by Jing Chen and Silvio Micali

The general context of this document is provided by the Proposal for Decentralizing Algorand Governance. Familiarity with that document may help the reader with the terminology and the setting of this one. This said, the material presented here is of quite independent interest. The basic governance auction is a blockchain implementation of a Dutch auction. (The fact that the currency involved are tokens rather than, say, US dollars; that the auction establishes a governance-reward rate, rather than, say, the interest rate of a bond; or that the winners of the auction lock their tokens and participate in governance, rather than, say, lend their money, is quite tangential. The underlying auction mechanism is the same.)