Expanding Governance Cross-Chain with xALGO

Folks Finance
4 min readMay 30, 2023

Algorand Governance is set to visit new worlds through xALGO, a new cross-chain solution built by Folks Finance. Using Wormhole technology, ALGO holders will be able to easily bridge xALGO from Algorand to BNB Chain, giving them access to the yield generated from Algorand governance while maintaining liquidity in another ecosystem. xALGO will not only be yield-bearing, but also able to be traded on-demand.

The benefits of xALGO are numerous and impactful:

  • Greater participation in Algorand governance
  • Two-way bridging established between BNB Chain and Algorand
  • Increasing liquidity in both DeFi ecosystems
  • Onboarding BNB and Binance users to Algorand and locking their Algo in governance

And if you’re an OG governor, you’ll love the continuous-commitment, which gets rid of the quarterly governance tasks.

How does xALGO work?

Minting: Holders of ALGO can mint xALGO on Folks Finance by depositing ALGO into the smart contract, which in turn uses Wormhole technology to automatically bridge the xALGO to BNB Chain. Upon the redemption of xALGO, the ALGO deposited will be redeemed and returned, along with the yield generated. xALGO can be redeemed during the commitment window for a new governance period. A video tutorial and official documentation will be published near xALGO’s launch.

Interest-bearing: xALGO is an interest-bearing asset, meaning that the rewards from Algorand governance will accrue on the token. Upon its launch on July 1st, xALGO is minted at a 1–1 ratio to Algo, but will be worth more as each governance period passes.

For example, at the beginning of G8, a user mints 100 xALGO at a cost of 100 ALGO. At the end of the period, after rewards have been distributed, the same user would be able to burn the 100 xALGO for 104 ALGO (assuming APR of 16% after fees). In the beginning of G9, since xALGO is worth more, if a user wanted to mint 100 xALGO it would cost 104 ALGO. And the same process will continually repeat where the value of xALGO will increase after rewards have been distributed.

Voting: Technical limitations currently restrict xALGO minters from directly voting in Governance. However, we know the importance of choice for voting. We’ve opened a post on the Folks Forum to discuss how to best tackle this. Please share your thoughts there and invite your friends to join the discussion too. Folks Finance will draft proposals for Liquid Governors to vote upon based on the dialogue from the Folks Forum. Click here to go to the forum.

xALGO vs. gALGO: Though xALGO and gALGO are both derived from ALGO committed to governance, the fundamental difference is that xALGO is interest-bearing and gALGO is not.

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 contrast, xALGO’s liquidity is bridged to BNB Chain, and the yield is not distributed to the wallet at the end of the governance period, but distributed upon redemption of the xALGO. The yield on xALGO can be accrued over a longer period of time than one quarter, which eliminates the necessity to recommit.

Liquidity Provision Rewards: Folks will be partnering with a to-be-revealed DEX to bootstrap the adoption of xALGO in the BNB ecosystem. By providing liquidity to the xALGO-BNB pool, you can get trading fees, and by staking your LP tokens, you’ll earn extra rewards!

With its unique qualities, xALGO is poised to spark new activity and opportunity in Algorand DeFi by boosting active users, liquidity, and the velocity of capital. We can’t wait to launch at the start of Governance Period 8.

“Opening up Algorand Governance to new markets is a big deal, and xALGO is the perfect way to start that process,” remarked Benedetto Biondi, CEO of Folks Finance. “We hope our fantastic community enjoys the opportunities available on BNB Chain, and BNB users enjoy all the wonderful benefits Algorand has to offer as they create wallets and plug-in for the first time.”

Daniel Oon, Head of DeFi at the Algorand Foundation, also shared his excitement about xALGO: “We are thrilled about the xALGO launch on Algorand, as this opens the door for Algorand’s technology to shine and accelerates our push towards the next million users,” he said. “The introduction of xALGO enables users to participate in the growth of Algorand’s adoption, regardless of which chain they are on.”

Folks Finance is a leading DeFi platform providing innovative tools for lending, borrowing, trading and managing digital assets, all in one place. Folks Finance streamlines the DeFi experience with a UI and UX competitive to centralized exchanges, all while running on permissionless smart contract technology.

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Folks Finance

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