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?