by Wenzel Bartlett (@wpb), Kyle Langham (@Kyle_Langham), Alex Mucalov (@ayjayem)
The current structure of the Internet Computer NNS entails risks that require attention by the IC community. The current NNS tokenomics parameters have failed to i) attract sufficient new participants to offset the dissolving stakes of current participants, ii) encourage current participants to remain committed long term to the IC, iii) address conflict-of-interest risks that may prevent the IC from executing its mission long term. We have published an article that explores those risks and proposes a solution with the intent of driving a community conversation and executing an NNS proposal for vote.
This article provides a detailed analysis of the problem and the proposed solution: The Current State of Governance of the Internet Computer and Proposals for Tokenomics Improvements that Incentivize Long Term Participation | by Wenzel Bartlett | Nov, 2021 | Medium
We believe the two changes identified below are worth a formal motion proposal in the NNS to enable a proper vote to see if a majority of voting power agrees. While there are many ideas that can incentivize long term staking, this proposal is focused on ideas that are actionable in an immediate time frame. The primary objective is for 90 percent of the total supply of ICP to be locked in neurons and to incentivize neuron owners to make their dissolve periods as high as possible, which are objectives identified in the tokenomics white paper published by Dfinity prior to the genesis launch.
Proposed Change #1: Increase the Maximum Dissolve Delay Bonus
The change that will be proposed is to increase the maximum dissolve delay bonus to 8x. The changes to the NNS governance that would be necessary to accomplish this task are shown below.
let d_stake = stake + ((stake * 7 * d) / (MAX_DISSOLVE_DELAY_SECONDS as u128));
assert!(d_stake <= 8 * stake);
Proposed Change #2: Increase the Maximum Age Bonus and Reduce the Time to Reach It
The change that will be proposed is to increase the maximum age bonus to 2x and to reduce the accumulation period for the age bonus to 6 months. The changes to the NNS governance that would be necessary to accomplish this task are shown below.
pub const MAX_NEURON_AGE_FOR_AGE_BONUS: u64 = 1/2*ONE_YEAR_SECONDS;
let ad_stake = d_stake + ((d_stake * a) / (MAX_NEURON_AGE_FOR_AGE_BONUS as u128));
assert!(ad_stake <= (2 * d_stake));
If this proposal passes, the voting reward yield distribution would change according to the blue trend in the graph below. The voting reward yield distribution based on the current dissolve delay bonus and age bonus parameters is shown in the red trend. The data in this chart is based on dissolve delay configuration and age of existing neurons identified by ic.rocks. A spreadsheet is linked in the references of the article that can be downloaded and reviewed. The spreadsheet is structured so each of the parameters highlighted in yellow can be modified to model alternate scenarios.
It is worth emphasizing that none of the parameter changes in this proposal would affect the total voting reward inflation schedule of ICP. The parameters in question only change the distribution of the voting rewards among the neurons in the NNS as weighted by voting power. It should also be pointed out that these proposed changes would not discriminate between genesis or non-genesis neurons or the amount of ICP staked in neurons: if a neuron owner is committed to long term participation in IC governance, then they would be rewarded in proportion. Based on current staking strategies, most neurons would have a decrease in voting reward yield if this proposal passes. Neurons with the longest dissolve delays and not dissolving would have an increase in voting reward yields. There is nothing keeping anyone from changing their staking strategy in order to achieve the greatest voting rewards if this proposal is adopted.
A time period of one week will be provided for deliberation on this proposal in the forum. The final days will be used to wait for quiet on the deliberation. If new, insightful, and actionable comments continue in those final days, then the deliberation period will be extended. Otherwise, seven days after making the forum post the formal NNS proposal will be made on this topic. The exact content of that proposal will be shaped by the ideas presented in this article as well as actionable feedback that occurs during deliberation as long as they move staking performance closer to the 90% goal and can incentivize maximization of dissolve delay.
No matter how this vote turns out, our hope is that this proposal generates a high level of participation among IC stakeholders, translating into significant active voter turnout, and ultimately resulting in the IC community collectively learning something useful about decentralized governance on the IC. Please encourage participation in this process. Please vote to Approve or Reject according to what you believe is best for long term governance of the IC. Please add your comments to this forum post so others will know your opinion. Thank you for your participation.