Temperature Check Proposal – Introduce NNS Treasury

Governance
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When dApps launch on the SNS, folks can swap their ICP tokens for SNS tokens. The ICP tokens that SNS investors contribute go into a treasury that the SNS token holders controls. This treasury is a great fundraising tool for the dApp. The development team that bought the dApp into existence can submit a proposal to use some of those funds to further the development of the dApp; other token holders in that SNS ecosystem can likewise do the same.

Unlike the SNS where dApps have a communal treasury, the NNS has no such fund that ICP stakers can draw on. What happens if Dfinity runs out of money? There’s simply no backup fund that Dfinity can request funding from. And what about the fact that there’s only one Dfinity? Wouldn’t it be great for decentralization if we have not one but three, five or 10 Dfinity-like foundations spread across the globe, all with the express goal of building the Internet Computer? Well, that costs money. Not a little bit of money. A lot of money. And no whale is going to spend their ICP tokens on making ICP more valuable for everyone else by establishing a foundation and burning a hole in their pocket for the greater good of everyone else. That is called the free rider problem. We need foundations to do the hard work of protocol development.

While I did not agree with @lastmjs conclusion that committee neurons are needed for the decentralization of the IC, I did agree with him that for folks to truly take this seriously they need to get paid. We cannot expect hobbyists on the weekend to check and audit the work of the Dfinity Foundation, a foundation with world class cryptographers. We need many more foundations that work side by side (or in competition) with Dfinity to push the envelope forward on IC development. Wenzel wrote a great post in Jordan’s forum on his ideas for a sister foundation.

But here is where it gets contentious. And I’d like to make a shout out to @icpjesse and @Kyle_Langham for taking both sides of this debate on their recent podcast and encouraging me to write a Temperature Check proposal. While I outlined the benefits of a NNS treasury above, the risks associated with a NNS treasury are not insignificant. Please listen from the 1 hour mark link is here

Firstly, how would folks feel if even 1% of their staking income was redirected away from their pocket into a NNS treasury? Technically this is inflation redirected which we’ve seen already on the NNS, but folks could look at it as a tax on their income which is not untrue. It would be a tax, albeit directly from the source, not literally coming out their pocket. Given the libertarian ethos of crypto Jesse is right to point out it folks may not like it at all. Kyle had the interesting suggestion of funding the NNS treasury from rewards only from stakers who are not actively engaging in governance on the NNS. That way, if you are actively participating in governance, no tax would be levied on your staking income. Fair? I think so. @skilesare what do you think? Could work nicely and hand-in-hand with your proposal to change how staking works and prevent spam.

The second major risk of a NNS treasury is that the NNS is no where near decentralized enough to bear such a responsibility at this time. Dfinity could pay itself a ton of money and tank the whole system if folks feel it is corrupt and paying itself to the detriment of others. ICPMN could also try make a proposal and pay itself, for example.

The third risk of a NNS treasury is massive infighting and politicking of organizations to get NNS funding. How would the NNS decide which organizations to fund and which ones not to? Would this devolve into a major fight? Would some governmental organization need to exist to oversee funding does not go corrupt?

I maintain that if done correctly a NNS treasury would be a game changer for both decentralization and development on the I.C. BUT it does come with major risks. What do people think?

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Dfinity has spent a lot of time building a platform where BTC and ETH can operate their business on the ICP then why have they not built the same for any project that can easily run their new ideas or current business on as most of the SNS investment will be spent on each project creating the same template and not producing a return.

I should then be able to invest into the SNS to a project of my choice like I decided to invest into ICP and not DOGE. I see too many of the same projects out there and am not interested in another chat, shopping or charitable idea to invest in.

I want IC to show that you can’t be hacked and if you do I want a trial to the spammer for some jail time and my funds returned by your ICP NNS account.

I want IC to show that it is faster and better and when it is not then why and what is the problem, like my data provider throttling me down.

I don’t want to see pop ups and things I have to agree to or join and have to provide all my personal details.

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These are great points @dfisher. I would not have a problem dedicating 1% of my maturity earned every day to an NNS treasury that serves the purpose of funding the experts and organizations that will be required to achieve decentralization. I agree it will take a lot of funding and it would be good to start talking about where we will get that funding.

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It’s better to just issue more than move people’s earnings

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I don’t think a treasury is needed. NNS only needs to issue an additional ICPs as a reward for a certain organization or individual to do some work on the IC.

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I’ve suggested the move to voter based rewards as opposed to system based rewards with the inactive part being burned or going to a dev treasury.

I have enough faith in the foundation to honor the arrangement in the short term and then decentralization takes care of it in the long run.

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I believe this would be a great outcome. Did you submit your proposal to the NNS to be voted on?

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Not at this point. I’d imagine it is in consideration as one of the ‘fix spam’ solutions, but that is on hold until the SNS ships.

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I think the idea of an NNS treasury is very interesting and should be explored. Funds could be taken from voting rewards, or perhaps the ICP can just be minted like the node operator rewards. In that case it’s still a “tax”, and the NNS voters would need to determine if the potential affect on the price of ICP would be worth the amount issued.

I wonder if we could start with something simple to test the idea out. Imagine if the NNS had the power to give out smallish bounties for review of the proposal topics that relate to replica or system canister code updates.

The NNS would commission a trusted code reviewer, they would perform the review, submit some sort of proof, then the community would vote to issue the ICP. Or the payment could be issued first, not sure on the details.

An NNS treasury sounds very appealing and possibly quite dangerous.

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Hi @dfisher,

as a read-across I would like to mention that the concept of a NNS treasury was also recently raised in the context of the Community fund (CF) in this post.

In particular the post also mentions that the NNS treasury is meant to be extendable to use cases beyond the CF

As you point out, there is a lot of design work (and risks) we will have to deal with it.
Nevertheless, also from my perspective, creating a NNS treasury is worthwhile pursuing.

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I’m glad @dfisher is kicking off this conversation. For the record, I am fully in favor of there being an NNS Treasury. In my perfect world that treasury would be funded with the governance rewards of inactive NNS participants (those not voting) using a modified version of @skilesare’s spam resolution idea (instead of not minting the rewards for non-active NNS participants, those rewards would instead be minted into the treasury fund). However, it seems like there’s no easy way to make this happen because there’s a lack of available developer time to develop and test the needed code changes.

One low-effort solution would be an SNS proposal for a CF-funded treasury. If that proposal passed the NNS, then the CF neurons would get tokens representing their donation to the CF-funded SNS treasury and those tokens would provide governance over the treasury. I believe this can be done standard with Milestone 2 of the SNS (ie, no additional code changes required). The downsides of this approach is the treasury would consist of only funds donated by the CF, there would be decreasing value of the SNS token (since it would only have rights to the treasury) and it’s likely that the broader NNS or ICP communities would reap much of the benefits of the treasury usage.

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Instead of 1% of maturity (i.e. inflation), another option is to redirect the ICP transaction fee (which is currently burned) into the treasury instead.

That would be more of a tax on actions taken rather than a tax on passive income.

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Since the IC has a reverse gas model, that would be more of a tax on developers and product teams than on investors.

I’m not a huge fan of taxing the creators in this small, but growing ecosystem - why do you think a tax on the transaction fee is preferable?

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Not necessarily preferable (and those costs can be passed onto users if necessary), but it’s another option. Personally, I’m undecided between the two.

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Hi all,

I would like to outline why DFINITY has voted yes on the proposal “Temperature Check Proposal – Introduce NNS Treasury.”

  • The current form of the proposal is high-level and comparable to an exploration feature. It does not describe a directly actionable implementation proposal.
  • This is reflected in the proposal stating that voting yes is understood to be “support further exploration of the NNS Treasury idea.” DFINITY is interested to participate & contribute to that discussion and hence voted yes.
  • We are conscious of the fact that there are many aspects of a potential NNS treasury which need to be defined and also several concerns in the community which need to be considered.
  • In parallel, we already had some discussions within DFINITY on whether the current grant process could be steered via NNS voting. These ideas could be taken up as part of the NNS treasury discussion.
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Using transaction fees is basically inflation as well. Tokens that were meant to be burned are now being introduced back into circulation.

What about this, we take 2% of maturity. 50% of maturity taken will be used for treasury funds and the remaining 50% will be burned. We’re still immediately introducing more tokens into circulation but we are also destroying tokens that would eventually be introduced into circulation.

Another thing I read are neurons that have been idle for certain time period let’s say since launch their maturity can be used to fund the NNS but that is also another form of inflation since those tokens could never be introduced back into circulation due to many reasons like say the holder died or they lost their keys. Honesty we could burn idle neurons that would be a form of deflation.

I honestly think all funding should derive from maturity. Funding for everything even node providers. I don’t think we should create new tokens outside of maturity. It be a form of tax which would be extremely minimal for all neuron holders.

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So I see the majority voted Yes, what’s the next step?

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So those who stake fund price growth for those who just hold without locking?

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I don’t think anyone is willing to ‘trust’ the NNS anymore for stuff like this.

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  1. the treasury idea, I like it

  2. just like the social funding, why not give neuron holders the free choice if they want to tax themselves, only that is fair

  3. ppl who decide to tax themselves, we should try come up with an incentive to the taxpayers, just like in the normal world, I pay tax but I get some benefit, like healthcare or a developed education system etc.

As without tax, I would not benefit of the state built infrastructure.

  1. idle neuron holders should not be penalized, these are individuals / groups who took a risk by investing and locking their funds, very early, there should be no discussion whatsoever on how to penalize them.

Just because someone is not participating doesn’t mean they should be treated worse than any other, the risk is the same for everyone.

It also would greatly damage the icp reputation, you have ppl invest and lock their funds, with no interest in participating because they have other topics to tend to in their life and give the trust to nns , the dao, to make the best decisions for the network.

the rules changes against them in the long run. If this happens, not one investor will decide to create a new long term running neuron.

Final thoughts:
IMO, we are starting to touch topics that shouldn’t be touched, long term neuron holders and fundamental tokenomics, these are the basic fundamentals, if we change these every year, then who will come to invest for the long run, the risk just grows and grows, beyond market price involvement. Deadly stuff.

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