"Dark Matter" or "Do you know where your ICP Bag's value is going?"

Value is about to exit your ICP Bag and no one seems to notice

h/t to @klac x.com for the media.

TLDR: Neuron Markets, Liquid Staking, and Quadratic Passion reduce the value of YOUR BAG. But can they be used to fund public goods that benefit everyone? Maybe.

(author’s note: This piece evolved quite a bit over the last week. Some things disturbed me and, being an introverted dude who spends most of his day working from home scratching and clawing to get projects off the ground under circumstances that sometimes feel stacked against me, I jumped to a lot of conclusions. Through a moment of enlightenment or maybe years of making poor mistakes, I started reaching out and sharing. This made things better. It made things less about me. Eventually I even just, shockingly, decided to go to the source and ask questions instead of firing accusations off on Twitter. This is a small community. We’re all trying to vie for elbow room in a market that is still way too small for all our big ideas. Be kind. Talk face-to-face or DM to DM first. Get the whole story. :v::heart::infinity: --and thanks to those that gave feedback.

Along the way, I learned that this Water Neuron thing is not quite as far down this road of Dark Matter that I speak about, and in fact, has some really well-thought-out pieces to it. I’m still not convinced that it is the jumping-off point that we want to start with and I think the NNS needs to ask some really tough questions about team allocation, about mitigation for if things go off the rails, and if there should be some self-imposed limit to the size of the thing before the SNS Swap is approved.)


We need to discuss “Dark Matter”, an eventuality of the coin voting that the IC uses, and what we are going to do about it because it is coming at us like a freight train(“chugga chugga” :steam_locomotive::steam_locomotive:).

There may be a way to use this substance that could blow everything up as a fuel source to fund public goods for the Internet Computer ecosystem, but we need to have an honest and open conversation about how far we want to open Pandora’s box. Depending on how we approach this “Dark Matter” we could bring statistics and operational realities out into the open with clear, transparent mechanisms that are under the ultimate control of the NNS.

These are governance issues that are sometimes easier to ignore, pretend don’t exist, and are shrouded in darkness.

Heads up: this post is unlikely to leave anyone who knows about the IC and how it works in a neutral state. I’d encourage a spirit of collaboration, problem-solving, and goodwill to work through the sticky parts.

How I got here(skip this part if you don’t care and just want the main idea)

At ICDevs we have a Donation Mechanism called “Dedicated Neurons.” We’ve had these for over 2 and half years, but they are underutilized because the NNS removed the “manage neuron” topic that is necessary for us to harvest donations from donors(ICDevs.org).

With the upcoming freedom for canisters to control neurons, we started building out a new interface for this that drastically simplified the process for new neurons and allows donors to keep complete control of their neuron other than the donation of maturity which we automate and give them more features like a slider where they can adjust their donation level.

It didn’t take very long for us to realize there were many more things we could do with just a few lines of code. Many of these things undermine governance, remove skin in the game, and make the NNS and SNS DAOs more brittle. We decided that for now we’d put on our halo :innocent: and just try to do good. Then we saw others in the community starting to do these things with fancy names, memeified, and with slick mottos attached. In our view, unless you are very careful and self-regulating these mechanisms can lead to unknown, potentially disastrous places. (And we all know how well crypto likes to self-regulate.)

So a thought experiment. We put on our Devil Horns :smiling_imp: and asked the question “If these things are going to happen anyway, can we have them work for good, and can we better track what kind of behavior is actually emerging, rather than speculating?”

So what is now possible with a few lines of code to change “Dedicated Neurons” to “Dark Matter Neurons”:

  1. Quadratic Passion Voting:

    • An optional engagement where dedicated neurons vote according to the level of ‘passion’ demonstrated by stakeholders, measured through token escrows.
    • Passion investments required for votes increase quadratically as the voting period nears its end, encouraging early decision-making.
    • After the first investment is made on one side of a vote, the other side can invest a higher amount to swing the votes the other direction.
    • Winners of the passion bids get their preference adopted, while the funds from the losing side are refunded.
    • Potential for Good: Half of the tokens from the most passionate are donated to Public Goods and half is distributed to participants in proportion to their VP.
    • Alternative/Contrarian Potential: Why not take all the proceeds from quadratic passion? More on this later.
  2. Neuron Wrapping:

    • If a canister can stake, then a canister can also own a stake in one of our “Dedicated Neurons”. These can be wrapped easily wrapped in an NFT with something like Nucleus. Nucleus attaches VP to an elected human council on-chain voting which mitigates VP snipping, but other systems might not be as restrictive leading to easy to implement, free floating neurons that can be bought and sold on any NFT marketplace. This makes voting power buyable and sellable at a rapid pace and owners get paid maturity for risk that they off load to others.
    • Potential Use for Good: Marketplace fees can be directed to public goods/to fund developers/benefit the edge of the network. Basically what nucleus is advertising they will do. Limiting vote buying by locking votes to a particular voter.
    • Alternative/Contrarian Potential: Why lock voting if there is more value for not locking voting and there is no penalty for taking this option?
  3. Liquid Staking:

    • What if by “burning” a Canister controlled Neuron the users could receive Dark Matter(“DM”) tokens, making their neuron “investment” liquid and tradeable.(DM for ICP, chatDM, ntnDM, gldgovDM, etc for SNSs). Water Neuron is doing this for ICP and I would expect it to follow for SNSs soon enough.
    • The burned neurons are merged into a single quadratic passion neuron.
    • All neurons in this system participate in quadratic passion voting, accruing both maturity and payouts.
    • Neurons can be re-minted by burning the DM token which will come with the proper amount of distributed payouts and maturity.
    • Potential for Good: Same as for quadratic passion as the liquid representation would abandon their VP to the system and the community could use it for fundraising into a garden of DAOs for different purposes.
    • Alternative/Contrarian Potential: Same as for quadratic passion. What if a liquid staking dao discovers that they can 3x their yield by doing this?
  4. Governance and Kill Switches:

    • Potential for Good: Whoever builds the system could limit these Dark Matter assets by building kill switches controlled by the NNS and SNSs. If the networks decide these mechanisms are getting out of hand, they can be turned of with a simple motion proposal. (Water Neuron is using the NNS as a final arbiter for this instead of the Water Neuron DAO which significancy increase the safety of the neurons, but doesn’t completely eliminate the possibility that we may need to shut the whole thing down if a big enough suitor comes to the table)
    • Alternative/Contrarian potential: If the features can be turned off, why would I use that system if another without a kill switch exists?

Why will people use the system?

Mostly Cash. But more below.

People will be drawn to use the these Dark Matter systems for several compelling reasons:

  1. Public Good Contributions: By participating, stakeholders could have a direct impact on funding public goods. Cryptographic proof of donation, perhaps via a social credibility token like ICDV could be provided to users that want to show off their contributions. This feature is especially attractive to those who wish to see their investment yield societal benefits beyond financial returns. But if other options exist with higher APY, will this be a chosen path?

  2. Tradeable Neuron NFTs: People love NFTs and initiatives like Medallions have already demonstrated public interest in these kinds of systems. These constructs provides a much easier pathway to stake liquidation for new stakes. It gives users an out of their stake. From a risk management perspective it is a no-brainer. It maybe shady and morally questionable from a social perspective depending on the exact configuration, but perhaps, redirecting the value through public goods and capturing it by the network is enough compensation. If not we will see it in the data.

  3. Potential for Higher Returns: For those who engage with the Quadratic Passion voting mechanism, there is a potential to achieve higher returns(potentially much higher returns). Under these systems when stakeholders influence governance outcomes some or all of the funds they use flow straight to the user of the system providing the voting power. This would result in a higher APR (Annual Percentage Rate) than is offered in the NNS or SNS dashboards. If this was an option, why would anyone use the old systems? You’d only need one hotly contested SNS vote for everyone to get paid(damn the consequences).

  4. Experimental Ground and Data: Maybe we need these Dark Matter assets to serve as a critical experimental platform. They allows participants to explore and observe how modified governance mechanisms can operate within a controlled environment. This appeals to innovators, researchers, and those interested in the future of decentralized governance systems.

More on Why this needs to be discussed:

In case you haven’t figured it out yet, “Quadratic Passion” is bribes.

All of these use cases are potential huge security holes. Committing brain power and raising this discussion is a bit of a hot-box and a forcing mechanism for discussion, coordination, and to see who is here line their own pockets and who is here to line each other’s pocket and push the platform forward.

There are enough lego bricks sitting around for anyone to build these system, coordinate with other devs in the ecosystem with initiatives underway, and to attempt to create a “Public Good” pathway for the ecosystem to leverage as they see fit. I’d rather we not ever talk about liquid staking and transferable neurons ever again, but I’ve been around long enough to recognize that until code starts making it into the wild there are too many other things to focus on than to try to deal with possible future states. The code is here and will be open source soon enough.

“Unlocking DeFi” is not a good excuse to build security-reducing systems into the IC. Unless it is. I’ve railed against adding these systems, but if we’re going to have them and if I’ve been wrong, fine…these systems at least could direct much of the value created back into the network.

What we could create here is something along the lines of a “sin tax” or “mob tax” where the general populace benefits for the illegal behavior that goes on and can’t be policed out of existence. Is that a good thing to do? I’ll leave it up to the community to decide. Perhaps there is some scientific research on these topics? If building these are “maybe good” and we can provide a controlled focused, data collecting way with kill switches then maybe we should do it so someone with different motives doesn’t. There are lots of doors out of this situation, most of which are not contained as a proposal in this document. I’ll be happy to find those with you all.

Reasons we SHOULD build this and Reasons we SHOULD NOT build this:

This could be an Oppenheimer moment where we just don’t know the effect of what will happen and could produce the material and let the cat out of the bag that brings the whole thing down. Ill advised financial instruments only almost destroy the world economy every ten years or so, so we’re not exactly dealing with the unimaginable.

It also provides a very Oppenheimer like question where we need to ask if we want to let the grifters and rent seekers pull value out of our network or if we want to attempt to capture and keep that value inside of our network.

I have a lot of the building block for these things already in open source repos. A group of community groups could put their heads together and build it.

An SNS could do it(but might be subject to take over while small…at that point, the NNS would need to step in if the security of the network were being undermined…kudos to WTN for having this NNS oversight built in).

After a lengthy discussion with Water Neuron, they seem to have some of these public goods intentions, especially around replica verification and potentially some other types of active participation in validation which the IC desperately needs, but I had to go fishing to find these out(It is a damn shame that crypto projects don’t feel like they can lead with their actual value…I even had to do it with this post by appealing to ‘your bag’ instead of the innate intellectual value of the material :man_facepalming:). They also have a ~20% team allocation with no bounds on how big their DAO can grow(why not put most of that in the treasury where the DAO will almost certainly fund the founders for as long as they want to be involved and/or where projects can come and request funds try to contribute…or cap the DAO so it splits and we end up with a bunch of ‘Coopetition’ DAOs in the ecosystem where everyone is trying to do the most good or fund the most innovative thing…just some initial thoughts and suggestions…they have been thinking about it for far longer than me so I’d defer to their thoughts and reasoning)

The NNS could do it to fund the public treasury that it desperately needs. After some community feedback I’m not sure that there should be any ‘one’ system, but perhaps an interlocking garden of them all working with the same guiding principals.(ht/ LL).

Just keep in mind that there is no reason anyone needs to take a single point less than full return from their neurons in one of these schemes without explicit understanding and intent. We think that Public Goods would be a good intent, but understand that not everyone feels that way. But if the network doesn’t capture this value in some way it will leave our already strapped ecosystem as fast as we let it.

The Water Neuron mechanism is just a zero-sum betting mechanism on if the DAO will succeed or not. If you think they will do poorly you mint nICP and hold. If you think they will do well you contribute and get WTN. Unless the DAO is coopted by some Dark Matter type mechanism they can’t offer collectively higher yields than just the return from the 6m and 8y neurons.(In both cases you’re paying a 20% fee on your returns due to the team allocation.) I really wish we didn’t have to wrap these basic utility features is strange DeFi concoctions and dress them up like a bigger initiative than they are(and if they are a bigger initiative, lead with that).

Ultimately I’d prefer that neurons were tied to a proof of humanity and untradeable(with the power of slashing for social contract violation) as I think this is the only practical way to keep skin in the game(the fundamental assumption of the network security model). PoH plus a way to eliminate bribes via a bicameral solution would make these “Dark Matter” assets irrelevant and there would be no need to go build any of these workarounds(although we still need a good way to fund public goods.) Until then, the following security concerns persist.

A brief discussion of the security concerns:

Security Concerns of Neuron Transferability

In the design of the Internet Computer, a core assumption is that neuron owners have “skin in the game.” This means that neuron stakeholders are inherently financially and strategically tied to the consequences of the governance decisions their neurons vote on. This condition is essential: it aligns the long-term health and security of the network with the interests of those holding its governance tokens. The fact that, most of the time, neuron holders don’t vote doesn’t negate the fact that, given a consequential enough action, they could vote.

The transferability of neuron ownership, as proposed, can potentially undermine this foundational security premise. When a neuron’s ownership is transferable, the original staker can relinquish their exposure to the voting consequences of that neuron. This shifts the risk permanently to another party potentially less invested in the network’s future, or who may operate under a shorter-term profit motive.

This scenario dissociates accountability from decision-making. It’s not just a theoretical vulnerability to a 51% attack, which is a well-known but rare concern in large DAOs. More subtly but just as dangerously, it introduces a misalignment where voters may not bear the full economic consequences of their decisions. They can vote irresponsibly knowing they can exit their position by transferring ownership.

This loss of accountability creates a scenario where decision-makers are insulated from the outcomes of their votes. In the worst case, this can lead to governance decisions that benefit a few at the expense of the many, effectively disrupting and potentially corrupting the governance process. The system must ensure stakeholders remain committed as if they are “tied to the mast” rather than looking for the nearest exit, ensuring decisions made under the pretense of collective benefit do indeed align with the long-term health of the network.

Ultimately those that transfer neurons are stealing from the commons, in this case, the NNS or SNS DAO that is supposed to be secured, in two ways. We pay them maturity that they don’t earn by sticking around to endure the result of their votes(Your bag gets smaller due to inflation) and the votes of everyone who knows they have an out are least optimized for the long term view(your bag has a higher chance of going to 0). In this case the NNS or SNS DAO that is supposed to be secured. They are stealing YOUR VALUE that you created by entering into the smart contract.

The Problem with Liquid Staking

Liquid staking refers to the mechanism where users’ staked assets are tokenized, allowing them to remain economically active and transferable while still staked in consensus activities. However, it is essential to understand that the concept of liquid staking on the Internet Computer poses significant risks and fundamentally breaches the core security assumption of “skin in the game.” Stakeholders are incentivized to act in the best interests of the ecosystem as their assets are at risk should the network’s integrity or value diminish due to poor governance. The whole reason we are paying neurons maturity is so they will bear the market results of their decisions.

Conversely, liquid staking introduces a detachment of stakeholder responsibility from asset ownership. When assets are tokenized and made transferable, the immediate alignment of stakes with outcomes dilutes. A stakeholder could potentially influence crucial governance decisions and subsequently transfer their tokenized stakes, escaping any adverse long-term consequences that may arise from those decisions. Bluntly, the network should not pay maturity to neurons where the owners have abandoned their vote to someone else. If someone else(or a DAO) wants that VP they should put up stake to do so.

Even if the core stake from liquefied stakes are pooled and subject to a DAO, you are now transferring risk to the whole of a block of votes that can be easily overwhelmed by accumulating half the market cap of the controlling entity.

Such a system does not merely raise theoretical concerns; it borders on the operational destabilization of the governance framework. The name ‘liquid staking’ perhaps misleadingly suggests fluidity and efficiency, but it should be scrutinized as it effectively allows and perhaps encourages behaviors akin to abdicating responsibility. It paves the way for short-term gains at the expense of long-term stability and potentially opens the system to manipulations where entities could accumulate governance power, influence decisions without lasting stakes, and subsequently liquidate their positions to unsuspecting buyers.

Just like whole transfers, liquid staking is theft from the commons. That means YOUR VALUE is stolen(through inflation or increased risk).

Concerning Water Neuron, from a commons perspective, they are setting up a mechanism for WTN holders to get paid more than a standard staker for the same governance oversight. Maybe we want to pay them more because they are delivering a certain kind of value, but that should be explicit and universally understood.

The Social Contract Violation of Selling Votes

The current system does not have explicit mechanisms in place to prevent the selling of votes, nor does it possess the capability to detect such activities should they occur. Given this systemic openness, the only deterrent against the commodification of votes is the built-in incentive for voters to act in the network’s best interest due to the direct financial implications of their decisions(which we have already established is threatened by both neuron transfer and liquid staking).

While small-scale vote trading might seem innocuous and unlikely to alter major decisions, its real danger surfaces during closely contested votes. Here, the marginal value of each additional vote is dramatically amplified, making even minor vote buying or selling potentially pivotal. The ability to sway results in such scenarios could attract substantial investments into acquiring votes exactly when the stakes are highest.

When this incentive exists, and we’ve made no attempt to keep it from happening, do we want that value handed to the least moral among us or to flow back to the commons?

In the future, to mitigate such risks, the concept of a complementary mechanism, akin to a veto power or bicameral governance structure, could emerge as a potent solution. By introducing a second component that is not bribable in addition to coin-voting, the system gains a protective measure against potentially catastrophic decisions driven by bribes. This two-tiered approach serves as a check and balance, preserving the integrity of governance decisions.

For SNSs this could be a simple as the potential of an NNS veto(which exists in an existential way anyway) where the NNS could block the execution of a proposal via some means. If this is possible, then bribing an SNS becomes much less attractive. How to handle things at the NNS level is a bit stickier and I hesitate to make too many suggestions at this time.


So that is a lot of words to ask the following questions:

  1. Are we all sure we know what we’re getting into with these mechanisms?

…if yes or “we don’t care let’s do it anyway”…

  1. Are we ok with all of it or just parts of it(Unearned Maturity(NFT Transfers), Risk-less(Liquid) Staking, QP(Bribes))? What should the guiding principles be?

…if one or more…

  1. Do we need a place where they can operate in the open?

…if yes…

  1. How do we get from here to there in a way that no one group gains an outsized voice in governance, influence, and hands on the purse strings? (aka, how do we maintain political and financial decentralization of the network)

I have a bit of a vacation coming up, but I’ll try to pop in and see if any discussion come of this. Thanks to anyone that took the time to read the whole thing.

(As of the morning of June 9, I think the Water Neuron SNS proposal should be rejected without some changes. I’d love nothing more than to see Enzo and Leo contributing to the safety of the IC for a long time and be handsomely rewarded for it, but I think there are few easily corrected misalignments in the current SNS yaml file/proposal for both the long term good of that DAO and the safety of the IC. I’ll address those in the Water Neuron thread)

edit: added media


Great post! It’s a real head-scratcher. I’ll need to read it a couple more times to fully grasp it. Currently, due to the ICP’s price action, many would be willing to jump into anything, as liquid staking will definitely give a significant boost to ICP’s lacking DeFi ecosystem. But at what risk? That’s the real question.

The IC is distinctly unique compared to other blockchain projects, so blindly copying their approaches may not be the best strategy.

We also need Dfinity’s feedback, as liquid staking further diminishes the “skin in the game” core design, which was already partially eroded by the IDgeek II marketplace that is great from a user perspective but not from a governance security standpoint.


The issue at hand (from my view) with the upcoming WN sns is there is no “liquid” in liquid staking. Two ICRC tokens will be introduced without listings on ecosystem defi system and there’s no plan for team to allocate ICP for pairs of WTN or nICP. This is imo a fatal mistake. Arrangements should be in place for these canisters (wtn and nICP) to be “ready to rumble” for users whom wish to partake in this sort if staking arrangement.

Why should a user commit 1000 Icp to a neuron via an sns to recieve a token which has no active LP and is unlisted within the ecosystem.

Id be interested in what the market making plan is for WTN and nICP separate from the elaborate staking accessories.

Still trying to wrap my head around a lot of the post but what I can say is that I am opposed to anything that reduces users commitment to their stake. I am not a fan of the idGeek market nor a lot of what is mentioned in this post such as liquid staking. I believe that it fundamentally undermines the entire point of staking ICP in the NNS which devalues the entire system.

To be honest I have to read more on why canisters are able to control neurons and what benefit that it provides. It sounds like through this functionality, WTN wants to operate as you mention here:

With the drawback of potential behaving this way:

Once I understand more I can elaborate my position further but based on my current understanding. WTN and the other things you mention here are a hard no for me.

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If the network decides it is a hard no then we need some way to make it so. PoK was suggested as one alternative. I think a better would be zk Proof of Humanity. Now that has implications. It means that companies and institutions wouldn’t be able to hold neurons either. Obviously lots of companies and DAOs own them now.

Some of this can go away if coin voting isn’t your only governance method. I’ve started thinking more along those lines because it is really, really hard to secure coin voting.

And maybe that is just generally ok. Maybe we need a system that works better than all the others even if it isn’t perfectly secure.

In general, checks and balances have a decent record of working. But they can also slow things down. We probably don’t want a three month parliamentary process for reconfiguring a subnet.

Interesting points, but it’s worth noting examples from other cryptocurrency networks that demonstrate the potential success of these mechanisms. For instance, Ethereum has implemented liquid staking through platforms like Lido and utilizes DAO voting systems. These mechanisms have been operational without causing network destabilization. Issues do arise, but they are typically addressed through enhanced security and governance measures. Instead of fearing these changes, we should focus on refining and adapting these mechanisms within the ICP ecosystem to ensure stability and growth.