Motion Proposal
The Internet Computer is an adaptive blockchain, which supports sophisticated protocol economics through intelligent decentralized governance. We propose a new feature that will enable a neuron holder to perform an “emergency unlock” to release locked ICP, according to special mechanisms and parameters set by the NNS that prevent a flood of ICP being accidentally released.
MOTIVATION
The Internet Computer’s NNS represents the most sophisticated on-chain governance system ever developed. Its liquid democracy structure is exceptionally suited to the rapidly evolving crypto environment. However, this design may result in a divergence of vision and priorities between some stakers and the NNS over time. Additionally, the network’s security parameters require that these stakes remain illiquid for an extended period, often up to 8 years. Therefore, we propose to implement an emergency unlock mechanism for neurons in order to harmonize these interests and to increase the security of the network over the long term.
SPECIFICATION
1. Emergency Unlock Maximum
In any given period (for example a week), a maximum volume of locked ICP can be released from neurons by emergency dissolve actions. This is called the “Emergency Unlock Maximum.” This value is set by the NNS, and can be updated by proposals at any time, for example according to market conditions.
2. Emergency Unlock Bids
Unlocking neurons comes at costs to the neuron holders, requiring them to burn a portion of the stake. During any given period, the volume of ICP that neuron holders wish to emergency unlock might exceed the Emergency Unlock Maximum. Therefore, neuron holders wishing to emergency unlock their ICP, must bid to make use of the available capacity, by submitting “Emergency Unlock Bids.” Bids are submitted for specific neurons. This involves specifying how much of the ICP that will be emergency unlocked will be burned.
Bid {
UnlockAmount // how much you wish to unlock
BurnOffer // what percentage the system can burn
NeuronId
}
In order to submit an unlock bid, one needs to be the controller of the neuron.
3. Bid Scoring
An “bid score” is calculated by dividing the “burn percentage” by the dissolve delay multiplier which is the boost in voting power (and thus voting rewards) that the neuron receives due to its dissolve delay. The overall idea is that neurons with longer dissolve delays should be subject to a higher burn percentage. Recall that the dissolve delay multiplier is a linear function of the dissolve delay: dissolve delay multiplier = 1 + (dissolve delay in years) / 8. Hence the dissolve delay multiplier has values between 1.0625 (for 0.5 years dissolve delay) and 2 (for 8 years dissolve delay). For the determination of the bid score the neuron “age” is ignored.
4. Stack Ranking Bids
The bids are stack ranked in order of decreasing bid score. Starting from the highest bid score, the available capacity defined by the current Emergency Unlock Maximum, is assigned to the bidders, until no more capacity is available (the last successful bidder might only have part of their bid satisfied).
5. Minimum burn penalty
Given this is meant to be an emergency measure, there should be a minimum burn penalty of 25%.
6. Handling of staked maturity
Staked maturity can be unlocked in the same way as staked ICP and is subject to usual maturity modulation in addition to the burn penalty.
Perceived benefits
Neuron holders are able to unlock in extraordinary circumstances. The ICP ecosystem benefits from the unlock due to the burning of ICP tokens (deflationary measure). On the other hand there might be short-term negative impact on the ICP price. This should be controlled by the Emergency Unlock Maximum.
EXAMPLE
INPUT：
Emergency Unlock Maximum: 40k ICP
Person 1：
Bid:
- UnlockAmount: 80k
- BurnOffer: 50%
Referenced neuron:
- Staked: 100k
- Dissolve delay: 3 years
=> Dissolve delay multiplier: 1.375 (=1 + 3/8)
=> Bid score: 36% (= 50% / 1.375)
Person 2
Bid:
- UnlockAmount: 40k
- BurnOffer : 25%
Referenced neuron:
- Stake: 60k
- Dissolve delay: 1.5 years
=> Dissolve delay multiplier: 1.1875 (= 1 + 1.5/8)
=> Bid score: 21% (= 25% / 1.1875)
Person 3
Bid:
- UnlockAmount: 100k
- BurnOffer : 75%
Referenced neuron:
- Stake: 100k
- Dissolve delay: 5 years
=> Dissolve delay multiplier: 1.625 (= 1 + 5/8)
=> Bid score: 46% (= 75% / 1.625)
Result
- The bid from person 3 has highest priority and is processed with the full amount. The full neuron with a stake of 100k ICP is unlocked of which 75k is burned and 25k is released. 15k (=40-25) ICP is left for unlocking further neurons.
- The bid from person 1 has the second highest priority and is partially unlocked. 30k ICP (out of a requested unlock amount of 80k) is unlocked of which 15k is burned and 15k is released. 70k ICP (= 100k - 30k) remains locked in the neuron. No ICP is left for unlocking further neurons.
- The bid from person 2 cannot be processed.