As demand for cycles goes up, more app devs will need to buy ICP which they can then convert to francs on the IC and each franc gives them 1T cycles. The ICP hodlers will vote (the NNS) to determine a “franc to ICP” ratio and therefore the number of cycles that are issued per ICP. I am curious what mechanism is going to keep them honest about this ratio. Short term ICP hodlers will want to issue as few francs (cycles) as possible because they want to drive up demand for ICP. Long term hodlers will be more honest or even issue excess cycles because they want the IC to entice more users with “freeware” before driving costs up. Long term hodlers get more weight to their vote.
Not having an adjustment for Moore’s law helps ICP hodlers at the expense of users and data centers if ICP holders select the most competitive data centers by paying a smaller ICP reward as Moore’s law allows data centers to operate more efficiently. Since app devs are pegged to cycles per franc instead of data center efficiency per franc, the IC becomes less competitive to other options in the marketplace.
The other method by which ICP hodlers may entice adoption with “freeware” before driving up costs is if they increase the burn rate relative to their reward.
If they peg the franc/ICP ratio honestly and burn cycles at the same rate as they & data centers get rewards (ICP creation) and if the franc has stable value, then the increase in ICP value increases linearly with the increase in cycles/day, minus the amount speculation has already driven ICP up, plus Moore’s law improvements if they they have no substantial competition. This seems like an excellent system with the Moore’s law being the only abuse of authority. But there are a lot of ifs that seem to require trusting the hodlers in the NNS.
Paying data centers in an amount of ICP that hodlers decide instead of directly in cycles is suspicious. This allows ICP hodlers to entice data center creation but then put the screws to them later. I do not know why some regions will be paid more than others unless it is prevent concentration in location with cheap electricity.
Letting hodlers govern seems to unavoidably threaten the type of abuse the IC is advertised to avoid. Saying NNS governance is “open” seems disingenuous if initial holders are >50% and their reward matches the burn rate and there is no other ICP inflation like an extra amount of ICP going to data centers. If ICP qty is held constant and some goes to data centers, then those owners might be able to eventually get voting control away from initial hodlers. But the only ones who deserve competitive entry into dislodging the initial hodlers are the users and app devs who are paying the cycle fees. The ones who actually need and use the data centers. But I did not see any mechanism that allows those who pay for the system’s growth to ever be able to govern the system. Selling cycles for ICP on exchanges does not give them the ability to eventually take control unless cycle creation exceeds ICP rewards.
To summarize, governance and data centers do not appear to be open like the internet so I think it’s marketing to call it “The Internet Computer”. It’s just a private company in the sense ICP is just another stock in which “we the people” can never gain a controlling vote. So far, the governance and data centers give no proof of decentralization. For this reason, we should buy ICP in order to become the new 1%.
To be excited about this as a world-changing tech, Dfinity or a competitor needs to eventually release governance to those who pay the most in cycles. It appears the 2-coin system obfuscates how hodlers may abuse users for capital gains.