Periodic confirmation - design

Governance NNS Governance
125

After more than 2 weeks, let me summarize the discussion and propose some edits to the original design based on the received feedback.

We propose the following changes to the original design.

  • A few different ideas were shared with respect to what is the right period after which the voting power adjustment is applied. After the discussion, we propose that the voting power adjustment starts after 6 months and decreases until the minimum is reached at 7 months. As pointed out by community members, this nicely means that one relevant action every half year is sufficient for neurons to keep getting rewards.
  • For inactive neurons, it was discussed whether in addition to the voting power adjustment the following settings should also be completely removed. Based on the discussion here and because this is closer to the original proposal, we propose to add such a reset of followees to the design.

Let us also address some other alternatives that were raised.

  • Decisions could be based on the full voting power rather than the adjusted voting power.
    In particular it was discussed whether the current design comes with a significant risk for 51% attacks.
    • Using the non-adjusted voting power would be a risk for urgent proposals as explained in the “Alternatives considered” of the original post.
    • As argued in the discussion, with the new design it is still expensive to launch a 51% attack: sleeper neurons’ tokens are still locked and thus an attacker would have to buy a large portion of the liquid ICP tokens (see Bjoern’s analysis).
    • For all actively voting neurons, the relative voting power for decision might increase. For neurons with a lot of (sleeper) followers, e.g., DFINITY, the induced voting power including the followers would decrease as the sleeper neurons would not vote anymore. Therefore, this is overall a step in the right direction.
  • The rewards could be based on the adjusted voting power rather than the potential voting power.
    • The main reasons why we propose to base the reward on the potential voting power are
      1. Already today, the voting reward computation is taking into account the non-voting neuron’s voting power. The initial intention of the design was to keep this as similar as possible.
      2. It can be considered a nice side effect of this feature that it would potentially decrease inflation, as mentioned for example in this post and this message in another post. Likely, as the sleeper neurons would not get any rewards, the effect of this feature is that there is less maturity distributed. If in contrast the adjusted voting power is considered for the rewards, this would increase the maturity, and thus likely increase the inflation, compared to today.
  • Rather than having periodic confirmation, there could be a one-off reset, possibly also with batches of neurons being reset at a time.
    • The main concern is that it is hard to predict whether it would be possible to make fast decisions in cases of hotfixes. If neurons are reset in batches, it is also unclear what should be done if the first batch is reset and we then observe that it is impossible to reach 50% - would the next batch still also be reset?
    • Another motivation for a regular reset that was raised is that users might die or lose their keys. It is thus advantageous to regularly consider who are the voters who are still around and active.

Overall, we think the proposed design with these adjustments reflects the main intent of the original proposal, namely neurons having to regularly reconsider following and a reset of following if this is not done. In addition, it ensures that default following is reset and has the side effect of reducing inflation, which some community members find advantageous.

It is impossible to know what other intentions voters had when voting on the original proposal.
If more details are required to find an agreement, maybe a new motion proposal is needed that replaces the original one.

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126

FWIW, I would probably do a one-off batched reset, progressing as long as we remain safely above 50%. I believe the chances of us not reaching 50% are similar to DFINITY owning more than 50% of the adjusted VP. The proposed idea feels like too much work for everyone, with an uncertain outcome.

If I remember correctly, there are a few L1 DAOs (Polkadot?, Cardano?) that use councils in case an emergency hotfix needs to be approved. Such a council could be composed of named neurons, SNS, etc.

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127

Thank you for this summary @lara. The changes seem appropriate and the summary of alternatives that were raised seem accurate. My only sticking point is that the reward distribution is still based off potential voting power instead of actual active (aka adjusted) voting power. This means the governance reward distribution and proposal decisions would be based off different mechanisms and we are using this mechanism to control ICP price (via inflation control) instead of using it exclusively to reward governance participation. I’m not opposed to inflation control, but I think it should not be done in the context of governance reward distribution.

I would actually prefer to see a new motion proposal to replace the original one. Is this something that you are planning to do or does this need to be community led? Since I was an original author of the periodic confirmation proposal, I would be happy to put forward a refined proposal if you prefer for the discussion to be community led. If you plan for this to be DFINITY led, then will you please consider explicitly raising this question of which of these two mechanisms should be used to distribute rewards?

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128

Thanks for this summary @lara. I’m very much in favour of everything this proposal seeks to achieve, except for what feels to me like a misguided approach to reducing inflation (which weakens the entire proposal in my opinion).

Could you clarify why it would increase total maturity? Surely the difference (compared to today) would be zero-sum. The loss for sleeper neurons would be equivalent to the gain for active neurons.

I’d like to clarify what I mean by misguided to make the reasons for my opinion clearer. Sleeper neurons indicate that some stakers aren’t motivated/aware enough to maintain their neuron. In the context of sleeper neurons, active neurons become more valuable to the network. This is obvious when you consider the extreme case of minimal participation. It would make far more sense to increase the incentives for participation the more that participation dwindles (much like how prices are dictated by supply and demand). This would be a stablising feedback loop (why wouldn’t we want that?).

It’s not accurate to assume that the value provided to the network by those who are active participants in NNS governance (by voting directly and/or by maintaining their following) should be measured in absolute terms. Everything has a context, and the value that an individual NNS participant brings to the table is relative to all those who cannot be bothered. If one day 99% of NNS participants lost interest and stopped engaging, wouldn’t you like to see the incentives for the 1% increased (to make sure that they don’t follow suit, and in fact avoid this situation emerging in the first place)?

Inflation should be reduced by simply reducing rewards proportionally (taking into account the number of sleeper neurons today, and adjusting reward rates accordingly), if a reduction in inflation needs to be achieved alongside this proposal.

At least, this is my stance, and it’s why I would personally plan to reject a proposal that intends to introduce a stick without a carrot :carrot:

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129

Thanks @wpb and @Lorimer for explaining your position. It sounds like we agree with the design except for how the rewards are computed.

I think we can split the points of open discussions / where we might currently disagree into the following ones.

  • If the full reward pot is always distributed among active voters, would this overall have a positive effects?

It was argued that it could be beneficial if the rewards per neuron are higher when there are fewer neurons as this could incentivize new neurons to join when this is more needed. This is an interesting input. A potential counter-effect of this could be that if rewards are distributed among active neurons, it is not in the (financial) interest of current active neurons to motivate others to join the NNS. It is therefore unclear if overall this has a positive or negative effect towards the decentralization goal.

  • Is it beneficial to have less rewards (and thus less inflation)? If so, should this be achieved by lowering the reward pot?

I don’t fully understand yet if we mainly disagree on the first point or if you would also be in favor of decreased rewards but just advocate for implementing it differently.

In general, this seems to be a matter of opinion: Different people (e.g., links above) think it is beneficial to decrease the rewards as they are a main contributor to tokens being minted while others might not agree. If rewards should be reduced, it is unclear whether this should be done as suggested in the design or rather by just decreasing the reward pot.

As was mentioned, one idea when introducing the current reward mechanism was that the portion of the sleepers that is now forfeit could be used for other purposes. This might be connected to an upcoming feature where we want to think about how the incentivisation of voting neurons can be built into governance. This will likely also require some form of rewards, that could be taken as a portion from the followers, from a new reward pool, or indeed from this currently unused portion of the reward pool.

All of these choices have different implications for the rewards that are minted overall (and hence inflation), for rewards for the non-sleeper neurons, and for the rewards for actively voting neurons.

We think it would be very natural to separate the discussion about rewards from the periodic confirmation design and rather include it in the larger discussion of how rewards can be designed:

  1. If we implement the currently proposed design, we would not change how rewards work and keep the status quo. The proposed design does not exclude any future direction for rewards (we could still decide on a next step to distribute rewards based on the adjusted voting power).
  2. As illustrated by the thoughts above, the reward topic is closely related to the topic of how we can further incentivise voting neurons.
  3. We think it would be beneficial to conclude this discussion with a decision that allows us to move forward with some implementation while we keep discussing other aspects of governance that can be separated.

For these reasons, we plan to submit a motion proposal that proposes to replace the original motion proposal with the refined design here. We could explicitly mention in the motion that it does not exclude any future direction for rewards, to ensure that we can separately have more in-depth discussion about this aspect.
I will not manage to draft the proposal this week, but plan to do so early next week.

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130

Thanks for providing further clarification @lara. I agree to your proposed path forward. I appreciate that you are thinking about how governance rewards could be used in the future to incentivize additional active participation in governance. That makes sense.

It’s probably a good idea to offer this clarification in the proposal. I hope some day we arrive at a voting rewards distribution that is used solely for governance participation. At this point, I can see how that will take further discussion that is best saved for another day.

For what it’s worth, I think this is true regardless of how rewards are distributed. The more voting power that exists in the NNS, the less everyone earns. It has always been in everyone’s best interest to not promote staking in the NNS, yet so many of us proudly wear that #8YG badge. I haven’t really ever sensed that people hold back on promoting the need and value of having more participants in the NNS.

I personally don’t think our inflation is too high, so I don’t see a need to adopt policies that reduce it. However, I know there are many people who find this to be very important. I would have no issue at all if the NNS made an intentional decision to reduce inflation by reducing the Voting Rewards Function that defines our daily voting rewards.

Thanks again. I look forward to seeing your proposal come out soon.

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