Proposal to Change Dissolve Delay Bonus and Age Bonus Parameters

Point ii

The current NNS tokenomics parameters have failed to: encourage current participants to remain committed long term to the IC

This is true for the genesis group, but as I explained in a previous post, the genesis group has had such enormous gains that they are going to dissolve and sell a good chunk of ICP. This is expected, and I don’t believe that increasing rewards will incentivize them to change their minds. 28.7% per year is already fantastic, unless you increase it to outrageous levels I don’t see any significant portion of the genesis group moving to 8 year neurons.

Also, most neurons created post-genesis are going straight to 8 year locked neurons, which is exactly what we want them to do.

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Point iii

The current NNS tokenomics parameters have failed to: address conflict-of-interest risks that may prevent the IC from executing its mission long term

I believe the article explains this point as follows:

This situation also creates a security concern, as there are many seed investors and early contributors who have evidenced a disinterest in remaining committed to the IC long term, in that they have chosen not to lock their neurons or increase their dissolve delays. Approximately 36.6% of voting power on the NNS is controlled by genesis accounts that are dissolving with less than 4 years remaining. Many of these entities could well have other blockchain investments or Big Tech investments that are directly threatened by the IC, and it is possible that they could execute governance actions with nefarious intent with little warning and a reasonably well-coordinated effort.

As explained in previous posts, I don’t believe that tweaking the tokenomics parameters as proposed will cause a major shift in the genesis group. But even if that were the case, do we really want to try and keep these kinds of people around? Why not just let them leave?

If their neurons dissolve and they sell, we can get that ICP into the hands of more committed users who are much more likely to lock it up into 8 year neurons, as evidenced by the fact that most new neurons are 8 year locked neurons.

Just let them go! Let’s decentralize this original group.

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Conclusion

I’m just not sure if the risks outweigh the rewards here. The default choice I lean towards is: do nothing.

In my opinion, there is not enough compelling evidence indicating a significant problem that needs to be addressed.

Let time pass, let the IC mature, let the apps develop, and let usage soar. That is the solution to our “problems”, not tweaking parameters.

But then again, I don’t necessarily have a problem with the parameter tweaks themselves (besides the risk of unknown consequences and a possibly bad precedent), just the underlying motivations for proposing them.

If you think the tweaks will result in a long-term better distribution of voting power and better reward for time commitment, and you’re okay with the risks…there’s no better time than now (except for the past) to do this. It’s only going to get harder to change as the network matures.

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The minimum of 1 ICP per neuron has been introduced since the space in the governance canister is limited – currently it can hold up to 200’000 neurons. The minimum of 1 ICP ensures that it’s at least very expensive to allocate all those neurons and thereby prevent other people from participating in governance.

There are two possibilities for addressing the problem that you describe:

  • First, improve scalability of the governance system. That is certainly something that needs to be done, but it will certainly take a bit of time.
  • Allow disbursing liquid ICP instead of it being locked into neurons – for small rewards.

I think the latter one definitely makes sense; the reasons for distributing neurons instead of liquid ICP seem more important for large stakers. If this is an important point for the community, we should bring it on the roadmap. I don’t think it’s hard to implement.

EDIT: The main reason for distributing neurons is preventing bank-run scenarios, where during a quick drop if token price panic makes people sell – increasing price pressure. That problem is smaller for rewards of less than 1 ICP.

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I think this proposal could improve retention, but not necessarily help adoption. What we need is very little incentive for holding liquid ICP, which means more rewards for shorter staking periods – although maybe also shifting voting power toward the longer spectrum as this proposal would do. That way, people who just want to get their feet wet for the sake of rewards would be incentivized to stake more-and-earlier, while those who later want to help guide the development the IC would be incentivized to begin increase their lockup duration.

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If you look at the charts in the article, it is very clear that the genesis group overwhelms the post-genesis group in most metrics.

If their neurons dissolve and they sell, we can get that ICP into the hands of more committed users who are much more likely to lock it up into 8 year neurons, as evidenced by the fact that most new neurons are 8 year locked neurons.

Where can I find this data? I couldn’t find it in OP’s post.

If the price is low, then many more people can get exposure to ICP and start to materially participate in governance.

I’m not sure this is true. Ironically, in investing if the price is high more people will want to buy it.


Now that I think about it, I feel like for an early-stage, ambitious project like the IC, highly committed advocates (i.e. 8 year stakers) are actually way more valuable than casual supporters (i.e. <1-2 year stakers).

Highly committed advocates do your marketing, they build your dapps, they grow your ecosystem, they make proposals like this and discuss them on forums like this. We need more highly committed advocates if this project is to realize the potential we all think it has.

Casual supporters are mostly bystanders who treat ICP as another slice in their portfolio with a “wait and see” approach. There’s more of them so it may seem like having them “decentralizes” the voter base, but in reality these people just follow DFINITY and nothing else (i.e. that’s not decentralized). Only highly committed advocates take the time to read and think about proposals like this.

If we agree that we want more highly committed advocates at this stage in the IC’s development, then the question is: will bigger long-term rewards lead to more highly committed advocates?

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If we agree that we want more highly committed advocates at this stage in the IC’s development, then the question is: will bigger long-term rewards lead to more highly committed advocates?

I think it could, but executing this proposal isn’t nearly enough. We would need to blast this on Twitter, write Medium articles, etc in order to promote this new APY. If we just vote “yes” and move on with our lives, nothing will come out of this besides existing 8-year stakers getting paid more and existing 1-2 year stakers getting paid less. That would probably have a negative effect IMO.

So unless there’s a clear marketing plan on how we’re going to promote this, I’m leaning no.

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My largest concern is the centralising of tokenholdership through governance participation. PoW networks had operational costs that forced recipients of new tokes to sell. This distributed ownership. The IC includes no such pressure. The SNS and the community fund may help with this but we don’t know how much yet.

Secondly, I disagree with the entire premise that we should “incentivise” governance participation. It should be rewarded yes, but participation should be a decision made deliberately, not by default or polluted by financial motivation other than the future success of the protocol. This selects the wrong people. Locking in the seed holders appears to have been a very last minute decision and in my opinion, ill-considered. We just locked in a whole bunch of apathetic voters. This undermines the entire NNS.

Why would we not want to see the dissenting seed neurons dissolve and their ICP distributed. They never chose to be on this team. However, @wpb, one of the creators of this report purchased tokens from the market after launch. Would it not be preferential for people like Wenzel to enjoy higher sell pressure & lower prices in the short term?

The low price may not be ideal but these are juicy lemons that we can make all kinds of lemonade from.

I will follow up with a blog post for cycle_dao. I think this discussion should be revisited in 6 months. The SNS will be out
The environment will have changed.

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Kyle, Alex, and I have met several times over the past few days to discuss the appropriate path forward on this proposal. We recognize that the number of views on this forum topic have been increasing significantly and that there have been many intellectually honest comments posted here on the forum toward the end of our deliberation period. As originally planned (the wait for quiet provision), we believe the appropriate course of action is to extend the deliberation until Monday, November 29. That will give everyone additional time to consider the new opinions and ideas that continue to be presented. This deliberation has definitely been a healthy discussion on this important topic and we really appreciate everyone’s participation. We are listening and your comments are shaping our thoughts on the appropriate path forward.

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This a bit rough given that discussion is still ongoing, but the blog post is here:

Given that motion proposals are live for a matter of hours we feel it is important to provide an opinion in advance of the vote. If our perspective changes, we will strongly publicise the fact.

I think @lastmjs summed up the strongest argument against accepting this proposal well with his comment on premature optimisation. That said, this process has been extremely valuable and whether or not the proposal succeeds, hopefully, this has sown the seeds of ongoing discussion.

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Hey Arthur, thanks for taking the time to write your blog post. It was very enlightening to read about the collective opinion from cycle_dao on this topic. It is an important and strong voice in the IC community.

We have been interested in learning about actionable recommendations from the community on our proposal to make sure it is properly considered. In the conclusions section of your article, you made the suggestion that “The Proposal to Change Dissolve Delay Bonus and Age Bonus Parameters should be shelved for 6 months during which time ICP tokens have time to circulate in the market and unlocking/onboarding trends have a greater chance to emerge.” This is an actionable suggestion and we agree that it would be an appropriate next step to put this question before the governing body of the IC. We believe this is a question that should be decided by the governing body because at this time we have no idea who is a vocal minority on this topic and we believe the appropriate way to make decisions on this topic is through the NNS.

You are welcome to submit this motion proposal to the NNS yourself, but I would also be willing to do it on your behalf. The motion needs a title and a summary. I have made an attempt at writing this out based on the information you provided in your article. However, this is your motion and the wording needs to reflect your thoughts. Feel free to edit as needed or you can come up with a totally different motion.

If this motion is made, then I would recommend the following timeline:

  1. as soon as possible you should post in this forum topic the exact wording you want included in the motion so folks have time to review, deliberate, and decide how they would vote
  2. on Mon, Nov 29 either you or I will submit the NNS Motion to Postpone.

Please advise how you would like to proceed.

Edit: Removed content from this post that Arthur reposted with edits below.

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I love the collaborative spirit Wenzel! I think there is an opportunity to conduct some fantastic research here.

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i made a couple of edits

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Motion to Postpone for 6 Months the Proposal is that most people are 6-month stakers ? Are you waiting for them to disband?

I use Google Translate and the grammar is not smooth, please forgive me

@chishan1082 The motion to postpone for 6 months is made by cycle_dao because they believe more time is needed before our proposal to change the dissolve delay bonus and age bonus parameters is voted by the governing body. Their position is that more data needs to be collected, more community discussion needs to occur, and there are some research questions that can be answered by waiting 6 months.

The Motion to Postpone is not intended to cause anyone to change their staking strategy.

If you take a look at the original medium article that we published, you will find tables that show number of neurons, ICP in neurons, voting power of neurons, and voting reward yield for neurons organized by dissolve delay and neuron state of dissolving and not dissolving. It shows that most neurons still have 0 - 4 year dissolve delays due to the initial allocations and that most new neurons are 8 year dissolve delay and not dissolving. This data shows that most people are not 6 month stakers.

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Thank you for answering my question!

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Cycle_dao has asked me to submit the Motion to Postpone for 6 Months the Proposal to Change Dissolve Delay Bonus and Age Bonus Parameters. I will do that on Mon, Nov 29 at approx 12:00pm-1:00pm UTC using the wording Arthur provided. I will post on the forum, Twitter, Reddit, Telegram (Dfinity Community and ICP Maximalist Network), DSCVR, and Distrikt immediately after the proposal is submitted asking people to vote. Arthur will promote through his channels as well. It would be good if everyone can help spread the word.

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There are both Pros and Cons for postponing the proposal. A few are listed here. Others are welcome to comment their own opinions.

Pros

  • It will allow more time to discuss the proposal as a community. It is very important that this proposal is well understood and properly debated.
  • It will allow more time to observe how current developments on the IC attract new users and developers to the IC and whether they are inclined to participate in governance (e.g. BTC and ETH integration, DeFi, SNS, SoFi, NFTs, Achievement Unblocked program, Community Grants program, people parties). These are all big developments that are expected to happen over the next 6 months and they will attract new people.

Cons

  • Approx 33M ICP will be unlocked due to currently dissolving neurons and we will have given those neuron owners no reason to consider changing their staking strategy
  • It is likely that there will be significantly more ICP removed from the NNS than what is newly added through staking new neurons. This means neuron owners that are disadvantaged by tokenomic changes will have less voting power to Reject a proposal in 6 months compared to what they have today.

I think it is very important for the governing body to decide if our proposal should be postponed or not. Therefore, I fully support this motion to postpone. In fact, I will be submitting the motion on behalf of cycle_dao at Authur’s request. That said, my personal opinion is that we should not wait 6 months. I think we can achieve acceptable deliberation much sooner and that data exists today that supports the need for an actionable proposal to change key tokenomic parameters. I will be voting to reject the motion to postpone, but will be fully supportive of the final result no matter which way it goes.

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Sometimes paying too much attention to details can do more harm than good! We all can have chicken and egg arguments (which one came first) as long as we are all aware it will not help anyone. However, it is indisputable that eight years of locked neuron holders can only have one motivation, IC, to succeed in the long run! That in itself is enough reason not to delay the proposal and go ahead.

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Hello Wenzel et al.,

I have tried prompting many ICP-holding friends to move their coins into the NNS. Most have voiced preference for keeping ICP on the exchanges (primarily binance) while they wait for staking to become available on Binance.

Unfortunately, many people feel most comfortable with storing their coins on exchanges because that’s all they know. It’s their safety blanket.

To increase the amount of ICP staked, I strongly recommend looking into allowing people to stake through the exchanges.

One of the most successful long-term lockups is the staking of Ethereum on the Beacon chain. A lot of people can easily participate in this via Binance.

Most of the crypto consumer base have yet to discover Defi. They’re still being spoon fed services through exchanges. We must adapt to yield full benefit.

Hope you take my recommendation into consideration.

Thank you kindly for reading,
Pwo :pray:t4:

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