The Algorand Foundation has published the measures to be voted on in general Algorand governance period 14 (GP14). The measures are about the xGov council, which is to be established as part of the ongoing transformation of the Algorand governance. The voting starts on 27 February 2025 at 16:00 (UTC+0) and ends on 13 March 2025 at 16:00 (UTC+0). The registered governors must vote on the measures in order to remain eligible for governance rewards. GP14 marks the final governance period where governors will receive rewards for voting. Going forward, governance rewards will be replaced with staking incentives to further enhance network security and decentralization.
What is Algorand governance?
Decisions about the future of the Algorand network and its ecosystem are taken based on a decentralized governance model. The current model consists of ALGO holders registering at the beginning of a governance period by committing to hold a certain amount of ALGO in their wallet for the next 3 months. Their voting power is based on their committed ALGO. If they uphold their commitment and vote on the governance measures proposed by the Algorand Foundation, they receive governance rewards as an incentive for active participation. After 14 periods of this approach, the governance is now transforming to a new model.What is xGov?
The xGov program is part of Algorand governance. It is meant to make more concrete decisions regarding the Algorand ecosystem compared to the general Governance, thus requiring larger efforts and commitments from its participants. The program is initially focused on awarding public grants but expected to gradually take over more responsibility from the Algorand Foundation. The initial one-year alpha pilot of the program recently ended and is getting an overhaul, where ALGO stakers will be eligible to participate in the program. Unlike general governance, the xGov program does not provide additional rewards for participation. To alleviate the burden on the Algorand Foundation of administrating the xGov program and to further decentralize it, the program is to feature the so-called xGov council — a body elected through general governance to administrate the xGov program.
Transformation of Algorand Governance and xGov
As the rewards are shifting to staking, the general Algorand governance and the xGov programs are transforming. The general Algorand governance is staying but without rewards. While the details of the new program are still being defined, it is planned to consist of shorter commitment periods, conducted on an ad hoc basis, and reserved for matters that broadly impact all ALGO holders that are not better resolved by more specific governance programs like the xGov or through node runners’ consensus upgrades. The general Algorand governance will be compatible with staking if you are a solo node runner or use a staking solution that lets you keep control of your ALGO, as for example with Valar peer-to-peer staking. Through staking, you will also qualify to vote in the xGov program.
The xGov program will first be responsible for voting on proposals for retroactive grants. It will be guided by the xGov council, which will gradually take on more responsibilities from the Algorand Foundation to further decentralize the process. The xGov council members will be elected through the general governance. Any ALGO holder can apply to be on the council.
The duties of the members will be to: 1) review and understand the terms and conditions of the program; 2) evaluate proposals to check compliance with terms and conditions, provide general guidance, and outline benefits or issues to help kick off a discussion regarding the proposal; and 3) hold public discussions about the proposals review process above.
The powers of the council will be to: 1) block funding of any proposal that does not comply with the program’s terms and conditions; 2) expel council members for misconduct by a supermajority vote of at least 85%; 3) block council members’ remuneration (if there will be any) by a majority vote in case they are not performing their duties.
While the council is to hold important powers to block proposals by deciding they do not meet the terms and conditions, all final funding decisions will be made through votes by all xGov participants. The current general governance period (GP14) is to define more specific requirements for the xGov council members. The council is planned to consist of 13 members with equal voting powers and 1 year mandates.
Measures of Governance Period 14
There are five measures as part of GP14. Governors must vote on all of them to remain eligible for governance rewards.
The first measure asks whether xGov council members should be required to publicly disclose (i.e. dox) their full names or not, after they have gone through the Know-Your-Customer (KYC) process with the Algorand Foundation. The latter is meant to ensure legal compliance, while the former is considered to increase accountability. While it is common for members of public offices to be doxxed, a part of the blockchain ethos is also pseudonymity and many members of the Algorand community have expressed concern that if doxxing is mandatory, it would dissuade some pseudonymous members, who have demonstrated throughout the years their merit, to not candidate for the council. As the Algorand Foundation will anyhow conduct KYC on the candidates, which can prevent issues with pseudonymity like the same entity applying under two pseudonyms, and as the whole process will anyhow still require a certain trust in the Algorand Foundation, for example to pay out the approved funding, the public doxxing does not seem to be mandatory at the moment. Moreover, candidates could still voluntarily dox to improve their chances of being approved.
The second and third measures are about council members’ ability to submit their own proposals to the xGov program and to vote on them, which can create a conflict of interests. While that is a possibility, preventing them to do so could stifle innovation and/or result in a lack of builder experience on the council because able community members would have to choose between building for the ecosystem or participating on the council. Moreover, due to the decentralized and pseudonymous nature of blockchain, the efforts and costs to track and enforce compliance with these rules would likely be significant, effectively benefitting members who would be breaking the rules.
The fourth and fifth measures address the question if council members should be compensated for their work or not and/or how much. The maximum suggested compensation is 10k ALGO/year per member, i.e. at most 130k ALGO for the council per year. To put things into perspective, during the xGov pilot, more than 100 proposals were submitted within one-year, despite the total grant pool being rather small. With the updated program and increased funding amount, the hope is that even more entities will submit proposals. Based on the defined duties of council members and feedback from xGov pilot participants, it is safe to assume each member invests at least 1 hour per proposal. At the current prices of ALGO (0.25 USD), this is a quite limited compensation for the required effort and an efficient use of community resources if it helps to attract good members to the council. Without any compensation, the danger is that there will not be enough experienced or dedicated volunteers for the program to have a meaningful impact on the ecosystem.
To discuss the pros and cons of the measures, visit Algorand Forum: https://forum.algorand.org/t/the-xgov-council-shaping-the-future-of-xgov/14035.
Disclaimer
This article does not constitute financial advice. Readers should conduct their own research and fully understand the risks before participating in any staking or governance programs. All information provided is based on available sources and is subject to change by the blockchain network and the respective entities that operate the programs.
Sources:
- Interview with leads of Algorand governance programs at Algorand Foundation: https://www.youtube.com/live/IiEFPrCxdyc
- xGov program portal: https://xgov.algorand.foundation/
- xGov council: https://forum.algorand.org/t/the-xgov-council-shaping-the-future-of-xgov/14035 and https://docs.google.com/document/d/1Abo8ndT0wYkPcGcWBWAjp1b9Dwq9mlm-HdvVwuSWsWM/edit?tab=t.0
- xGov pilot: https://forum.algorand.org/t/xgov-guide-post-alpha-pilot/12153
- xGov overhaul: https://docs.google.com/document/d/e/2PACX-1vT_YxrlnZFp_RzD1bpQgIRLbCtYLVh7UdOUabTQ0k6CDN2tryDTBFOdfhfnJZENqrRR1BV7azym8sy9/pub
- About General Algorand governance: https://forum.algorand.org/t/governors-guide-2021-2024/12013
- General Algorand governance portal: https://governance.algorand.foundation/governance-period-14/period-14-voting-session-1
