Isn’t this how most PoS blockchains work? I stake my $TOKEN, earn my $stTOKEN (earnings from my stake), convert that $stTOKEN back into $TOKEN, put it right back into my existing stake (auto compounding), and continue with that cycle? I believe it’s a taxable event in the U.S. (which I think is currently up for debate), but I don’t need the blockchain to do anything about that for me. I’m responsible for that.
Calmly. I and others in the crypto world love paying taxes, Commissioner. ‘Transactions’ don’t have to be public, please bear in mind the presumption of innocence and good intentions of taxpayers.
Personally, I think that you should pay taxes conscientiously and honestly, because thanks to them the roads aren’t full of holes, there are no queues to the doctor, and education is at the highest possible level (no one spends/invests money more wisely than politicians), XD
In this scenario, $TOKEN is ICP, and $stTOKEN is Maturity - $stTOKEN is a native token to $TOKEN.
The situation changes when you start investing $stTOKEN into $rtTOKEN, collecting a yield on $rtTOKEN, then converting back to $stTOKEN, under the guise of a singular event - being the distribution of staking rewards.
I’m not presuming or accusing ill-intent of anyone, I am saying that this creates what may be perceived as a scenario in which tax is evaded - and participants may not be aware of this. I’ve simultaneously presented 5 other issues alongside this fact.
Hey @Accumulating.icp the discussion between you and @jwarner is interesting. So far I’m resonating more with most of the points James is making. This is especially in regards to expecting people to take personal responsibility for understanding their decisions to participate in the SNS token swap, whether by direct purchase or through the neuron fund, as well as the need to take personal responsibility for compliance with local government requirements and taxes.
I do think the SNS and the neuron fund is complicated and what would be very helpful is for there to exist a curated website that fully explains how it works and what people should consider when they decide to participate. The DOYR that each person should conduct should be easier than sifting through many forum threads.
Personally, I live in the US and cannot participate in the direct SNS token swap due to geo blocking, which doesn’t bother me at all. I make no attempt to circumvent it. However, I don’t think the SNS token swap and the neuron fund should be designed solely around US laws when the goal is accessibility to a global audience. I think geo blocking is an acceptable solution at this point in time. The neuron fund can certainly be improved and I’m glad to hear @bjoernek highlight that Dfinity already recognizes these opportunities.
@accumulating.icp would you please clarify further why you think the neuron fund would fully exit participation in a SNS all at once? I know it is possible, but I don’t recall seeing anyone post anywhere that this is likely. It seems more plausible that the NNS would agree to an exit of the neuron fund in stages. I’m actually curious if there will be some SNS where the neuron fund never exits. I’ve never given this much thought, but when you look through a governance and a decentralization lens, instead of an investment lens, then this seems plausible.
@accumulating.icp you made the comment that registered known neurons are the decision makers of the NNS. I disagree with this claim. The decision makers are the individual owners of neurons. Owners decide who to follow and when to vote manually. It is the personal responsibility of every neuron owner to make their own decisions how to vote on every proposal. They can follow a known neuron, but it is still their decision. Known neurons cannot accept or decline followers and they don’t profit in any way from the votes of those follower neurons. The only people in control of their decisions are the neuron owners.
1 Like
I see. And you’re saying it appears to be a singular event because Dfinity doesn’t provide any way to easily prove otherwise to regulators?
It seems to me that the solution to the tax issue of NF in regulatoryly questionable countries should be blocking this feature in regions, where it can pose a real threat in terms of possible tax interpretation.
I 100% agree with this.
1 Like
It’s pretty hard to invest thru the Neuron fund. You will need a million $ in ICP staked for 8 years for long while so you can buy tokens from an SNS for ~10k$. That is why it is beneficial for an SNS to separate a chunk of its tokens for those who are investing in the whole ecosystem in the long run.
A smart contract isn’t trying to evade taxable events. It’s up to you & your accountant to calculate your taxes properly. If you think investing thru NF should be considered 4 taxable events in your country, then file them as such and pay their taxes.
Not sure where you are going with this. NF has just started, it will get better. There are problems and attack vectors, but these will get fixed.
The NNS doesn’t have to do a market order, a limit order that sells the tokens at a specific price will avoid front running. ICPSwap and ICDex support these.
I doubt NNS will bother selling a few tokens and emptying liquidity pools, it’s not economically beneficial for the 8y neurons.
1 Like
Im not saying it necessarily would happen all at once, but it definitely could happen, as you’ve acknowledged.
The Neuron Fund receives a basket of neurons with various dissolve delays, however that does not change the fact that these “tranches” of dissolve delays still have immense volume behind them.
Proposals are to dissolve, disburse, participate, with the entirety of the fund, inherently resulting in drastic volume.
Furthermore, should the entirety of the NNS be making decisions on behalf of 10% of peoples “investments” (ability to participate, disburse, sell)?
Named Neurons are delegated the responsibility of decision making on behalf of the majority of active voting power, across the majority of topics - we utilize a Liquid Democracy, Followee Based System.
That inherently makes them primary decision making entities.
However this is going off-topic so we’ll have to agree to disagree.
I’d agree, this is definitely a potential solution specifically in regards the “tax evasion” design flaw - however I’d have to imagine if someone wants to evade taxes (I understand that this seems as though it is a personal issue for that person, but the NNS is what is providing this “tool”), they wouldn’t have an issue utilizing a VPN to do so (as frequently recommended to participate within SNS sales).
Now let’s work towards the other 5😅
The Neuron Fund consists of 20 Million ICP, and has 5M Liquid Maturity.
It is consisting of 30-60% of SNS Sales.
It is inaccurate to say it is “hard to invest through the Neuron Fund”.
Nobody in this thread has disagreed with the fact that it is the personal responsibility of the participant to report their taxes.
I am saying that in the manner the Neuron Fund is setup, it is not transparent with the potential taxable events it is committing.
Therefor it will create many scenarios in which it simply is not possible for the average investor to accurately report their taxes in regards to their ICP Staking Rewards & Neuron Fund SNS Sale Profits.
Surely you recognize the irony in the sentiment that we can’t decentralize a self assigned super majority of voting power, due to a design flaw (being the fact that the party that has self assigned themselves a super majority, would lose it), but we can allow the active exploitation & liquidity extraction of Neuron Fund Design flaws, because they will get fixed over time?
This does not prevent front-running.
If the Neuron Fund would like to sell its position, it’s going to have to conform to the market.
It can place a sell order for .6ICP, but if the market is trading at .4ICP, nobody is buying it.
It doesn’t change anything.
Should the entirety of the NNS, be deciding what 10% of the NNS gets to do with their assets? Please consider the fact that these assets were provided in exchange for 30-60% of the SNS treasury.
Sorry, I totally skipped over this part of your proposal.
I agree this should be changed to be a percentage of the minimum, and maybe scale with what they get over that? Not a percentage of the maximum.
I don’t think it’s a reason to shut it down though.
I have to agree with @infu on this one. I am an average investor that you seem to want to protect. Yet I do not find it difficult to properly pay my taxes and I do find it difficult to have any meaningful maturity to dedicate to the neuron fund. It takes a long time to accumulate maturity as @infu gave in his example. At my average investor level, I just don’t find it worth it to participate in the neuron fund.
Most of this maturity is not from average investors. It is from large neuron holders who have accumulated their maturity. I’m certain that they feel like they are capable of paying their taxes as required by their local governments.
You’re not an average investor. You are a stakeholder managing the second largest voting neuron on NNS. Why are you trying to hide your insider deals with DFINITY by downplaying your influence on NNS?
This is about to head off topic again, so I’m going to engage as little as possible to keep from distracting this forum topic from the neuron fund proposal. My ICP investments are very much average investor. The neuron I manage literally owns 21 NNS votes…all other votes that are cast when we vote are owned by people who choose to follow us. I am not a DFINITY insider. I don’t think my comments are a downplay of my influence on the NNS, they are a reflection of my personal experience as it relates to this discussion.
Old Joe… should ban VPNs in the U.S. and other weird jurisdictions they throw their rights at!
Storming the 
would then be irresistible 
More seriously, it seems to me that even the NF itself could automatically calculate taxes for a specific jurisdiction (add the option of flagging your jurisdiction in NNS).
And the security holes AFAIK should be patched soon 
So you have no skin in the game but submitted 30 Spam proposals for no reason?
You are not an “average investor” - you’ve personally taken on a high-level role within the ecosystem, making yourself a face of governance. You have knowledge that the “average investor” does not.
When an “average investor” has to do their taxes - it’s not reasonable to expect them to sift through the smart contracts of the NNS to find the maturity modulation, exchange rates, etc. - this information should be easily available.
Although I’m shocked to hear you only have 10ICP Staked - I could have sworn Synapse made a “skin in the game” arguement for a long time.
However, I’d love to enlighten you with the fact it does not take a long time to generate maturity. I have by no means a sizeable stake, and I generate a few maturity every day.
How do you make this claim? Where is this information available? Is this an assumption or do you have statistics to back this claim?
I don’t disagree, but in its current state it doesn’t - hence why I’ve raised this proposal; these need to be addressed.
Regarding “Security Holes” - DFINITY has seemingly brushed them all aside, with the exception of “Proportional Contribution” - so we’ll see if they are addressed at all, or left to be abused.
1 Like