Algorand Governance Period 11 — A Passive Income Opportunity

9 min readApr 7, 2024

Introduction

Algorand’s approach to governance, structured into distinct quarterly periods, offers a unique and structured framework for community participation and decision-making within its ecosystem. This predictable setup not only facilitates engagement but also allows for strategic planning by its members. Here’s a brief overview of how Algorand’s governance works and the strategy I plan to adopt for Governance Period 11.

Algorand Governance Process Flow

· Deposit $ALGO for Governance: Participants deposit $ALGO to receive governance tokens ($gALGO or $mALGO), which are considered liquid staking derivatives (LSDs). This process marks the commitment to being part of the governance period.

· Proposal Publication: Proposals for the governance period are published, outlining the key decisions to be made by the community.

· Vote on Proposals: Governance token holders vote on these proposals, exercising their influence on the strategic direction of the Algorand ecosystem.

· Collect Governance Rewards: Upon the conclusion of the governance period, participants collect their rewards, incentivizing active and meaningful participation in the ecosystem’s decision-making processes.

Governance Period 11

With the conclusion of Governance Period 10 and the distribution of rewards, attention now turns to the upcoming Governance Period 11. Algorand’s governance tokens, obtained through deposits via platforms like Messina One for $mALGO or Folks Finance for $gALGO, serve as Liquid Staking Derivatives (LSDs). This mechanism not only facilitates participation in governance but also allows these assets to be leveraged further within Algorand’s DeFi ecosystem.

Given Algorand’s focus on DeFi through its DeFi Incentive Campaign, the ecosystem is ripe with opportunities for liquidity provision, participation in derivative vaults, lending, and collateralization. This campaign, bolstered by funding from the Algorand Foundation, aims to enhance the liquidity and attractiveness of Algorand’s DeFi protocols, offering potentially higher rewards and drawing new users to the platform.

Strategy for Maximising Rewards and Mitigating Risks

In Governance Period 11, my strategy revolves around leveraging the governance tokens in ways that balance the pursuit of rewards with the management of associated risks. While the potential for earning through liquidity pools and other DeFi mechanisms is enticing, it’s crucial to approach collateralisation and borrowing with caution. The risk of liquidation, especially in volatile market conditions, underscores the importance of strategic asset management.

By participating in governance, engaging in carefully selected DeFi activities, and staying informed about the ecosystem’s evolving opportunities and challenges, I aim to optimise my involvement in Algorand’s governance process and maximise the potential rewards.

Algorand DeFi Ecosystem

The Algorand DeFi ecosystem is brimming with diverse opportunities for liquidity provision, yield farming, and innovative financial products, setting a robust foundation for users looking to engage with decentralised finance on this platform. Below, we explore some key components and strategies within this vibrant ecosystem.

Algorand DeFi Platforms and Opportunities

Folks Finance (Governance & Lending/Borrowing): Enables the use of $gALGO for over-collateralised loans, presenting a range of options for leveraging your holdings.
Messina One (Governance): Offers a platform for Algorand governance participation through liquid staking derivatives.
Pact (Liquidity Pools & Farming Vaults): Features various liquidity pools and farming vaults, including:

ALGO/gALGO LP with a 36.69% APR and $2.16m TVL, plus an additional farm yield of 20.34% APR.

goUSD-gALGO LP offering an 8.87% APR and $10.8k TVL, with an additional farm yield of 92.55% APR.

AlgoRai Finance (Yield Farming Vaults): Specialises in yield farming vaults with options for bear and bull strategies, such as the gALGO Bear Vault Weekly, offering a 10.87% APR with a 91.66% success rate.
TinyMan (Liquidity Pools & Farming Vaults): Hosts a selection of liquidity pools and farming options, including high APR opportunities.
Humble Swap (Liquidity Pools & Farming Vaults): Offers a range of LPs and farming vaults with varying APR rates and TVL values.
xBacked (Under-collateralised Loans): Provides an innovative approach to under-collateralised loans for minting $xUSD with $gALGO.
CompX (Farming Yield Vaults) & Cometa (Time-locked Yield Farms): Both platforms offer farming opportunities and yield vaults for those looking to maximise their returns in the Algorand ecosystem.

Bridging Into & From Algorand

For individuals looking to dive into Algorand’s ecosystem, the first step is to secure an Algorand-compatible wallet. The most recommended and ecosystem-integrated wallets are:

Pera: The #1 Algorand wallet with complete compatibility.
Defly: A newer wallet for Algorand with updated features.
Daffi One: The latest wallet entry into the Algorand ecosystem with advanced utility.

By also creating accounts with Moonpay and Meld Finance, you can directly purchase $ALGO, $USDC and several other Algorand coins from your bank account or debit card through your wallet. All ramping service providers require KYC to be completed due to global AML (anti-money laundering) laws. Compliance is required with AML for these service providers to receive banking licenses.

Once you’ve set up your wallet, understanding how and where to bridge assets into and from Algorand is important. Here are the premier bridges facilitating these transactions:

For bridging from EVM chains like Arbitrum, Base, Avalanche, BNB Chain, and others into Algorand, use Messina One.
To bridge from Solana, Injective, Moonbeam, NEAR, and Sei into Algorand, Portal Bridge is your go-to solution.
For transitions from Bitcoin, Telos & Libre into Algorand, the pNetwork Bridge offers a reliable service.

Pros and Cons: Folks Finance vs Messina One

The development of liquid staking derivatives (LSD) like $gALGO and $mALGO by Folks Finance and Messina One, respectively, represents an evolution in Algorand’s governance and DeFi ecosystem. Both offer unique advantages and considerations for users looking to participate in Algorand’s governance while leveraging their assets within the DeFi space. Here’s a comparison of their key features:

Folks Finance $gALGO

Pros:

Eligibility for $FOLKS Airdrop: Holding $gALGO positions users to benefit from potential airdrops, such as the anticipated $FOLKS token, rewarding active participants in the Folks Finance ecosystem.

Cons:

Active Voting Requirement: To earn bonus $gALGO rewards, users must actively participate in the voting process during each governance period.
Manual Unwrapping: At the end of each governance period, holders must manually convert their $gALGO back to $ALGO within a specific timeframe, necessitating close attention and calendar reminders.
Limited Availability: $gALGO’s integration across the Algorand DeFi ecosystem is not as extensive as $mALGO, potentially limiting its utility in various DeFi applications.

Messina One $mALGO

Pros:

Future Airdrop Potential: While not confirmed (nor widely speculated), the current market conditions with bridging services tokenising (see LayerZero & Wormhole) offers a remote possibility of a future token from Messina One. If so, $mALGO holders may reap the rewards should this speculative future realises.
Automatic Renewal: $mALGO automatically rolls over into the next governance period, simplifying the process for users and ensuring continued participation without manual intervention.
Automatic Voting: In case users miss the voting window, Messina One facilitates automatic voting to secure bonus $mALGO rewards, ensuring users don’t miss out due to inactivity.
Broader DeFi Utility: $mALGO is accepted across a wider range of DeFi platforms within Algorand, offering greater flexibility for leveraging assets in various protocols.

Cons:

Uncertain Airdrop: There is no confirmed plan for a Messina One-specific token or airdrop, making this potential benefit speculative at present.

Both $gALGO and $mALGO bring distinct advantages to the table, catering to different user preferences regarding ease of use, potential rewards, and DeFi application. The choice between them may hinge on individual strategies, whether one prioritises potential airdrops and the ease of governance participation, or values automatic processes and broader DeFi integration. As Algorand continues to grow and its DeFi ecosystem expands, the roles and features of both $gALGO and $mALGO are likely to evolve, further enriching the options available to Algorand stakeholders.

Optimising Returns in Algorand’s Governance Period 11: A Strategic Overview

For Governance Period 11, after evaluating various platforms, I’ve decided to pivot back to Folks Finance for two primary reasons:

Roadmap and Integration Plans: Folks Finance’s Q2 2024 ambitions include creating a hub on Avalanche and integrating several EVM chains and Solana. This cross-chain liquidity concentration is poised to significantly boost rewards and liquidity, making it a compelling option for engagement.
$FOLKS Token Launch: The anticipated launch of the $FOLKS token, coupled with an airdrop to eligible participants, presents an attractive opportunity for governance participants and those using Folks Finance for loans.

Given these factors, engaging with Folks Finance not only aligns with my strategy for maximising governance rewards but also positions me to benefit from the platform’s future growth and token distribution events.

As we venture into the eleventh Governance Period of Algorand, it’s pivotal to strategise effectively to leverage the myriad opportunities within Algorand’s DeFi ecosystem. Despite the allure of Messina One’s user-friendly $mALGO, the impending $FOLKS airdrop from Folks Finance presents an unmissable investment prospect due to the remarkable roadmap they’ve outlined for 2024. My conviction in the $FOLKS token’s potential success underpins my personal strategy for this period, aimed at maximising long-term value as outlined below:

Strategic Deployment: I’ll allocate 75% of my $ALGO to Folks Finance, obtaining $gALGO to serve as the cornerstone of my investment activities.
Collateral Utilisation: Next, I’ll use $gALGO as collateral to secure an $ALGO loan with a 75% Loan to Value (LTV) ratio, tapping into the advantageous lending services offered by Folks Finance.
Token Optimisation: Half of the borrowed $ALGO will be converted back into $gALGO via Tinyman, optimising my governance token holdings in preparation for further strategic moves.
Liquidity Pool Engagement: I plan to participate in the gALGO-ALGO liquidity pool on Pact, thereby bolstering my liquidity position and enhancing potential returns.
Yield Amplification: To conclude, I’ll seek to augment the yield from my liquidity pool stakes by engaging in the gALGO-ALGO Yield Farm on Pact, targeting compounded returns.

The remaining quarter of my initial $ALGO holdings will be preserved as liquid assets. This prudent reserve will be readily available to fortify my loan position in Folks Finance, ensuring my LTV ratio remains favourable and safeguarding against potential liquidation risks.

It’s worth noting your governance tokens may not appear immediately upon commitment, if so the tokens will be released to you upon the conclusion of the entry period on April 15th. So don’t panic if you don’t see them in your wallet beforehand.

Key Advice for Algorand’s Governance Participants!

For newcomers and veterans alike, participating in Algorand’s DeFi via Folks Finance for $gALGO or Messina One for $mALGO offers a streamlined route to accrue rewards throughout the governance period. However, a pivotal piece of advice is to patiently await the official announcement of reward distributions post-governance period before converting your governance tokens back to $ALGO. Acting prematurely could result in forfeiting additional rewards.

Staying informed through official updates from Folks Finance and Messina One on platforms like X (formerly Twitter) is essential for all participants. Joining their respective community channels on Discord and Telegram is highly recommended, as these forums provide invaluable insights and timely updates, ensuring you remain well-informed and optimally positioned to navigate Algorand’s dynamic DeFi ecosystem successfully.

Summary

Thank you for joining me on this exploration of Algorand’s vast potential and the opportunities it presents, especially as we look towards Governance Period 11. Algorand, often described as a sleeping giant within the blockchain space, is poised for significant growth in the coming years. The strategic developments, governance structure, commercial RWA rails in development, and the burgeoning DeFi ecosystem lay a solid foundation for what could be a transformative period for Algorand in 2024–25.

For those looking to deepen their engagement with blockchain technology and specifically with Algorand, participating in the upcoming Governance Period offers an excellent starting point. It’s not just an opportunity to contribute to the network’s direction but also a chance to learn, earn, and be part of a community at the forefront of blockchain innovation.

Algorand’s journey is a testament to the power of visionary leadership, advanced technology, and community engagement in shaping the future of finance. As we edge closer to Governance Period 11, let’s seize the moment to build our understanding and involvement with Algorand, setting the stage for what promises to be an exciting phase of growth and innovation.

As the Fundamental Analysis Lead for The Birb Nest, I’m committed to providing our community with a wealth of resources to navigate the complexities of the crypto market. Whether you’re interested in trading calls, signals, daily market updates, 1–2–1 tutorials, in-depth fundamental analysis reports, airdrop strategies, exploring passive income opportunities, and much more, The Birb Nest is your go-to platform. Our aim is to equip you with the knowledge and tools necessary for success in both the crypto and legacy trading spheres.

Chris Cravens (aka Milky) — Fundamental Analysis Lead Researcher, providing content and services to The Birb Nest since 2022. Join us to unlock access to a comprehensive suite of content designed to enhance your trading and investment strategies across the crypto and traditional markets.