Folks Finance to Support xGov Signup in Liquid Governance Redesign

In Governance Period 3, Algorand Governors voted to implement a community-sourced solution for proposing measures into traditional Algorand Governance.

With the arrival of Governance Period 7 during Q2 2023, Folks Finance has stepped forward to lead the way as DeFi protocols integrate the xGov program. xGov will offer users of Liquid Governance the option to strengthen their impact toward building a more decentralized ecosystem, via on-chain proposals and votes.

What is xGov on Algorand?

Nearly a year has passed since the vote to adopt the xGov program, and the measure will soon be implemented. “xGov”, short for Expert Governor, is intended to further decentralize the governance process of Algorand. To quote the Algorand Foundation, “xGovs…are a select group of decentralized decision makers who demonstrate an enduring commitment to the Algorand community, possess a deep understanding of the blockchain’s inner workings and realities of the Algorand community, and whose interests are aligned with the good of the blockchain.” xGovs shall be tasked with determining the distribution of certain grant funds (amongst other things) via decentralized proposal generation and voting.

A Brief Background

Since the passing of the xGov measure in early 2022, feedback has been gathered from the Algorand community. A framework for the program began to materialize, utilizing GitHub entries referred to as ARCs (Algorand Request for Comment). These ARCs have served as the public forum for the collaborative building process.

xGov: Q3 2022 — Q1 2023

Throughout the past few months, the Algorand community and Foundation have refined the original proposition into its current form in ARC-33 “How to Become an xGov” (as provisioned in the G3 Measure, accompanied by the article “xGov: an Expert Governors System for Algorand”. Included for context, though some information is outdated due to the time this article was written). Members of the Algorand Foundation held regular discussions with the community across social media platforms such as Discord and Twitter to gain further insight into what shape this program should take. Many options were debated in terms of possible tokenomics, inclusion of an NFT into the design, and a desire to maintain the program’s flexibility for future improvements. All this has brought us to our current xGov model.

What to Expect from xGov on Folks Finance

The process is remarkably simple. Folks Finance users will be familiar with the Liquid Governance system of committing their Algo, for which they are entitled governance rewards from the Algorand Foundation, and minting gALGO to maintain their liquidity, redeemable for ALGO 1:1 at the end of each governance period. Nothing about this part of the process will change. However:

• If one chooses to take part in the xGov program, they will be electing to lock their Governance rewards (for that Governance period) for 4 quarters. For example:

1. In G7, if you would receive ALGO rewards from traditional Governance as an xGov, your ALGO reward for G7 is locked for 4 quarters.
2. In G8 you could remain an xGov and commit your G8 rewards for a further 4 quarters, or you can decline the option. Your ALGO from G7 would still unlock 4 quarters after the initial lockup. Any xGov commitment you make for G8 would be unlocked one quarter after your G7 xGov rewards were unlocked (and so on for any subsequent periods in which you commit to xGov).

• Governance through Folks Finance will operate the same. If one chooses to be an xGov, the Algo rewards that one would have received are now the xGov’s voting power in the xGov program. To exercise this voting power, an xGov must utilize the relevant Algorand Foundation sites each voting period. These sites have yet to be published.
• Once Folks Finance registers an xGov, it is the xGov’s responsibility to fulfill all further requirements in order to maintain their eligibility in the xGov program (maintaining eligibility in Traditional Governance, using all available votes in xGov voting sessions, and any future requirements that may be added).
• Due to the change in design, Early Claim in gAlgo will no longer be available. Community polls were taken across multiple social media engagements and platforms, and participants showed overwhelming support of xGov integration over the Early Claim feature’s utility.

xGov Voting: Potential Risks & Rewards

Beyond the key differences of locking up rewards for one year, and use of the Algorand Foundation xGov site for voting on xGov proposals, the potential xGovernor must also be aware that failure to use 100 percent of their voting power each period will be grounds to become ineligible. For example:

1. If you had 100 Algo committed to xGov, and 1 Algo = 1 Vote, then you have 100 votes.
2. If three xGov proposals must be voted on, then you must distribute each of your 100 votes across all three proposals (eg. 50 on Proposal ‘A’, 20 on Proposal ‘B’, 30 on Proposal ‘C’). Should you have any votes leftover, there will be a mechanism or “mock proposal” to use this “excess” voting power. At the end of the 1-year lockup, assuming you have fulfilled your duties, your Algo will be unlocked and awarded.

It should be noted that, while this is an exciting program to have available, it is not mandatory, nor are there any minimums or maximums to commitment levels should one choose to participate. Traditional Governors may continue to use Folks Finance and will never have to worry about becoming ineligible or losing rewards due to not voting. This is due to the passing of a Folks internal measure to proportionally allocate unused voting power equally amongst Folks Finance Governors who did vote in a given period.

For the xGov that has the commitment and drive to see the Algorand community into the next phase of governance, there is potential for reward! xGovs who have become ineligible in a given period would forfeit their rewards to the remaining eligible xGovs in that reward pool. This means an xGov that maintains their eligibility might also see an increase in their rewards, should other xGovs become ineligible.

How to Make an xGov Proposal

One of the biggest changes the xGov program brings to Algorand is the ability for any member of the community to submit proposals to be voted on by the xGovs, which could potentially be voted on through traditional Algorand Governance in-turn. One of the exciting features of this process is that it should be possible to submit proposals throughout the governance period. This should significantly increase the amount of decisions that can be affected through traditional Governance. These proposals can vary in nature such as:

1. Funding for early stage projects.
2. Facilitation of community involvement.
3. Addressing the needs of the community.

If a member of the Algorand community wishes to submit a proposal, ARC-34 sets guidelines for doing so, as well as provides a template form and a link to the “xGov Proposals Repository”. A proposal would need to pass a minimum threshold of votes, proportional to the amount of funds requested. Once the voting period begins (approximately 1.5 months from the start of the period) xGovs would vote on the final proposals that would then be filtered up and voted on through traditional Governance, if passed.

We hope you are as excited about this evolution of Algorand Governance as we are! Happy voting xGovernors!

— The Folks Team