As an ASA with broad support and deep liquidity Algofi should consider allowing gALGO as collateral. Each gALGO represents an Algo that has been committed to Algorand governance on the Folk Finance DApp. gALGOs have 1M+ pools on Pact and Tinyman. The minimum of 1 and the average of the spot price on those two pools can be used a price Oracle for the market.
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I have a number of big problems with gALGO which IMO are deal breakers:
- There is a time mechanism on the burning of gALGO for ALGO. This is a massive liquidation risk. In the biggest drops we’ve seen $1Ms get liquidated in a short period. Liquidators need to be able to offload their seized assets to get more of the repay asset and perform more liquidations. gALGO prices would plummet if liquidators tried to sell off even a couple 100k and there is no mechanism for stabilizing that between governance cycles other than algo holders willing to buy up large amounts of gALGO with a high time price (up to 3 months) before the can burn.
- gALGO’s system of locking is fundamentally problematic. If you remember a couple weeks ago folks finance TVL dropped almost 90%. This is because every governance cycle all gALGO holders have to remove their gALGO and go “re-lock” it and for a period of up to a week may not have access it gALGO. Having gALGO as a significant collateral source in the protocol would mean large and disruptive movements of capital every cycle.
- Last and probably most important, as far as I can tell gALGO is quite centralized, the folks team determines when and how it locks/unlocks. I’d be very hesitant tying something like that into Algofi.
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Thanks for the well thought out reply. I didn’t consider the aspect of liquidators wanting to immediately get out of gAlgo.
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Those are good points, but …
gALGO works perfectly fine within the context of the Folks Finance protocol because
- 1 gALGO = 1 ALGO by the protocol
2 gALGO cannot be borrowed - it can only be used as collateral for borrowing - Folks Finance runs its own liquidators
Folks Finance integrates gALGO as an asset derivative and applies special rules and restrictions that are specific for the gALGO asset type. AlgoFi cannot treat gALGO like any other asset. The gALGO asset type is probably not compatible within the AlgoFi protocol architecture. Integrating gALGO would probably require some architectural and design changes. The effort, time, and cost to integrate the gALGO asset type into the AlgoFi protocol must be considered. These costs must be weighed against the benefits and competing priorities.
gALGO provides significant benefits to Algorand Governors and the entire Algorand DeFi ecosystem. The proof is in the pudding. That being said, nothing is perfect, and there are always trade-offs. I do agree that its current processes to redeem and recommit to Algorand Governance can be enhanced and streamlined. This is all part of the process for product development and software engineering.
The gALGO centralization argument is weak. Folks Finance does hold Governance votes on liquid governance measures. Regardless, most (if not all) DeFi protocols are not fully decentralized because protocols depend on the project team and its human developers to maintain and enhance the protocol and product - in addition to operating and supporting the system. In the end, the project team is in control. Let’s be honest, most users of any DeFi protocol are not qualified to make protocol level design decisions. Users provide valuable product feedback from a UX perspective, but most provide naive, ignorant, and misinformed feedback on the underlying DeFi protocol itself from a finance perspective. That’s reality.
In summary, I think integrating gALGO into AlgoFi would provide tremendous value for AlgoFI and the entire Algorand DeFi ecosystem. The gALGO integration has to be done right - or not at all. FxDX is a prime example - the gALGO integration was rushed, not well thought out, and turned into a mess - instead of creating value. I mention FxDx because I know some folks will reference it. They made the mistake of integrating gALGO without consideration or full understanding of its properties as an ALGO asset derivative type and the ramifications of how it would function within their protocol … live and learn. Integrating gALGO into a DeFi protocol is not straight forward. It’s not simply another ASA. It’s a whole other asset type.
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1 gALGO does not = 1algo - not sure what dex you see that on ser, gALGO belongs in the trash or on Folks Finance, keep it away from Algofi. We already saw the damage it did to Fxdx, keep that disaster of an centralized ASA on Folks.
can we keep the discussions a bit more civil please? 
i dont think he did shit on BANK holders and he just seems to like the concept of gALGO and wants to promote more interaction of the protocols on Algorand which would be great honestly, although i think that we should wait on how the team behind FF will improve their protocol and gALGO especially
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How someone can be so wrong and so confident is beyond me.
gALGO provides significant benefits to Algorand Governors and the entire Algorand DeFi ecosystem. The proof is in the pudding.
No, it doesn’t it’s a net-negative that causes a myriad of problems in the ecosystem. It props up our TVL metrics by double counting at worst, and bringing into circulation ALGOs that are still not in distribution at worst. Why do you think TVL on Folks has grown exponentially? Because it’s basically a sham built on the pretence that governance will payout, and since governance is from a centralised party it’s completely antithetical to crypto. Not only this, but it creates liquidity fragmentation and it creates a net-negative development cycle. gAlgo can’t hold its peg since it’s so poorly thought out (“let’s just give rewards now and have infinite sell pressure, whilst also knock on everyone’s door to try to accept this at peg value and hope that they develop for us, let’s also throw in a referral system to be even MORE shill-y about it”), and it’s actually a disservice to the network, since it as an asset creates unnecessary friction. It’s a stupid idea but it’s applauded because “we” are so preoccupied with TVL that we’re willing to support anything that boosts it, no matter how dumb it is.
The gALGO centralization argument is weak.
*Proceeds to LITERALLY say that FF is centralised.
I’m not even gonna comment on this.
In the end, the project team is in control. Let’s be honest, most users of any DeFi protocol are not qualified to make protocol level design decisions. Users provide valuable product feedback from a UX perspective, but most provide naive, ignorant, and misinformed feedback on the underlying DeFi protocol itself from a finance perspective. That’s reality.
What a trash take. If you truly believe this, then quit crypto. This type of thought is part of the problem, and if that’s the kind of takes early adopters have, then no wonder most people see crypto as a scam. Crypto is EXTREMELY inefficient when compared to literally any other system for transacting (most blockchains are), but this inefficiency is a trade-off for trustless-ness and permanence. Once a contract is out in the wild (sans-upgrade-ability) it’s out, and ANYONE can interact with it. Enhancements and upgrades are most of the time “opted-in” by people and deprecation tends to only occur at the front-end level, not at the blockchain one, or at least that’s how it should be, and how it is for most of the successful protocols out there (UniSwap, AAVE, GMX, Yearn, 1inch, PancakeSwap, and so on…). So for you to criticise this is an insult to what the objectives of this should be at worst, and just ignorant at best.
FxDX is a prime example - the gALGO integration was rushed, not well thought out, and turned into a mess - instead of creating value. I mention FxDx because I know some folks will reference it. They made the mistake of integrating gALGO without consideration or full understanding of its properties as an ALGO asset derivative type and the ramifications of how it would function within their protocol …
This integration is LITERALLY a proof as to why gALGO doesn’t work and shouldn’t be given the time of day. I know the guys at FF are not malicious, but I’m tired of reading from all of these ppl that clearly have interests in the middle (often times in the form of referral links) push the narrative that it’s a good product. Specially considering just how centralised that platform is.
And all of this without even opening the can of worms that Aeneas and the new DeFi boost is… I’m surprised that we’ve not gotten flack from other chains based off of the ridiculous APY and fake-yield we’re offering for the sake of adoption. But honestly at this point nothing from the Foundation surprises me.
AlgoFi isn’t without its problems, however, at the very least they’re building towards true decentralisation, and have a plant to get there as opposed to what the guys at FF have been doing so far, which is compound what’s already a centralised aspect of the Algorand Chain (its governance system), with another centralised and poorly thought out model (gAlgo).
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FinneganJoyce I like your style. We could use a voice like yours in DragonFi.
Seriously though, one point of criticism if I may: although your rebuttals come off as slightly contentious vs educating, I think your format can be used as a template for future healthy argument and debate. Point by point, shining a light on the pros and cons, mostly cons here. Simple layout but complex topics. Well done.
Also. I will use all my power (#1 delegated wallet) and influence (DeFi community) to prevent gALGO from ever being integrated on Algofi unless technical challenges mentioned by Algofi devs are solved.
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Hey, I don’t have social media, just a lurker that felt the need to write-up something.
I suppose part of it can come off as overly-aggressive, but it is annoying to see gAlgo being pushed so hard without much consideration, due to misaligned incentives. I hope at least there’s enough criticism of the system on my reply for it to be of any value.
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Fair enough. Preciate ya.
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