High Algorand Governance Rewards

An overview of Community Governance Rewards model.

The Decentralized, Community Governance Rewards model has been designed to highly value and reward the commitment of Algorand Governors to the Algorand ecosystem and their participation in voting. 

Let’s look at the rewards that Governors could earn in the first governance period, starting October 1st:

The first important information to note here is that the existing participation rewards program will continue through to the end of 2021 alongside governance rewards. So each Algorand Governor who is holding Algo in a live wallet will receive their participation rewards as before.

This is currently running at a rewards rate of 5.6% annualized. On top of this, 60M Algo has been allocated as the governance rewards pool for the 1st Governance period. As modelled using the same method as the Decentralizing Algorand Governance Proposal this will lead to a range of scenarios depending on the level of participation in governance:

  • If there are 4 billion Algo committed in Governing Accounts for that quarter, their rewards will be 60m/4b = 1.5% for every Algo committed for the quarter, corresponding to annualized 6%, to be added to the return from participation rewards, totalling 12%
  • If there are 2 billion Algo committed in governing Accounts for that quarter, their rewards will be 60m/2b = 3% for every Algo committed for the quarter, corresponding to annualized 12%,  to be added to the return from participation rewards, totalling 18%
  • If there are 1 billion Algo committed in Governing Accounts for that quarter, their rewards will be 60m/1b = 6% for every Algo committed for the quarter, corresponding to annualized 24%,  to be added to the return from participation rewards, totalling 30%

An Algorand Governor, participating in the first Governance period can expect to claim an annualized rewards rate of 5.6% from the old participation rewards model and also claim a Governance reward rate (annualized) that will likely fall in the range of 6% to 24%. So a Governor could expect to claim a total annualized reward rate between 12% and 30% in that first period. These are the likely upper and lower bounds of what will be possible and a governor might expect to see the initial reward rate fall between these 2 levels. This could be the most generous Governance rewards model ever seen in a leading, decentralized, layer-1 protocol. The reward level for this first governance period is consistent with the long term economic design underlying the LTAD, whose sustainability under Community Governance is explained in the Algo Economic Evolution Report, which we will be sharing very shortly.