Algorand’s Switch to Governance Rewards

Algorand, a popular blockchain and cryptocurrency, began its staking rewards program in 2019. Algorand set aside 200 million ALGO here to give to those who staked their ALGO funds.

Before April 2022, you could stake your Algorand funds in the same way you would Ethereum, Cosmos, Tezos, or other popular staking assets. This is because Algorand operates using the proof of stake consensus mechanism. A range of exchanges offered Algorand staking, including Binance, Coinbase, and KuCoin, as well as numerous software and hardware wallets.

But after the entirety of this 200 million ALGO had been dealt out, Algorand’s passive staking program came to an end. However, this doesn’t mean Algorand holders cannot continue earning rewards. Using Algorand’s Governance Rewards program, you can still make a profit on top of your existing ALGO, but the process does differ.

So, how does it all work?

Algorand’s Governance Rewards Program

In the crypto world, the term “governance” relates to the decisions made about a network or project’s progression. Many individuals can participate in governance, including developers, network nodes (validators or miners), and regular users. This ensures that the decisions made for a project’s future aren’t solely made by its creators or operators.

Governance mechanisms have become hugely popular among DeFi and crypto projects, including within Algorand’s network.

The Governance Rewards process occurs via Folks Finance, a carbon-neutral lending and borrowing DeFi protocol.

Within governance, programs are governance tokens. In the case of Algorand, a token known as “gALGO” is used. gALGO is pegged to ALGO in a 1:1 ratio, meaning that the prices of the two assets are the same.

If you can vote within Algorand’s governance program, you are fittingly known as a “governor.” But you can’t become a governor simply by signing up. Instead, you must put forward a dedicated amount of your gALGO to qualify for the governance program. In this way, Algorand’s Governance Rewards program is somewhat similar to staking.

Governance rewards, however, are dealt out in ALGO, not gALGO. But gALGO can be used as collateral within the Folks Finance ecosystem for lending and borrowing.

Algorand’s Governance Rewards program goes through individual phases known as “periods.” The network has now reached the end of its Period Three voting window, with the Period Four window set to open in early September 2022. You need to commit your ALGO for three months for the governance period.

Algorand currently has over 33,000 governors within its network, all of which harbor the power to vote within Algorand’s development. This growing network of governors makes Algorand’s decision-making mechanism even more decentralized.

The Rewards

Your profits in Algorand’s Governance Rewards program will differ depending on how much gALGO you initially put forward. This is because the rewards dealt out to each user are proportional to their initial stake.

A great thing about Algorand’s Governance Rewards program is that you won’t have to deal with fees. Fees are pretty standard in the staking realm (though some platforms offer free staking) and can take a hefty cut out of your overall earnings. So, if you take part in Algorand’s governance mechanism, you won’t need to worry about losing any of your rewards to fees.

It’s worth noting that you’ll need to vote on every decision put forward to the governors to remain eligible for your rewards. This ensures that all governors are taking part in the process. Withdrawing your committed ALGO during these three months will also remove your rewards eligibility.

Users can earn up to 10.02% APY on their committed ALGO via Algorand’s Governance Rewards program.

Algorand’s Governance Mechanism Offers Rewards for Your Votes

By participating in Algorand’s Governance Rewards program, you can have your say in the network’s progression while also earning some healthy rewards. While passive rewards are no longer available on Algorand, you can still make a profit by putting your votes forward.