On October 1st, 2021 the Algorand ecosystem moved to a decentralized Governance model. The system was inspired by Silvio Micali's vision for governance.
Community Governance enables all ALGO holders to participate in the decision making process on the growth and development of the Algorand ecosystem. The Governance approach for the Algorand community is designed for simplicity and maximum participation:
Four quarterly Governance periods per calendar year.
Each governor must commit to keeping a certain ALGO balance for each quarterly Governance period.
There will be at least one voting session in each period.
Governors must vote in each voting session, but can choose to “vote with the Foundation”.
Every measure to be voted on will have an information pack explaining it.
Compliant Governors claim rewards for their service at the end of each quarterly Governance period.
Reward levels are tied to the ALGO commitment of a governor.
Specific Rewards pool for each period, decided by Governance vote.
How to Participate in Governance
At a high level, there are three key periods in the Algorand Foundation Governance:
Register by Committing ALGOs: There is a 2-week Registration Period before during which governors can "commit" their ALGOs in governance. Committing ALGOs means sending a zero-value PaymentTxn with the amount specified in the notes field of the transaction to the Governance Address. By doing so, the Foundation can read how much governors are committing on chain. After the registration period ends, the voting period begins. NOTE: THE ALGO BALANCE IN THE GOVERNOR'S WALLET CANNOT FALL BELOW THE COMMITMENT AMOUNT AT ANY BLOCK DURING THE VOTING PERIOD. IF THAT OCCURS, THE ACCOUNT IS "INELIGIBLE" AND WILL NOT RECEIVE GOVERNANCE REWARDS.
Vote on Proposals: There is a 3-month Voting Period during which the Foundation issues at least 1 proposal for governors to vote on. The proposals have an information packet explaining the proposal and the options. The proposals also display which option the Foundation supports. The vote is binary so governors can either vote for option A or option B. Governors can also chose to "vote with the Foundation" which simply votes with the option the Foundation supports. Voting means sending a zero-value PaymentTxn with the vote specified in the note field of the transaction to the Governance Address. After the voting period, governance rewards are paid out to governors. NOTE: THE GOVERNOR MUST VOTE ON ALL PROPOSALS IN THE VOTING PERIOD IN ORDER TO RECEIVE GOVERNANCE REWARDS. FAILURE TO VOTE ON A PROPOSAL WILL MAKE THE GOVERNOR INELIGIBLE.
Governance Rewards Payout: There is a 1-week period following the voting period during which the Foundation pays eligible governors their governance rewards. If a governor's account is still eligible for governance rewards, an amount of ALGOs is paid to the governor equal to GOVERNANCE_REWARDS * (GOVERNOR_COMMITTED_ALGOS / TOTAL_COMMITTED_ALGOS). For example, if the total Governance Rewards are 70,500,000 ALGOs, total eligible committed ALGOs are 3,000,000,000, and an eligible governor committed 300 ALGOs, they are paid 70,500,000 * (300 / 3,000,000,000) = 7.05 ALGOs. This is an APR of ~9.4%. See Algorand Governance Stats for live data on the Governance Rewards APR.
How to Maintain Eligibility for Governance Rewards
During the Voting Period, keep ALGO balance above the Commitment Amount (e.g. if 300 ALGOs are committed, then the account's ALGO balance can never fall below 300, not even by 0.001 ALGOs to pay for a transaction)
During the Voting Period, vote on all proposals launched by the Foundation