Supporting Adoption by Improving the Algo Economic Equilibrium
Economic Improvement Proposal (EIP-090319AC)
The Algorand mainnet launched about two and a half months ago. Since then, the network has shown that scalability, security and decentralization can all be achieved together in a blockchain. Sending an Algo from Alice to Bob is fast (about 4.5 seconds), secure (meaning it is not reversible and no forks are possible) and decentralized, with validation occurring by random sortition of all Algo holders.
We are seeing early signs of adoption: The International Swaps and Derivatives Association (ISDA) is working with Algorand to define a Blockchain standard for derivatives financial instruments; Tether, the largest USD stablecoin by volume and market capitalization looking to launch its product on Algorand; IDEX the leading and most used Decentralized Exchange Platform decided to build the next version of its application on Algorand to increase scalability and speed; and these are just a few examples of how this network will be used. We are true believers that this will only accelerate and innovation will continue to grow as we have seen these leaders become the first movers.
Breadth and depth of adoption for any innovative technology takes time. Often, market understanding of the long term potential underestimates the time needed to realize that potential. Crypto and blockchain are no exception to this rule.
Algo is the native digital currency of Algorand and it is part of its core technology. Any Algo holder currently can participate in the public, permissionless, pure proof-of-stake Algorand consensus mechanism. It is therefore crucial to develop a well-functioning market for the Algo in order to support adoption of the Algorand chain. This means not only by bringing use cases to the ecosystem, but also finding broad economic equilibrium.
We have been watching the Algo market and believe that current daily growth in tokens supply is not aligned with the demand at present adoption levels. A significant amount of tokens are being issued every day to reward participants who support both the maintenance of the infrastructure and the performance of the network — specifically to the relay node runners.
While rewarding the ongoing support of the network is essential, an excessive daily supply increase can create a significant selling pressure which adversely affects the Algo economic equilibrium.
Therefore, we as Algo Capital in collaboration with and support from many other relay node runners, have decided to initiate a first Economic Improvement Proposal to:
- Provide ample time for the technology to reach full adoption potential.
- Support the Algorand network in the long term and create a stronger community.
- Help the Algo economy to find equilibrium with the right supply/demand dynamics.
The Economic Improvement Proposal (EIP-090319AC) which you can download here, proposes to extend the current 2 year linear daily reward for relay node runners to a 5 year linear daily reward. We socialized this EIP with the community of relay node runners and we are thankful that many members of the community have become supporters of this EIP. Here is a list of relay node runners who have already expressed their support (in alphabetical order):
- Algo Capital Node I
- Algo Investor
- Algorand DG Group I
- Applied Crypto
- Arrington XRP Capital
- AssetBlock
- BB Land Holdings
- Blockdaemon
- Brainchild
- Cartan
- Cognitive Blockchain
- Coinfabrik / Randlabs
- Collaborative Fund
- Eterna Capital
- Flipside Crypto
- First Rice Algo Blocker
- IMO Ventures
- MEWN
- Multicoin Capital
- Nirvana Capital
- Pillar VC
- PureStake
- QCP Capital
- Slow Ventures
- Union Square Ventures
- 11–11 Ventures
- Wing VC
With this support from what we believe is a majority of the relay nodes, we are submitting this EIP to the Algorand Foundation economic committee for their consideration.
We hope that this EIP can be properly approved through an on-chain voting process that makes the results transparent and visible for the entire Algorand community. We will defer to the Algorand Foundation on the voting process and implementation mechanics.
We are excited to be part of this effort and keep working to build a stronger, enduring and positive Algorand community for everyone.
David Garcia and Arul Murugan
Founders and Managing Partners of Algo Capital
Disclaimer: Algo Capital is not related to or affiliated with Algorand Inc, Algorand LLC, Algorand Foundation, or any of their subsidiaries. The views, opinions, and communications of Algo Capital are generated independently by the General Partners of Algo Capital, and are not endorsed or approved in any way by Algorand Inc, Algorand LLC, Algorand Foundation, or any of their subsidiaries or affiliates.
