Tokenomics Proposal [Community Consideration]

I just want to say i think this is a really great back and forth you have going. As someone who is observing the conversation I do take issue with a couple of your points:

  1. Why do you think we should try to learn anything from the tokenomic models of ADA/ETH/DOT? Is it because they’ve been around longer? Or are you saying their % staked is higher an therefore they are a better model to follow? Proof-of-Stake networks are still very new and I don’t think we can consider these models to be proven effective just because they seem appealing today.

That is definitely an interesting point. However, there is a growing number of people staking ICP for 8 years. Most of which aren’t dissolving. I don’t have a reference now but I will find one later and update. What this tells me is that we might consider changing the max lock-up to something like 3-4 years. To me the extra 4 years seems more irritating than beneficial. Would be great if @diegop could get someone from Dfinity to comment on why 8 was chosen.

I know we have talked about this topic quite a bit in the ICP Maximalist telegram channel. If you’re interested in taking part in a (respectful) discussion you are more than welcome to join the conversation. See @icpmaximalist on Twitter for telegram link.

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Great podcasts I must say

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Fair question. I actually don’t know their percentage numbers. If it comes to that eth is actually still pretty bad (~7 Mio Eth on ~116 Mio Eth in circulation). Lock up till after the merge (unknown) and already down at 5% annual return. Quite some risk for that return.
Cardano leads the statistics here I think. I’d have to research what the percentage staked is at the moment.

You’re absolutely right with the argument. Other approaches are still young and no one knows which one is the best atm. That’s why I try to give an overview and ask questions. Time will show which one has got the better tokenomics/governance. However if I compare some of them with ICP and watch the main arguments on why ICP is governed that way, I’ll always get the same impression:

We are far more concerned about a 51% attack than any PoS competitior. Much of our governance/tokenomics is founded on that. 6month lock up, discussion about neurons, etc.

And that’s my main point: I can’t predict the future, but this discrepancy is concerning me. If I look at Polkadot and Gavin Wood I’d be really cautious if I’d claim they’ll fail because they don’t have a 6month lock-up. They have good developers and tech as well.
So why do they think this can be done with 28day lock-up and we think we need 6 months lock-up?
Or why does Cardano think they don’t need a lock-up at all? By the way, all mentioned projects have got a higher market cap than ICP atm. So their holders have got far more to lose than we have, and yet we’re far more concerned about a 51% attack than they’re. Why?

Either they’ll fail miserably with their approach and ICP is right with the lock-up to ensure long-term governance, or in the end they’ll succeed and pressure on ICP will increase steadily.

I really don’t have answers to that, and no one has given me a satisfying one yet. Is it only because we are far more cautious? However if we bring in that argument I could also counter it again with centralization arguments: The longer ICP/Dfinity stays too cautious/restrictive/protective and fears giving up governance rights, the less likely its decentralization will become. Who takes part in the governance if it stays too protective? This could be a huge side effect.

And that’s why I think we should learn from other projects, or at least have a discussion about their approaches vs ICP approach.

That would be an interesting approach.

Thanks for your invitation to Telegram. I’ve already written with @ayjayem about it. I’m not the biggest fan of this messenger. Maybe there will be an own format anyway? There was a Townhall meeting on discord as far as I’ve seen.

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Hey @MichaelAnnh @LightningLad91

I definitely would not want to change the max dissolve delay to make it shorter.

The max neuron dissolve delay of 8 years is important because it discourages unlocking the neuron. It is more attractive to leave the neuron locked with an 8 year dissolve delay and liquidate ICP rewards indefinitely than it is to unlock a neuron with an 8 year dissolve delay so you can liquidate the total ICP in 8 years. Longer dissolve delays makes long term governance more attractive.

The long dissolve delay also creates deflationary pressure for ICP. Eventually we will see somewhere around 90% staking in 8 year neurons, which I predict people will chose not to reverse. Decentralization will occur because eventually it will make more sense for individuals to liquidate rewards than compound rewards.

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Is it really the number 8 that discourages unlocking the neuron or the promise of max rewards that discourages this?

I agree we need a long term dissolve delay for max rewards but what I think we’re all trying to figure out is if 8 is really the right number. What is the major advantage of 8? 4 years seems like a significantly long enough period of time to feel the affects of any bad voting history so why do we push it out to 8? Perhaps there is a reason for the 8 year lock-up but that isn’t apparent to me.

If we want to promote more long term staking I think reducing the max delay might help. Some people may want max rewards but aren’t willing to bite the bullet for 8 years. I think this is reflected by the lack of neurons being locked up for 4, 5,6,7 years. We could also make the argument that lowering the range from 8 years to 4 years would increase the rewards for smaller lock-ups, promoting even more staking. I want to reach the 90% staked goal as well but I don’t think we need to shoot for all neurons being locked for max delay. I think we should promote any level of commitment from 6mos+ and if the 4,5,6,7 year range is wasting away then why not re-work the system so everyone benefits?

This all really just comes down to why 8 years? Why was that number chosen. I really hope someone from Dfinity can chime in and provide this context for our consideration.

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Thank you for providing this perspective. I agree that we should continue to monitor the situation and adjust accordingly. I’m just not convinced we’ve given it enough time to determine if a drastically smaller lockup (< 6 Mos.) is warranted. I do think we should try to address the large gap in staking between 3 years and 8 years.

The great news is that the flexibility of the NNS allows us to make these changes when needed.

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Do we have any good responses from Dfinity on this? Why can’t we transfer ownership of a locked neuron from one address to another address? Here are scenarios I can brainstorm where this functionality is critical:

  1. Your original address is compromised so you need to generate a new identity and move your existing neurons to your newly created and secure address. This seems necessary from a security standpoint.

  2. You want to have a third party manage the handling of your neurons, how can you transfer full custody to the third parties?

  3. What if you want to sell a locked neuron? You need to be able to transfer the locked neuron to a buyer controlled address.

Does Dfinity have any plan to implement this feature on the roadmap? We need to be able to transfer control of neurons, whether they are locked for 8 years or not.

@diegop

Your third point is actually the reason transfer of neurons is not allowed, since a holder could vote against the interests of the network and then immediately sell, removing the risk of their stake losing value.

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This hardly outweighs the need for security.

Hi mac,

On your first point, we recognize that there is a need to deal with compromised keys and to safeguard the neurons controlled by them. No concrete proposal has been made yet, but we are continuing to think about this and review alternatives. We’re just not being hasty in rushing to a solution that could have other consequences.

On the second point, we are considering expanding the notion of a hot key to fuller set of privileges. This would allow, for example, granting permission to a neuron manager to spawn or merge maturity, without allowing the manager to start dissolving or disburse assets.

On the third point, such a proposal will likely never come from DFINITY, since it makes it possible for a disingenuous party to purchase a large number of locked neurons, use them to vote on a specific proposal, and then sell them. We want stakeholders to have a personal and enduring stake in what they vote for, since they incentivizing votes that have the best interest of the network in mind.

John

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Hi John. I would like to understand why Dfinity chose a max lock up of 8 years vs 4 or 5 years. Do you know of anyone that can explain that to us?

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