Many ICONists have only basic knowledge of how ICON’s penalty system works and are afraid of the coin burn. Many still avoid staking and voting altogether out of fear. But is it really that bad? Let’s take a closer look at how this works!
“The ICON Network has included a penalty system to ensure the security of the network and further align the incentives of both ICONists and Representatives.” (pg. 30).
What is Term and how to read Productivity
Term — this is basically one day on the ICON blockchain and consists of 43,120 blocks, with an approximate blocktime of 2 seconds each. During the first block of each new term I-Score (staking and P-Rep rewards) is distributed and the Main P-Reps for the current term are appointed.
Productivity — is the success ratio of blocks produced or validated by each P-Rep. Productivity for each Rep can be found on the ICON Tracker. Only Main P-Reps are rated for this.
Validation Penalty
Affects: Main P-Reps
If a Main P-Rep fails to produce/validate 660 blocks in a row, they are excluded for the rest of the current term and replaced by the next Sub P-Rep. This results in monetary loss for the Main P-Rep as they are not compensated for the rest of the term, with some top P-Reps missing on over $2,000 in revenue for a single day of downtime. This penalty does not affect voters.
Low Productivity Penalty
Affects: Main P-Reps, ICONists
If the productivity of a Main P-Rep drops under 85%, this P-Rep is immediately banned and their voters suffer a 6% coin burn on the ICX voting for this P-Rep. Each P-Rep has a buffer of 86,240 blocks to produce/verify before this penalty is applied.
Luckily, this is very unlikely to happen thanks to the Validation Penalty — making it very difficult to accumulate enough missed blocks for the Low Productivity Penalty to come into force. You can refer to “Safe Days” in our Burn Penalty tool to see just how unlikely this is. This tool shows the number of terms (=~days) it would take for each P-Rep to invoke the Low Productivity Penalty. And as it’s quite obvious, most P-Reps have almost 200 days already, and increasing all the time. So for anyone to get penalties, they would need to shut down their servers completely over this period of time and manage to stay in the Top 22 as Main P-Reps, as the penalty does not apply to Sub P-Reps. The chances of meeting all those conditions are quite slim.
Disqualification Penalty
Affects: All P-Reps, ICONists
If a P-Rep does not fulfill their duties or -even worse- acts maliciously, any of the Main P-Reps can create a Disqualification Proposal. This passes when at least 15 P-Reps with more than 66% of stake-weighted vote agree within the same term. The penalty applies immediately when this threshold is met. Voters of disqualified P-Reps are subject to a 6% coin burn on the vote allocated to those Reps. Disqualification Proposals are a last resort measure and should occur very rarely. P-Reps will attempt to use all available resources to fix the situation and minimize any impact on voters before creating any Disqualification Proposals.
P-Rep Productivity Notifier
Still unsure? Our notifier tracks P-Rep performance and sends out email notifications whenever a P-Rep you are voting for drops below 95, 90 and 85% productivity. We will also be upgrading this tool to notify about Disqualification Proposals as well. Feel free to subscribe, it’s completely free!
In conclusion, there’s no reason to fear the low productivity penalty. Chances of anything EVER happening are extremely low. By the end of the network’s stabilization period, most of today’s Main P-Reps will have a safe period of over one year. And this number only increases by weeks every single day! If you’re still worried, there’s good enough tools (including our Notifier mentioned above) to notify you, and the community is also quite active whenever anything strange occurs. So don’t miss out, get out and vote!
PS: Coin burn is not active yet and will not be invoked during network stabilization period!
Useful resources:
IISS Paper 2.0: https://m.icon.foundation/download/IISS_Paper_v2.0_EN.pdf
Next Term Countdown: https://blockmove.eu/nextterm/
Governance page at ICON Tracker: https://tracker.icon.foundation/governance
P-Rep Reward Estimates: https://blockmove.eu/preps/
“Safe Days” from Low Productivity Burn: https://blockmove.eu/burnpenalty/
Overview of P-Rep proposals: https://icon.community/prep/proposal/
P-Rep Productivity Notifier: https://notify.blockmove.eu/
