DFINITY Foundation

Internet Computer Association

Synapse.vote (original)

Arthur’s Neuron (used to be cycle_dao)

ICDevs.org

CryptoIsGood

Anvil

ICPL.app

Inactive (Request Removal) - The Fools' Court

ysyms

The Accumulators’ Neuron

RawTech Venture

Paul Young

ICPMANUAL

8yeargangDAO

John Wiegley

Isaac Valadez

Krzysztof Żelazko

Always Rejects

Nicolas.ic

Smaug’s Neuron for Retail Investors

ICLight.io

Synapse.vote (NEW)

Taggr Network

CodeGov.org

Sonic AMM

Rakeoff.io

I believe that as NNS, we are establishing a DAO whose total governance remuneration should strive to be equal to its actual effectiveness.

Calculate daily rewards for voting after reaching a rigid level of 5% after 8 years since genesis based on a simple equation:

*<u>Daily Voting Rewards = Daily ICP Burned</u>*

*…or just modulated a specific amount/percentage based on the change in network usage relative to the change in the ICP price.*

## 1\. Objective

This proposal aims to justify the source on which we receive such and no other remuneration for voting. If the total rewards we spend on remuneration for ourselves were adequate to how much real value by our effective (or not) governing we currently provide, it would be a quite rational solution. The value of the network can be determined based on the current consumption of cycles and transaction fees. It’s also intended to ensure greater resistance of the ICP to price fluctuations.

## 2\. Background

ICP is burned through the conversion of ICP to cycles (utilized for covering computational and storage expenses by dapp and smart contract developers on the ICP), transaction fees (costing 0.0001 ICP per transfer of ICP between accounts), and fees from rejected proposals (proposers whose proposals are rejected incur a 10 ICP rejection fee).

Currently, theoretical inflation is scheduled to decrease to 5% within the first 8 years after Genesis using a quadratic formula.

**The newly proposed system would be based on 7 possible scenarios:**

- *The token price increases, but network usage is unchanged = our reward % slightly decreases.*
- *The token price increases, but network usage decreases = our reward % decreases.*
- *The token price decreases, but network usage is unchanged = our reward % slightly increases.*
- *The token price decreases, but network usage is increasing = our reward % increases.*
- *The token price is unchanged, but network usage increases = our reward % slightly increases.*
- *The token price is unchanged but network usage decreases = our reward % slightly decreases.*
- The token price changes (or not) proportionally to network usage = *our reward % is stable.*

## 3\. Why this is important

Our approach should be to act locally but think globally. Each activity on [ICP](https://dashboard.internetcomputer.org/) can be considered a success that increases our revenues, whereas a decrease in activity signifies failure, what should result a proportional reduction in our compensation to motivate all [NNS](https://nns.internetcomputer.org) participants to make more effective decisions in the future.

The mere act of voting should determine our personal rewards APY ([Annual Percentage Yield](https://wikipedia.org/wiki/Annual_percentage_yield)), but our collective effectiveness should directly impact the maximum APY we can achieve overall. Generally, the point is that the voting rewards should really be a reward for all of us - not just a fixed APY based on percentage of total token supply.

## 4\. Pros

- All of the burning elements in this proposal contribute to the value that our decisions genuinely bring to the community. We can liken them to the [gross domestic product](https://wikipedia.org/wiki/Gross_domestic_product).
- Burned ICP tokens, constituting 5% of the total ICP amount in circulation per year (an objective we are still far from achieving), add substantial value to all token holders. Consequently, a percentage of the actual gross product generated can be allocated as 100% rewards for voting, which wouldn’t only be inflation but our real profit.
- It would also be possible to set 5% as a fixed value and start using reward modulation from 2029, depending on whether the ICP price changes in line with network usage or whether it’s an anomaly that requires a certain change in the remuneration level.
- Reducing rewards in the event of deterioration in previous results would provide an incentive to improve efficiency, while increasing them was a form of reward for effective governance for all participants.
- The reverse gas model is a big positive, little doubt about it. How it relates to the ICP token price is questionable though. If a higher token price means a lower burn rate, it seems that any price growth will automatically be severely slowed. By slightly reducing the voting rewards available for disburse from neurons during bear market periods, we are able to effectively defend the market price against the risk of an inflationary spiral.

## 5\. Cons

- This proposal diverges from the popular concept, which states that "Developers should pay 100% of real hosting fees on ICP in the form of cycles." If we charge cycle combustion as our profits, all activities in our ecosystem should be treated as a common good and further subsidized through inflation.
- Whenever the price of ICP increases proportionately or at a slower rate using the network, increased voting rewards during better periods will create increased selling pressure, which may slightly limit future growth potential.

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*Let me clarify upfront that this proposal isn’t intended to immediately compel the [DFINITY Foundation](https://dfinity.org) to implement it upon adoption. Its primary purpose is to outline a gradual implementation plan that ensures satisfaction and fairness for all participants. By executing this proposal, it’s proposed to establish a maximum implementation time for the proposal in the form presented or adapted to the situation until 2030.*

Long Term R&D: Daily Voting Rewards Aligned with Daily ICP Burn