Algorand Governance Voting Power Centralization - Period 4

Algorand Governance Voting Power Centralization - Period 4

Overview

We analyzed the top eligible wallets enrolled for Algorand Governance Period 4 as of August 21, 2022. The data shows a very "whale" heavy distribution of voting power and rewards, where the top 37 individual "whale" wallets control the vote and reap 50% of rewards, and wallets with over 1 million ALGO commitment control 86% of the vote and rewards.

Data Sources

To get our raw data, we used two different data sources and correlated them to confirm correctness:

1) the CSV export at the foundation website period 4 page

2) The tryalgorand.com API which powers algorandstats.com (see Appendix B)

After sorting by commitment (and then address) there was no discrepancy between the two data sets.

Filtering Data

We included only eligible wallets as of August 21, 2022 and focused on committed stake of 1M Algo and above.

We chose to ignore the top wallet (EPYLSP..Z7OMOQ) as it is the Folks Finance wallet and does not represent a single "whale" entity.

Data highlights

Top 12 whale wallets: 20%+ of stake.

Top 28 whale wallets: 40%+ of stake.

Top 37 whale wallets: 50% stake, control vote.

Top 99 whale wallets: 80% of stake.

Top 211 wallets with 1M+ ALGO: 86%+ of stake.

"Whale wallets" refers to high commitment wallets excluding Folks Finance.

Commentary

The current governance model risk-reward ratio heavily incentivises risk averse Algo holders to hold passively in Governance and exclude their Algo from the on-chain economy of DeFi, NFT, GameFi, and so on.

Governance was a good bootstrapping measure while the Algorand on-chain ecosystem was in its infancy, but we currently have multiple active DEX, a booming NFT community and interesting projects in GameFi, tokenized investments, music, etc.

Changing these incentives to offer fewer rewards will incentivize some of these holders to enter the Algorand on-chain economy.

Crucially, even for users who do not want to take the risks associated with actually using their Algo, the option of reducing their own rewards will reap multiplied dividends in the future: to us, the choice is between 7-8% APR of a top 30 coin, or (less) APR of a top 10 coin.

Algorand attracted us to build on it for the superior technology and we need to collectively decide to stop disincentivising actually using this superior technology for the ecosystem to flourish. The upcoming Governance proposal to redirect some Governance rewards towards DeFi  is a good start.

If you are still not convinced, ask yourself:

How will Algorand become a top 10 blockchain if 55% of all circulating Algo (3.8B / 6.8B) commits to not being used?

We want to attract builders to our chain, but what can a builder create on-chain that will compete with zero-risk 7-8% APR?

Appendix A: Data

Our spreadsheet is available as a public Google Spreadsheet, or you can download an xlsx or CSV.

The raw data we collected are available as CSV:

Algorand Foundation CSV export

AlgorandStats.com API data

Appendix B: Sourcing data: Algorandstats.com / tryalgorand.com API

We downloaded the algorandstats.com data with a script like this:

for i in $(seq 1 25); do
  curl 'https://www.tryalgorand.com/api/governance/governance-period-4/all/committedAlgos/asc/'$i -H 'User-Agent: Mozilla/5.0' -H 'Accept: */*' -H 'Accept-Language: en-US,en;q=0.5' -H 'Accept-Encoding: gzip, deflate, br' -H 'Referer: https://www.algorandstats.com/' -H 'Origin: https://www.algorandstats.com' -H 'DNT: 1' -H 'Connection: keep-alive' -H 'Sec-Fetch-Dest: empty' -H 'Sec-Fetch-Mode: cors' -H 'Sec-Fetch-Site: cross-site' > $(printf "data-%02d" $i);
  sleep 0.5;
done

Then filtered eligible wallets and converted to CSV using jq:

jq -r '.results[] | select(.is_eligible==1) | [.address, .committed_algo_amount, .committed_algo_amount / 1000000] | @csv' data-* > tryalgorand-data.csv

After sorting by committed amount (and address), the data set was identical to the Foundation CSV export, so we assume it to be correct.