Algorand Governance

Algorand Governance

The Current State of Algorand Governance

After years of ‘development’ and promises of decentralization, we face several criticalissues:

• Centralized control: Only the Algorand Foundation (AF) can propose general governance votes. The community has no direct mechanism to initiate broader governance changes.
• Stagnant public goods funding: xGov hasn’t materially improved over its year-long alpha period. What should be a cornerstone of ecosystem growth has been perpetually deprioritized.
• Glacial development pace: Version 2 of xGov is still in development, and even when launched, it won’t be optimal. We don’t have the luxury of years of experimentation while important projects go unfunded.
• Not taking community input: Despite community discussions across dozens of channels, forums, Twitter, the AF continues to make decisions internally with minimal incorporation of community input.
• Speed running treasury to zero: The AF is spending 100M+ ALGO per quarter, leaving little to govern over (whenever we actually can govern over it).

The Fundamental Flaw in the Proposed xGov Model

The upcoming xGov model introduces an elected council to filter proposals, which is a step in the right direction. However, it maintains a dangerous structural flaw: voting power based on blocks proposed (i.e., stake size), which heavily favors whales, protocols, and staking pools.

This creates a system where voting power is directly proportional to wealth, leading to potential governance capture. Consider this scenario:

• An LST protocol holds 100M ALGO in stake
• They submit a proposal requesting 100K ALGO, claiming it will “increase online stake”
• Their voting power, based on their entire staked amount, allows them to single-handedly meet the quorum required for passage
• Their users support the proposal (it’s a direct payment to them), meeting the accounts quorum
• The proposal passes, entirely within the rules

This isn’t a hypothetical concern — it’s the natural outcome of the proposed system. Treasury governance is fundamentally different from technical governance. When we vote on technical protocol upgrades, our incentives are aligned because failures harm everyone equally. But when voting on funding, the incentives shift dramatically toward self-interest. As the saying goes, “Whatever can be done will be done.” If you build governance with exploitable mechanisms, don’t be surprised when those mechanisms are used and abused.

A Better Governance Structure: The Council Model

The ideal structure would be a democratically elected council that independently decides how to allocate funds within a set charter. This provides both efficiency and accountability without requiring large-scale, self-interested votes on each proposal.

Median-Based Voting: A Superior Mechanism

Instead of binary yes/no votes, council members would each propose a complete budget breakdown for all proposals under consideration. For each proposal, the final allocation would be the median of all council members’ suggested amounts.

For example, if reviewing five proposals with a total budget of 1M ALGO:

• Council Member A might allocate: 300K, 200K, 400K, 50K, 50K
• Council Member B might allocate: 400K, 100K, 300K, 100K, 100K
• Council Member C might allocate: 200K, 300K, 200K, 200K, 100K

The final allocation would be the median for each: 300K, 200K, 300K, 100K, 100K

This approach:

• Prevents extreme allocations
• Reflects the collective wisdom of the council
• Allows for nuanced funding decisions rather than all-or-nothing outcomes
• Reduces the impact of any single corrupted member

Community Oversight

For alignment with existing governance, the council would submit its budget allocations as a proposal, subject to ratification by the broader community through a supermajority vote. This provides a high-level check on the council’s decisions without micromanaging individual proposals.

Specific Issues with the Current xGov Council Proposal

Unnecessary Doxxing Requirements

The requirement for council members to be publicly doxxed and undergo KYC with the Algorand Foundation is absurd in an industry built on pseudonymity. This:

• Creates unnecessary security risks for council members
• Contradicts the ethos of decentralization
• Provides no meaningful protection against bad actors

A Twitter account and an NFD/account on-chain should be sufficient identity verification. KYC doesn’t protect people — it puts them in danger.

Inadequate Compensation

The proposed compensation of 5-10K ALGO annually for council members is laughable considering the work involved. This will amount to cents per hour. Proper compensation is crucial for this service to ensure the proposals are getting the time and attention they need. If you want qualified people to spend real time on this, the proposed amounts are a joke.

The Algorand Foundation is spending 20M ALGO on this governance vote, just to determine whether to allocate 65K or 130K ALGO for the council. This perfectly illustrates the dysfunction of the current system.

Council Member Eligibility for Funding

Council members should be able to submit proposals but must abstain from voting on their own submissions. The alternative — barring them from accessing funding entirely — would prevent many of the most qualified and engaged community members from serving.

Even with all 13 council members potentially submitting proposals, the system remains protected because:

• They can only filter what gets voted on, not directly approve funding
• Abstention on conflicts of interest provides sufficient protection
• The broader community still has final say through ratification votes

Conclusion

While we debate the minutiae of xGov, a more significant issue looms: the Algorand Foundation continues to control the entire treasury and is selling over 100M ALGO per quarter. At this rate, by the time meaningful community governance is implemented, the treasury may be substantially depleted.

The disconnect between Algorand’s technical excellence and its governance inadequacy is stark. We have a blockchain capable of incredible performance, security, and scalability, yet our governance remains primitive and centralized.

Proper governance isn’t just about appearances — it’s essential for the long-term success of the ecosystem. The solutions proposed here — a properly structured council with median-based voting, appropriate compensation, reasonable identity verification, and true treasury control — provide a path toward governance that matches the quality of Algorand’s technology.

This piece originally appeared on Medium .