Folks Finance Algo Liquid Governance to boost Algorand DeFi TVL
Thursday, April 14, at 6 a.m. EST, the Folks Finance Algo Liquid Governance commitment ends. The Algo delegated to Folks Finance will be committed to the Algorand Foundation Governance G3.
An innovation for the ALGO dynamics and economics. In this G3, Folks Finance launched the ecosystem’s first ALGO Liquid Staking mechanism: the Algo Liquid Governance.
Liquid staking is a well-known mechanism that leverages other chains’ PoS consensus participation by offering liquid assets still allowing the commitment and the related revenue. The protocol’s sector leader counts $18B in staked assets, Lido, a liquid staking solution for ETH 2.0. The protocol lets users stake their ETH whilst participating in on-chain activities, solving the initial ETH 2.0 staking illiquidity problem.
The Algorand PPoS avoids such a problem of staking a cumbersome amount of Algo for participating in the Consensus mechanism. The breakthrough of professor Micali allows egalitarian, decentralized and secure participation.
The Algorand Foundation, in October 2021, has launched the most significant on-chain Governance mechanism that enables the Algo holders to become governors, and participate in the decision making life of the ecosystem. The Foundation Governance rewards the governors that maintain their Algo commitment and vote for all the proposals. The process has been highly successful lately, hitting 3B ALGOs committed from the holders, 30% of the total Algo supply (45% of circulating supply).
However, until now, even if the Algorand Governance generated massive participation, it has limited the circulation of the 3B Algos in the ecosystem, restricting the ALGOs’ daily trading volume and the DeFi TVL participation.
Folks Finance Algorand Liquid Governance
Folks Finance launched Algo Liquid Governance to unlock the power of the 3B Algos. The protocol delegated participation mints at a one-to-one ratio, gALGO3. The gALGO3 is tradeable and transferable around the ecosystem, and Folks Finance is the primary price keeper of the 1:1 rate by always allowing the minting of the new gALGO3 at the same rate. Moreover, after the governance period, the feature allows the burning of gALGO3 at the same rate. The game can change; the Algo governance can still be the highest decentralized voting system without limiting DeFI ecosystem dynamics.
The users delegate ALGOs, mint gALGO3, which is used as collateral to borrow ALGO and increase the revenue. The first use case of the gALGO3 is to be used as collateral in Folks Finance Capital Markets for borrowing other assets. This is possibly used as a Loop commitment for borrowing more Algo, and committing them to the Algorand Governance through the protocol. This can be repeated multiple times until the Borrow APR is grown higher than the Algorand governance Rewards APR. Some users could increase their initial Algo commitment several times and increase the initial rewards up to 50%. The video below shows how this strategy can be leveraged.
But still, the gALGO3 is free to be moved around the ecosystem in other dApps. The second-largest appreciated use case is DEX trading; since the gALGO3 is linked directly to the ALGO price, traders are incentivised to maintain the price at the one-to-one ratio between the different DEXs. For example, if the price of gALGO3 falls to 0.95 ALGO on an exchange, users can purchase the gALGO3 at that rate, guaranteeing a profit of 0.05 ALGO at the end of governance.
The Algo Liquid Governance has several advantages for the governors:
- Users do not need to renounce their Algo liquidity while committing.
- There is no risk of losing the rewards due to missing voting. Users delegate Folks Finance, who vote on their behalf.
- Earn liquid Algo and use it as you wish between the Algorand dApps.
- There is no risk that gALGO falls in price since users can always burn their gALGO at a one-to-one rate at the end of the governance period.
Folks Finance Algo Liquid Governance has to be considered a unique community governor that votes on behalf of its users. The vote will be aligned with the Algorand Foundation suggestion until the development of the Folks community decentralized voting system, which will allow users to vote themselves in the decision-making process.
Less than two days are available for Governors to change the ecosystem path by moving TVL in Algorand DeFi by participating in Folks Finance Algo Liquid Governance. Mint your gALGO3 and say bye to DeFi illiquidity.