The "Goodwill ICP" Distribution Framework

Governance
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Hello everyone!

This is not a proposal, just an explanation I was asked to give on Twitter: https://twitter.com/IsaacValadez55/status/1586441373125083136?s=20&t=3NtCFUrfRvA2p_nrPxLQ6g

TL;DR

If the NNS needs to distribute ICP for “public goods”, it should delegate the distribution to neuron holders by giving them “Goodwill ICP” in portion of their earned maturity. This is normal ICP, but the neuron cannot redeem it, they can only burn it or anonymously gift it to an approved “public good” source.

Where did this idea come from?

I first mentioned it during this Twitter Live a few weeks ago, when discussing the NNS Treasury: https://twitter.com/icpjesse/status/1582401416366198784?s=20&t=5yIKQKKBQXH5KmTJZyvvTg

I then refined and built up the concept a bit more in person that weekend with other members of the ecosystem, right before the Code & State LA meetup started.

Why is “Goodwill ICP” needed? When would it be used?

This concept is proposed as the preferred way for the NNS to distribute ICP, should it be in the situation where it needs to do so.

I don’t believe an NNS Treasury should exist, but I don’t like tearing down the solutions of others without providing anything useful to the discussion, so I came up with the “Goodwill ICP” distribution method.

I strongly believe it would be highly problematic for the NNS to ever distribute ICP directly to sources, using proposals. I also think it would be bad for any party to directly receive ICP from the NNS, since there are no market dynamics to hold it accountable for how the ICP is used.

In general, I think sweeping unilateral proposal decisions are a poor mechanism in many situations, and that complex decisions (such as funding) should be delegated to neuron holders and therefore held subject to market dynamics.

Detailed Description

  1. A DAO, foundation, or industry association would form, and submit a proposal to become an “approved goodwill ICP recipient”. This would be similar to the process for becoming a known neuron, though ideally more rigorous. These entities should either fund public goods across the ecosystem, or directly provide them.
  2. Any normal neuron can be delegated Goodwill ICP to gift out to NNS approved recipients. Neuron owners would select approved recipients to automatically gift their Goodwill ICP to, similar to how they would select neurons to follow. These gifts should be 100% anonymous so that nothing can be given in return. This should help reduce collusion, kick-backs, and gaming of the system. One default recipient would be a “burn” wallet address, so neuron holders can choose a reduction in inflation as the public good they would support.
  3. The “Goodwill ICP” that’s actually redeemable by an Approved Recipient would be quadratically weighted, so they would actually get less then they were gifted depending on how much in total was gifted to them in proportion to the other possible recipients (with the difference being burned). This means no whale public good funds would be able to hog all the Goodwill ICP and become a centralized power, and it also motivates neurons to diversify their recipients, especially by supporting smaller funds so that their goodwill ICP stretches further.

In the end, this means that market dynamics from the neuron holders would determine which public goods get funded. If a recipient does a bad job supporting the ecosystem or keeping promises, then neuron holders can remove their support. If a recipient starts getting a lot of funds, it requires a reduction in inflation since most of the gifted ICP will be burned (due to the quadratic balancing explained above).

ICP Sources

  • “Abandoned ICP” - (For the record, I am against this) In a nutshell, neurons are currently earning the rewards they were promised + the rewards non-voting neurons would have earned if they had voted. While I would prefer to see the “un-earned” ICP never be minted, if it was minted with the purpose of public goods, then I think allocating it as “goodwill ICP” for the neurons which are already currently receiving it would be the fairest way to distribute it to public goods.
  • DFINITY - They could use Goodwill ICP to delegate the distribution of some of their grant funds to the community, rather than distributing it all directly.
  • Public Good Neuron - The community could raise funds (using an NFT collection or something) for an 8 year neuron which can only be controlled by the NNS. We should add an “abstain” voting option (this is another proposal I’m planning), and then have this neuron always vote “abstain” so that it can earn maturity without impacting governance outcomes. Then this maturity can be distributed as Goodwill ICP for funding public goods.
  • Neuron Owner’s Choice - We could give neuron owners the ability to select a percentage of their maturity that they could automatically receive as Goodwill ICP, and then they could have this gifted however they wish. This may be good for tax reasons, or simply because they think reinvesting in the ecosystem will be the best way to grow the value of their ICP holdings.
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A lot of good stuff here!

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I still like this idea a lot. Thanks for documenting it in more detail. I’m looking forward to seeing what kind of feedback it gets from the community.

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We should be able to donate to this

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Hi and thx for the work you put in to come up with a possible solution.

I like the idea and I have a few questions.

  1. Is it necessary to convert the abandon icp to “good will icp” or community icp so to speak?
    They should never be minted in the first place. Lets keep it that way. It is just bad!

Lets have a clean solution. If someone votes or delegate actively every x month its vote to someone else, then he or she shall be compensated with minted icp.

  1. DAO fundation do it as charity work?
  • can they pay themself a salary for their work?
  • who decide it to redeem the “good will icp” ?
  • is it a non profit org?
  1. Is it necessary that the staker shall get good will icp ? It is much better when they donate some of their rewards to a dao fondation. Lets keept it simple at first and see if additional “good will icp” are needed. Every additional icp creates an inflation and this must be compensate. Inflation is a bad instrument to fund projects.

By the way, the idea to give the staker the power to donate some of the minted icp rewards to a fund is good. This is also done in other projwlect in similar fashion.

  1. How to cope or not to fall into micro management ?
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Abandoned ICP, to my understanding, never needs to be minted in the first place. Personally, I’m with you and would prefer it stays unminted.

So the fund or organization would need to make it’s business model clear and get strong support from the ecosystem to gain (and possibly even maintain) it’s “Approved Goodwill ICP Recipient” status. In many case, I’m sure it’s appropriate for them to use the funds to pay salaries and other expenses. If people don’t like how they intend to use the funds, then they can send their Goodwill ICP elsewhere.

The whole “Goodwill ICP” thing is about giving neuron holders ICP they can only gift to public goods, otherwise it’s just a normal airdrop/maturity. However, I agree that the best way to start is simply to enable the gifting of normal neuron maturity. If this isn’t enough to cover needs, then perhaps it would make sense to start building out a full Goodwill ICP implementation.

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important remark
I think this need to be described in more details. It opens the possibility to misunderstand it.

The foundation DAO is responsible to select the most promising project (top 3, top 5, etc.) Right? Are they also responsible to decide how much the project shall be funded ?

In this case, the decision why project x is funded with y dollars and not project z must be clear/transparent to all stakers (keyword: Detection of malicious behaviour)

Fair distribution is not always the best choice, but for starter it can be used and adjusted afterwards.

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Well it can be structure however is best. A recipient may not even necessarily be a fund that gives out grants, it my be something like Departure Labs.

Well, I haven’t even fully defined it, lol. Basically it’s just a balancing measure, in the spirit of quadratic voting (except in this case funds are being received, rather than votes).

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The main problem of the ICP is its inflationary. The icp, which was $750 a year ago, is $5 today. If ICP inflation will continue like this, after a year there will be more ICP everone, but the price of ICP will be $2. At that time, the wisest thing to do is to close the ICP to prevent inflation.
. Burning is in everyone’s interest.

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Well there were a lot of reasons for the token drop, inflation has basically been the same the whole time so I don’t think that’s been the core driver.

That said, I am against inflation by the NNS. Depending on where the ICP comes from, the Goodwill ICP distribution method may actually be a deflationary force on the tokenomics.

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To summarize your proposal to make sure I understand it. The core components of your idea can already be achieved today with the following steps.

Step 1: I create a 8 year neuron.

Step 2: I market my neuron in the forum and elsewhere, and ask community members to donate their ICP to my neuron. I say “I am good at allocating ICP, trust me for reason x,y,z. If you send me ICP i will use it to fund x,y,z type of projects”

Step 3. Some people are convinced by my promises, and they send their ICP to my neuron.

Step 4. I receive ICP donations from the community to my 8 year neuron.

Step 5. I decide who I want to send the maturity from the donated ICP to, pay myself a salary, and manage the distribution of funds as i see fit.

The only missing pieces which would require changes to how the NNS currently works:

  • The creation of a special Permissioned “Goodwill Neuron” type that can only burn or gift ICP. Ie it can’t be dissolved, and requires NNS approval to be created. The NNS approval would require me submitting a proposal to the NNS explaining why I am good at allocating ICP and trustworthy enough to control and create my own Permissioned “Goodwill Neuron”.

  • The creation of an “NNS Approved and whitelisted ICP recipients” who are authorized to receive funds from “Permissioned Goodwill neurons”. As the owner of a special Permissioned “Goodwill Neuron” I would only be able to distribute to a pre NNS approved list of recipients. For people to be added to this list, they need NNS Approval, which can be received by submitting a proposal explaining why they are trustworthy and should be able to added to a whitelist and allowed to receive funding from Permissioned “Goodwill Neuron” and are trustworthy".

  • Implementation of a quadratic funding algorithm to adjust how much funds can be receive by certain whitelisted recipient.

  • debate over various ways of funding the special Permissioned “Goodwill Neuron” (either by donation, dfinity, public good neuron, abandoned icp, etc.)

Did I miss anything or is this an accurate summary?

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For starter, forget the idea of using abandoned icp for funding.

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Who decides how much you get?

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Are not required at the moment. At first it can be performed based on rewards only. Maybe the rewards are converted into good will icp. But I like it to keep things simple and stupid at first. Just minted icp donated by stakers.

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Yeah that’s what I was thinking. No special neuron type needed or anything to be a Goodwill ICP gifter. It’s similar to the Community Fund model, but I think that’s separated for tax reasons, and since gifting is already a tax exception I don’t think that’s necessary for Goodwill ICP.

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So probably like every 6 months the automatic gift settings are reset for neurons and Goodwill ICP recipients will need to submit a proposal to maintain their status as an eligible Goodwill ICP recipient.

In this proposal they should explain what they’ve been doing with funds and argue for why they should keep their eligibility. If the community thinks they are wasting ICP (or not being transparent regarding it’s usage), the recipient will either lose their eligibility to receive Goodwill ICP (the renewal proposal is rejected by the NNS) and/or gifters will simply start giving to other eligible receivers (normal market dynamics).

This covers things like salary without requiring micromanagement or specific built-in restrictions (which would over-complicate things). If you pay yourself too much, you risk upsetting and losing all your donors.

While the public good receivers of Goodwill ICP are nonprofit, they do need to be competitive in terms of providing some type of value to the ecosystem. Otherwise, why should anyone gift them ICP?

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@aiv
I agree with you that there shouldnt be a treasury, and I’d also like to see the unrewarded never minted.
Could you elaborate more on why you think that the NNS should never distribute directly to sources?

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Salary
We could use some kind of agent model.
If the treasury manager find a good project which becomes sucessfull, he get paid for the effort of selecting a successful project.

Salary based on success
It should also be clear how high their salary is. To hinder any rug pulls.
One can overestimate their ability and say I pay myself 1 million dollar salary for every successful project. In that case he or she should try to work for blackrock.
If the opportunity exits, then it is going to be exploit by :100:%.

success as measurment
What are the key properties or measurment on which a decision can be derived whether a project is successful or not?
Who makes the decision ?
Idk, but that should be approved through a proposal.

Selecting a fund manager
Is anybody able to get the role or some criteria has to be met?
The why arguments should be very good formulated. Not only that, it must be transparent where the icp (and how much) is forwarded to a project. The project who gets funded has to do some meetings on regular basis too and provide information about their progress (as DFINITY is doing it right now) to hinder rug pulls.

The more I think about it the more complicated it gets.

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I agree with starting with this much simpler implementation, it may be enough. Key to any kind of “donations” platform IMO is lack of friction. It must be incredibly easy to divert your rewards to other neurons, otherwise many people who might give will just decide not to.

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Exactly, that’s why I didn’t make this a proposal. I suspect simple, automatic maturity gifting would be enough to meet most needs.

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