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Last Reviewed: January 2023
This article is focusing on Algorand staking as well as explaining the Algorand governance program. Due to passive staking through the Algorand Wallet (now known as Pera Algo Wallet) having ended as of March 2022, this article mainly teaches you about Algorands governance program. Staking and Governance have been excellent ways to earn passive rewards simply by owning ALGO and participating in the quarterly voting. You can look at it like earning interest through a bank on your fiat currencies (USD, EUR, etc.).
In this article I'll shortly explain the Governance Program and how to participate in it, as well as shortly talking about the previously existing staking that existed on Algorand.
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It's important to realize that staking and governance are two separate things. While the Algorand protocol itself is Pure Proof-of-Stake (and continues to be so) it's important to acknowledge that the Algorand Foundations official way of rewarding it's holders have shifted. The previous staking reward from passively holding in the wallet have been phased out.
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| Algorand Staking Reward Calculator on AlgoExplorer |
Algorand Staking on Exchanges
Staking Algorand on exchanges is the only real option left if you just want to stake Algorand and forget about it, not having participate in Algorands Governance program and what it entails. The upsideis that it's comfortable and easy, but the obvious downside is that it's always more secure to hold your own keys in your own wallet (like the good old saying goes - "Not your keys, not your coin"), in case something happens to the exchange where you hold your ALGOs. The most relevant example of this is the famous crypto exchange FTX collapsing and customers losing their funds. Only use trusted exchanges and a limited amount of ALGOs if you're not going to have them in your own hot- or cold wallet. Additionally most platforms only pay out once-a-week or after a longer lock-up period.
A) Kraken - Offers up to 1-4% APY without locking period.
C) BitFinex - Offers between 3-5% APY.
D) Coinbase - Currently offers 5.75% APY on staking Algorand. You're automatically opted-in just by holding it in your Coinbase account. Daily payouts.
Algorand Governance Program
Starting from October 1st 2021 Algorand is transitioning to it's new Algorand governance program and phasing out passive staking rewards as described above (phased out through 2022). The Governance Program was founded to decentralize Algorand even further.
Governance essentially means that everyone who owns Algorand can participate and vote on important topics and decisions that will impact the Algorands ecosystem. In practice you'll have to commit a certain amount of ALGO's during a 2 week period before every new 3-month governance period starts, as well as participate in every vote during the three month governance period. You'll get kicked out of the program if you fail to vote or if you fall under your committed amount of ALGO in your wallet during this period. This means no rewards, however there are no other penalties. Don't sweat it though, you can always sign up for the next period!
Every period has a total reward pool of 60 million ALGO. So the reward % for the 3 month period depends on how many ALGO's in total are committed to the program each round.
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Calculating the Algorand Governance Reward
The general equation for calculating the Algorand governance rewards:
60 Million / (TOTAL COMITTED ALGO AMOUNT) x (YOUR COMMITTED ALGO) x 4.
For example:
If you have committed for example 10,000 ALGOs and the total pool of committed ALGOs are 1000 million - 60,000,000 / 1,000,000,000 x 10000 x 4 = 2400
We multiply by 4 to get the theoretical reward for 12 months instead of 3. Now you have your total APY in amount of ALGOs, to get it to % just divide it by your original committed amount i.e. 2400/10000 = 0.24 = 24%. This concrete reward from the 3-month period on the other hand would be 10000 x (0.24/4) = 600 ALGOs.
Math is hard and it's easier to just let someone else do it for you. Go checkout algorandstats.com for easiest way of calculating your governance rewards. It also have tons of other useful statistics related the Algorand governance program.
💡 Important Update💡
Since the introduction of DeFi participation rewards the above calculation doesn't completely accurately produce the exact correct reward. However, it still gives a good estimate.
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| Algorand Governance Webpage |
How to participate in Algorand Governance
UPDATE: The current governance period (G5) is ending on December 31st 2022, and the rewards will be distributed from the 1st through 5th of January 2022. You can commit to the 6th period of Algorand governance (G6) from 1st to 15th of January 2023.
I don't recommend waiting until last minute, unforeseen events can always occur. That said - you can change the amount of committed ALGO's at any time during this 2 week period before a new period starts.
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Anyways Here's How To Participate:
1. Have your ALGOs stored on either a ledger or a software wallet
Make sure it has the amount of ALGO's in it that you want to commit and some more.
2. Head over to the official Algorand Governance webpage.
In the top right corner press "Connect Wallet" and follow the given steps in order to connect your Algorand wallet with the webpage.
3. Commit X amount of ALGO to governance
You will only earn APY/rewards on the amount you stake. Chose an amount that you'd be certain you don't have to withdraw during the upcoming 3 months.
4. Congratulations you're now a governor!
With great titles comes great responsibilities - i.e. you HAVE to vote on EVERY topic at hand. Every vote is open for 2 weeks at a time during the 3 month period (in our example until March 31st 2022). Make sure you write it down in your calendar.
Note: You must vote to stay eligible for the governance reward.
5. Enjoy your sweet rewards!
The rewards will be transferred to your account during the 2 following weeks after the Governance Period has ended. Hopefully you made it without accidently dropping out.
🔥 HOT ADVICE🔥
Have 2 different wallets if you use Algorand for anything else than governance and staking. That means having one wallet dedicated only for governance, and one for everything else (trading, swapping, buying NFT's, etc.), so that you never accidently make transfers that put you below your committed ALGO amount.
Conclusion
Now you know pretty much everything about Algorand Staking and the Algorand Governance Program. If you're not already participating in governance we highly suggest you do so the next period. You can earn free ALGO for voting once a quarter. It's a good deal.
That concludes this topic. If you found this post useful, why not check out any other Algorand articles & guides that we've written.
