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The Algorand Foundation has confirmed the details of the Second Algorand Governance Period, asking participants to weigh in on a proposed new DAO-inspired tier system. The measure put forward by Algorand is:
“We propose the creation of a new tier of Expert Governors (xGovs). These governors, via decentralized aggregation mechanisms such as a DAO, will have the power to put forward measures for our quarterly governance votes. These measures will still be voted on by our current governance platform, which will not change.
The remaining proposal can be read in full here.
Governance participants will then need to vote for one of the following two options:
Option A: The Governors support the creation of a new DAO-based tier of governance, xGov, with the power to formulate, evaluate and propose measures to be put to vote.
Option B: The Governors prefer the Algorand Foundation continue in its current role of curating and exclusively proposing measures for community vote, in addition to facilitating the vote itself.
The Foundation supports option A.
This proposal has sparked passionate debate within sections of the community as to both the positive and negative consequences of either outcome. Other participants have been left feeling unsure of the connotations of either outcome, being unfamiliar with DAOs and tiered governance structures. This article aims to explain what both options would mean for the future of Algorand governance and give a basic overview of how DAOs work for the unfamiliar.
The result of Option A
Option A, the preferred outcome by the Foundation, would see the DAO structure implemented and xGovs introduced. As outlined in Algorand’s proposal, xGovs would be required to commit to a longer term of governance than the existing quarterly period of governors. The purpose of this would be to ensure those given the xGov status provide a more significant stake in exchange for their increased influence. xGovs will then have the power to dictate the contents of new proposals put forward to the remaining governance participants to contribute. Under this model, xGov’s influence over this process would also be proportional to the size of the stake they contribute.
The result of Option B
If option B were to be implemented, the current status quo would be maintained whereby the power to propose new voting topics is solely vested with the Algorand Foundation. As such, the community would need to rely on the Foundation to action new proposals rather than have the power to put them forward themselves.
The Debate and an Intro to DAOs
Much of the debate permeating around the community is focused on whether the proposed model would result in an effective DAO model. For those unfamiliar, a DAO (Decentralized Autonomous Organization) is established by a core team of community members through the use of smart contracts. These smart contracts lay out the foundational framework by which the DAO is to operate. They are highly visible, verifiable, and publicly auditable so any potential member can fully understand how the protocol is to function at every step.
In this context, the DAO structure would see decision-making responsibilities transferred to the Algorand community and entirely remove the centralization that the Foundation presently has. One of the community’s primary concerns about the proposed model is that it may be more favorable to 'whales', or wealthy users. Due to their increased ability to purchase large stakes, they would hold greater voting and decision-making power in comparison to more modest users.
While some segments of the community are concerned this will result in the rich protecting the rich, others have argued it’s a positive thing. They suggest that because these users have made a more sizable investment in governance, this should be proportionately reflected.
The vote
Ultimately, as has been pointed out by numerous members of the community, this is not a black or white decision with valid arguments on the merits of either option. What is certain is that the result of the governance vote will ultimately be reflective of the Algorand community and continue to shape its future direction accordingly.
