Enhancing Tinyman Governance Model - LP edition

Governance Proposals
1

Enhancing Tinyman Governance Model - LP edition

Abstract:

This proposal suggests two reforms to Tinyman’s Governance Model:

  • Allowing Tiny-paired LPs a stake in Governance.

  • Gate rewards claiming behind your participation in the monthly farming rewards cycle.

Related Discussion Topic Here

Objective:

Creating tiny-paired LP stability, and giving them a stake in Governance, as well as encouraging a more active Governance body by imposing a penalty for failing to vote for farming distribution cycles.

1.Allowing Tiny-paired LPs a stake in Governance.

Background:

In many ways Tinyman Governance has been successful, at the time of drafting (40.46%) of circulating tiny is locked in the Governance Vault. However this both has handicapped our tiny-paired LPs of liquidity and done little itself to stem the price declining.

Our two largest pairings are algo/tiny and talgo/tiny, with 19.3 million and 13.3 million tiny paired in those LPs, and despite offering pretty consistently higher farming returns tiny/usdc has lagged behind in importance to users, despite being a (somewhat) safer bet with the addition of a stablecoin in it’s pairing. The talgo pairing provides both additional funds for the platform via Tinyman’s share of staking rewards.

Tiny/usdc itself is one of the few ways we as users can buffer against negative price-action by whales dumping by providing somewhat of a buffer to absorb price shocks – and even when that is behind us, the first round of Governance unlocks for those that haven’t increased their tiny lock duration looms over the ecosystem.

We can encourage liquidity in talgo/tiny and usdc/tiny pairings by offering users the ability to lock their LPs in addition to their locked tiny for additional TINY power (via the portion of tiny locked at the time).

Example: lets say Tiny at a price of 0.10 you hold $5.00 worth of the tiny/usdc LP. 250 Tiny + 2.50 USDC, 250 Tiny worth of TINY power would be added to your current governance position while the entire LP is locked for the remainder of your commitment.

Any farms created for that LP you quality for would automatically have the tokens locked in governance added to the farm. This provides both long-term liquidity in the LP as well as giving you the ability to not have to worry every cycle about re-committing your LP tokens to any farms that become available.

2. Gate rewards claiming behind your participation in the monthly farming rewards cycle:

Directing rewards is the primary duty of Govs, and a stunning amount simply ignore this part of the platform. That has to change – we need active govs, not passive ones – apathy among our governance gets us nowhere.

In-order to encourage this gate the next month’s rewards claiming behind voting in the current months farming rewards cycle. No vote cast means your share of the rewards are allocated to those that do.

Tinyman should offer protocol-supportive options to default to if you have no real strong opinion for pool choices given the very extensive list of LP options on Tinyman, exampled: tiny-talgo, tiny-usdc, tiny-gobtc.

This is not to say your voting share will automatically go to them, but offer a small summery of the LPs and the impact they have on Tinyman for users who may be overwhelmed by the number of pool choices given.

The implantation would be gradual to give time for word to get out:

Every month those that don’t vote lose 20% of their rewards for the next month, adding another 20% every month to give people some leeway into the adjustment.

Example: say this measure is approved in December:

  • Failure to vote in January’s Pool allocation results in a loss of 20% of February’s weekly Governance reward allocation.

  • Failure to vote in February’s Pool allocation results in a loss of 40% of March’s weekly Governance rewards allocation.

  • Failure to vote in March’s Pool allocation results in a loss of 60% of April’s weekly Governance rewards allocation.

  • Failure to vote in April’s Pool allocation results in a loss of 80% of May’s weekly Governance rewards allocation.

  • Failure to vote in May’s Pool allocation results in a loss of 100% of June’s weekly Governance rewards allocation with the same penalty applying every cycle moving forward.

Metrics for Success: An increase in Tiny locked in the governance vault, increased liquidity in the included LPs over time, and increased volumes of Govs continually voting for farming rewards distribution.

  • Yea - Lets do it!
  • No
0 voters
1 Like
LPs on tinyman should be eligible to vote and partake in tinyman governance
2

Seems like an okay idea, but if you’re going to punish people for not voting on pools every month, then I think there should also be a way to delegate your vote to another, and/or a way to auto-vote for the same LP each month until canceled.

2 Likes
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This is part of my plan, should this pass, I’m eyeing trying to sort out some sort of delegation amendment.

I pretty much tried to come up with something that would get to a majority vote yes – both here and on chain (I hope). There was some concerns as to people just delegating their vote to any random tiny user and being in a way held hostage, and I get that concern, and we can address those issues with future votes. It could also be kinda overwhelming for a user to know what pools to vote for, given the amount to choose from, and that’s why I think tinyman should offer protocol-supportive (aka important tiny pairings) as a potential suggestion for unsure share holders.

Just to get something passed we can tinker with and build upon. It’s also one of the reasons for the tiered implementation for rewards penalties for not voting. You are not asked to do a whole lot as apart of Governance, and a lack of penalties has led to apathy imo (among other options like the general struggle of the overall market and Algorand itself.) You should over the course of a few months though be able figure out oh something has changed and start voting in LPs.

Also: my understanding (and I could be wrong) is that should this proposal get passed, I don’t think we will have to revisit the 50 forum vote to make tweaks to the general idea, This proposal focuses on tiny/talgo and tiny/usdc, but if we wanted to add tiny/gobtc or tiny/folks LPs in a future expansion we could bring it up for a vote directly with governance since it’s just a minor addition rather than reworking the entire idea.

Or if we wanted to add the ability to delegate or set up and auto-vote option for so many cycles etc.

1 Like
4

@NerdyForDesign First of all, thank you for taking the time to put together such a thoughtful and detailed proposal. We genuinely appreciate community members who actively think about the long-term health of the Tinyman ecosystem and governance model.
The first part of the proposal — allowing TINY-paired LP positions to participate in governance — is conceptually very interesting and addresses a real challenge within DeFi governance systems: how to better align governance participation with liquidity provision and ecosystem support.

We agree that deeper and more stable liquidity for pairs such as TINY/USDC and TINY/tALGO would be beneficial for the broader ecosystem, and the idea of making governance capital more “productive” rather than purely passive has merit.
That said, implementing such a system in a secure, fair, and user-friendly way would be a very large undertaking from both a technical and product perspective.

A feature like this would require substantial changes across:

  • governance logic,

  • LP accounting,

  • reward calculations,

  • smart contracts,

  • frontend UX,

  • backend infrastructure,

  • and extensive QA and security auditing.

In particular, handling LP-based governance safely introduces a significant amount of complexity around:

  • LP valuation,

  • changing pool ratios,

  • snapshot mechanics,

  • governance weight calculations,

  • edge cases,

  • and potential attack vectors or manipulation risks.

At the current stage of the market cycle, Tinyman is operating with a lean team and a constrained budget due to lower trading volumes and reduced protocol revenue across the ecosystem. Because of this, we have to be extremely selective about which initiatives we can realistically commit engineering and audit resources toward.

For a feature of this complexity, we would only feel comfortable moving forward if we could implement it at the level of security, robustness, UX quality, and audit coverage that users expect from Tinyman — and under current conditions, we do not believe we can responsibly commit to that level of implementation effort.
That does not mean the idea lacks merit. On the contrary, we think it raises interesting long-term governance design questions that may become more feasible to revisit in the future as market conditions improve and the protocol’s available resources expand.

We truly appreciate the proposal and the thought process behind it, and discussions like this are valuable for helping shape the long-term direction of the ecosystem.

Regarding the second part of the proposal — gating governance rewards behind participation in the monthly farming allocation vote — we understand and appreciate the motivation behind it. Increasing governance participation and encouraging more active involvement in farming allocation decisions are valid goals, and it is true that a significant portion of governors currently remain passive participants.
That said, we also see several important concerns and potential downsides with introducing a punitive system of this kind.

The biggest concern is user experience and governance fatigue. Many users participate in governance as long-term holders and may not closely follow every monthly farming cycle. Introducing a system where rewards are progressively reduced — eventually reaching 100% forfeiture — risks creating frustration, confusion, and negative sentiment among users who miss votes unintentionally due to travel, inactivity, personal circumstances, or simply losing track of governance timelines.

We also believe there is a risk that this would increase “low-quality participation” rather than meaningful participation. If users are primarily voting to avoid penalties, many may simply cast random votes or blindly follow others without genuinely engaging with the farming allocation process. In that scenario, participation numbers increase, but the quality and intentionality of governance decisions may not meaningfully improve.

There are also operational and technical considerations:

  • additional tracking logic,

  • reward eligibility management,

  • increased edge cases,

  • additional support burden,

  • and potential disputes around missed votes or reward reductions.

Even if this proposal may not require the same level of smart contract complexity as LP-based governance, it would still introduce significant product, backend, QA, and support overhead.
From a broader governance philosophy perspective, we also generally believe positive incentives tend to work better than punitive mechanisms in community-driven systems.

Because of that, we would likely favor exploring lighter-weight alternatives that encourage participation without introducing harsh penalties or major protocol complexity.

Some examples could include:

  • small bonus rewards for active voters,

  • governance participation streaks,

  • governance badges or NFTs,

  • leaderboard/community recognition systems,

  • educational prompts and reminders,

  • improved voting UX and notifications,

  • or highlighting “recommended” ecosystem-supportive pools for less experienced users.

Importantly, many of these approaches could potentially be implemented incrementally and with much lower engineering, audit, and operational overhead compared to introducing strict reward gating mechanics.
We absolutely agree with the broader goal of increasing governance participation, but we believe it is important to balance participation incentives with simplicity, accessibility, and a positive long-term user experience.

2 Likes
5

I don’t disagree here with a concern of governance fatigue, but don’t we already experience that? A large portion of our governance simply don’t vote in pool allocation at all. Something that is frustrating to me as it is such a simple thing to do, – and someone who has voted in every cycle since I really started participating in governance in Cycle 6. Tinyman gov does not require a lot of real effort. Not that it should necessarily but just that there are SUCH simple, small things that could be done that many just ignore.

I’m not even sure that ANY governance proposal that made it to an on-chain vote would even garner the necessary minimum support to pass even if no one voted against it – just from apathy.

And I agree that the quality of governance decisions may not improve – but they also may improve. I feel that it is a pretty low-risk to reward ratio.

I also have concerns about approaching governance unlocks for those who haven’t been lengthening their commitment periods. VC dumping may be over soon (relatively speaking) but I wonder how many early locking govs have significant Tiny positions that are exhausted and ready to dump as soon as their locks are over.

That all being said all of these are great ideas:

  • governance participation streaks,
  • governance badges or NFTs,
  • leaderboard/community recognition systems,
  • educational prompts and reminders,
  • improved voting UX and notifications,
  • or highlighting “recommended” ecosystem-supportive pools for less experienced users.

I do particularity highly like the idea of gamifying the voting system with a streaks/leaderboard idea as well as reminders perhaps even a simple UI highlighting important Tiny-pair LPs.

Another would be I know there is a “Groups” option on the forums, but I don’t have access to it myself, but would it be possible to create teams of users to focus on specific Tiny LPs that would could have a simple group-chat for focusing our tinypower on specific LPs? Something along the lines of “LP Team Members” for say talgo/tiny, tiny/usdc, tiny/gobtc LPs.

Or say a tracking system for LP votes and should say tiny/usdc receive x amount of tiny voting power/liquidity it would unlock bonus rewards for holders in the LP or some other mechanic.

There are also operational and technical considerations:

Honestly, this entire list are fair enough points.

1 Like
6

Eric thank you for this comprehensive response. Personally I see this as a good sign.

Thank you for thinking this through and giving feedback coming from your side.

2 Likes
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I would agree on the prospect of positive rather than negative reinforcement, after reading Eric’s response, regarding governance participation. Consistent governor voting that would allow them more benefits is a good thing.

2 Likes
8

Hi,

I really like @NerdyForDesign proposal, but I also understand Tinyman’s side and concerns. How about this;
@EricTinyman you listed possible positive incentives for active governors and one was “small bonus rewards for active voters”. Maybe we can take funds for this from airdrop2.tinyman.algo wallet. There is 9M unallocated TINY or maybe was meant for another airdrop, but I think we all can agree that we don’t want to see another airdrop, so can we instead allocate those funds for active governors and core TINY LPs? Like 375k TINY bonus per month for active governors for next 12 months, so 4.5M TINY in total for active governance bonuses and then other half into TINY/USDC LP and TINY/tALGO LP rewards, 2 250 000 TINY each and 12 month farms.

So summa summarum:
Active governor bonus: 375k TINY bonus for next 12 months = 4.5M TINY.
TINY/USDC LP farm: 2 250 000 TINY and 12 month farm period.
TINY/tALGO farm: 2 250 000 TINY and 12 month farm period.

This way we encourage active participation into governance and long term liquidity commitment. This should be also easy to implement with current tools/infra.

Link to airdrop2 wallet: Algorand Blockchain Explorer | Allo.info

Regards,
ROAM

1 Like