Algorand: Moving towards Decentralized Governance
By: Amit Joshi
Tags: Governance, Algorand, Blockchain, Cryptocurrency, Decentralized

Currently, in Algorand, every account can participate in consensus, but not governance. Governance is the power of deciding non-consensus tasks such as the funding of grant proposals.

As a next step toward responsible decentralization of the network, it is being envisioned to introduce a mechanism for any account to not only participate in consensus, but also participate in governance. The proposed decentralization of Algorand governance just like consensus protocol, is simultaneously decentralized, secure, and efficient. In comparison to consensus, governance in Algorand will not be algorithmic and will require personal attention and time. Additionally where consensus is unmonitored, uncompensated and does not involve locking, governance is monitored, compensated and involves locking of stake.

Envisioned Governance Mechanics

Participation in governance will be voluntary. The accounts that choose to participate to be termed as governors will lock their tokens for a given amount of time, initially proposed to be one year. Governing accounts shall be rewarded for their work in a capacity that will be higher than the network rewards they will replace.

The two parties which will have a major say in the governance will be the Foundation and the governors. While the Foundation will be responsible for the facilitation of the governance mechanism, the governors will be the one controlling the voting process. Both groups have to follow set principles of voting sessions, voting deadlines, transparency, spamming, monitoring, validity and weight associated with the vote.

It has been proposed to implement governance gradually, starting by decentralizing the funding of grant proposals presented to the Foundation. The proposals submitted will be voted upon by the governance token holders via voting type found to be suitable to the decentralized nature of governance. Examples of a couple of potential voting type options are briefly outlined below.

K-out-of-N: In K-out-of-N voting type, there is a limit of K proposals to be selected from the total N proposals by the governors to allocate the funds equally. Anything below K item selections is not allowed but the Foundation helps to rank the projects in an order which governors may find useful if they are falling short of the threshold selection mark to make their vote valid.

Greedy Budget Voting: Unlike the K-out-of-N voting which works well when each proposal requires the same amount of funding, the Greedy Budget voting allows the governor to select a set of items (not necessarily all) that can be funded without violating the budget.

Rewards for Governance

With great responsibility comes higher rewards!

It’s encouraging for ALGO holders that they can not only partake in the consensus but also have their say in the governance of Algorand and additional reward is an incentive. Participating in the governance will be voluntary and there will be a certain period for which the tokens have to be locked in to participate as governor in the network. The rewards for locking in the tokens are higher than normal network rewards which can be directed to different accounts for usage by the governors. Rewards to partake in governance are higher when compared to network rewards but it involves Lock-in for at least one year and early withdrawal scenarios for Governing Accounts involve penalties

Concluding Insights

The highlight of this proposal to move towards decentralized governance is that the Algorand Foundation will only facilitate governance but not control it (to be catered to by the governors), inline with its steady movement towards complete decentralization. From the investor and holder perspective, Algorand is an investment token with a long-term vision.