the distribution of AERP. As long as they cast valid votes and maintain the amount of Algo invested in the governance wallet, they can receive rewards at the end of the governance period.

Governance can take into account decentralization, security and efficient mechanisms and incentives, just like the consensus protocol PPoS.

The governance program will begin in October, with additional rewards distributed to governance. (Thus, the total return earned by participants in governance projects will be significantly higher than the current fixed level of participation rewards.) By 2022, participation rewards will be eliminated from the stage of history and completely replaced by governance rewards.

Rewards will be distributed at the end of each quarter to governance wallets that participate in voting and maintain the amount of Algo voted. If the governor misses the vote, or fails to maintain the amount of Algo they voted, they will lose their rewards for this quarter. If you keep the invested Algo balance unchanged throughout the governance period and participate in all voting, you can claim governance rewards at the end of the period.

The plan can be withdrawn at any time during the quarter, but the governor who withdraws early will lose all rewards for the quarter. Early on, to increase the attractiveness of the program, there will be no additional penalty for early exit other than losing the quarterly reward. But in the future, additional penalties may be imposed through votes by the governors.

The rate of return to the governance in a given period will be determined by the participants, i.e. it will be based on the total number of tokens invested against the total prize pool for that period. As an example, ~300 million Algos will be allocated for governance reward distribution in 2022: i.e. approximately 75 million reward Algos will be distributed every quarter. Therefore, for a quarter in 2022:

If  4 billion Algos  are invested in the governance account this quarter, then the rate of return for each Algo invested in this quarter is 75 million/4 billion = 1.875%, corresponding to an annualized rate of return of  7.7%.

If  2 billion Algos  are invested in the governance account this quarter, then the rate of return for each Algo invested in this quarter is 75 million/2 billion = 3.75%, corresponding to an annualized rate of return of  15.9%.

If  1 billion Algos are invested in governance accounts this quarter, then the rate of return for each Algo invested this quarter is 75 million/1 billion = 7.5%, corresponding to an annualized rate of return of  33.5%.

Governance needs to regularly vote on more and more tasks, including ecological reward plan distribution, ecological partnerships and related fund transfers, node operators and governance incentives, etc. The Foundation will announce new tasks to be voted on before each vote. Participation in the governance system requires:

An Algorand address that registers governance and promises to maintain a certain Algo balance in that address at all times during this period (3 months). This address can be an existing address or a new address opened exclusively for governance purposes.

Participate in polls called by the Foundation during this period.

The vote weight of the governor will be equal to the share of Algos invested at the beginning of the period: one vote per Algo.

Key points from the conclusion:

Governance program will start in October, and there will be 2 rewards in parallel (participation + governance) by early 2022

Governance can be participated by all members, 1 Algo 1 vote, and the weight is determined according to the participating positions. You need to vote or follow-up to complete the governance responsibilities to get rewards. Early withdrawal only deducts current rewards and no additional penalties.

Initially, various parts of the governance system will go through off-chain mechanisms. In 2022, the entire system will be implemented on the chain.

If the governance starts normally in October, it is conservatively estimated that at least 1 billion Algos will participate in the governance stake, and the income of more than 33% is enough to make the big holders participate. thus causing the DS line to shift

In 2022, the Algo circulation rate is estimated to reach more than 50% of the secondary market circulation rate, and the tokens of early private equity investors may complete more than 70% or even all unlocked. Subsequent selling pressure on the secondary market will be further reduced

Algo’s current liquidity market value is 4.4 billion, FCap is 15.8 billion, and the circulation rate is about 30%. Out of the 10 billion total (tens of millions have been destroyed), there are basically 2-4 billion (20%-40%) tokens. It can be considered extremely slow to participate in circulation.

Judging from this, once the governance officially begins, it will be a very good pace of growth for Algorand's ecology. For the secondary market, based on the currency price at that time, it should be a relatively favorable situation.

But at the same time, investors cannot ignore the volatility risk of the overall market and invest blindly. They must have their own judgment criteria and holding logic to stabilize their mentality.

Reference: "Algorand Decentralized Governance"


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