IISS is the ICON Incentives Scoring System, originally designed and detailed in a yellow paper released on July 24th, 2019, by the ICON team. I described the current IISS system and areas of improvement in Part 1 of this series. Part 2 highlights the new IISS 3.0 and the advantages and growth I think it will bring to the ICON Ecosystem!
Motivation for IISS 3.0:
It is important to understand the background and current status of the ICON ecosystem in order to fully appreciate the changes in IISS 3.0. Recall from Part 1 that the IISS 3.0 Proposal outlines some shortfalls in the current system: “Issues that have become apparent include vote buying attempts, voter apathy/stagnancy, excessive competition leading to emotionally charged infighting and instability in the social media communities, excessive advertising/self-promotion in the public channels, a lack of clear incentives to collaborate vs compete, and a lack of direct rewards for direct contributions.”
IISS 3.0 aims to improve and fix these issues through a multi-faceted approach: creating a Contribution Proposal Fund (CPF), making changes to P-Rep rewards, initiating a bond requirement for P-Reps, and enacting rules to enforce active on-chain Governance.
Public discussions around IISS 3.0 began on November 15, 2019, on the ICON Forums. These discussions between ICON, P-Reps, and community members led to the IISS 3.0 proposal, which was published on the ICON Forum on March 11, 2020. After further discussion, the ICON team took into account much of the feedback from different P-Rep teams and the ICON community. The ICON team made modifications and put forward a revised IISS 3.0 proposal on April 19, 2020. This proposal was well received as beneficial for the ICON ecosystem. The proposal was put forward as a Governance Network Proposal, voted on and approved by P-Reps on April 23, 2020. The voting was impressive with 100% of P-Reps votes in favor of the proposal (note that the voting ends when enough votes are committed to make a decision). This is why the proposal shows 77% agreed, and not 100%). The statistics for the proposal vote are shown below:
The approval of the IISS 3.0 Proposal paves the way for the design and code of the required changes to begin. ICON estimates the changes to be implemented in 4Q2020. Let’s dive into the changes that are coming to the ICON ecosystem with IISS 3.0!
Contribution Proposal Fund (CPF):
The CPF is a fund to reward direct contributions to the ICON ecosystem. Anyone can submit proposals to contribute to ICON through the CPF. The CPF will hold up to 1,000,000 ICX in a smart contract, and will be a cornerstone of continued growth for ICON! Having seen the projects that have already been working on grants these past few months (accessible through the ICON Forum Grants section), I am very excited about the potential projects that will bring even more growth to the ICON ecosystem through the CPF! The ICON Main P-Reps will manage the CPF and determine which proposals are approved or denied. P-Reps will pay a portion of their rewards to the CPF to provide stable funding and incentives for CPF projects. By funding the CPF from P-Rep rewards, the ICON ecosystem adds a key module for direct contribution without added inflation. The flipside of this is that P-Reps will in turn have their rewards lowered. However, P-Reps can also apply to the CPF to be funded for their contributions to the network as well.
The CPF takes the place of the Ecosystem Expansion Projects (EEP) and DApp Booster Program (DBP), which were described in Part 1 of this article. Adding the EEP and DBP programs as originally planned would have added more inflation to the ICON ecosystem. Further, ICONists would have had to vote for projects in the EEP and DApps in the DBP, in addition to P-Reps, in order to receive full staking rewards. This would have added a lot more complexity and time requirements to ICONists to receive rewards and stabilize the network, which is one of the main purposes of staking in the first place. Lastly, having the Main P-Reps provide oversight to the CPF and putting rules to enforce active on-chain Governance will help ensure that CPF projects are properly vetted and managed.
Changes to P-Rep rewards:
P-Rep rewards have been reduced in order to fund the CPF and maintain stable inflation. 10% of all P-Rep rewards will be allocated to the CPF. Additionally, any P-Rep with over 1% delegation will allocate the rewards from their delegation percentage raised to the 1/4 power to the CPF, and block production rewards are removed. Essentially the new reward structure is analagous to a tax system, with every P-Rep contributing at least 10% of their rewards, and higher ranking P-Reps paying much more. In the case of Ubik Capital, we will be giving about 37% of our rewards (if the changes were implemented today). The fact that the Main P-Reps voted 100% in favor of IISS 3.0, knowing they are going to be taking such a reduction in rewards, speaks volumes to the belief and support they have for ICON, as well as the confidence in the growth that IISS 3.0 will provide for the ecosystem! The current reward system and new rewards under IISS 3.0 can be seen in the figure below. The full changes and equations are detailed in the IISS 3.0 Proposal
P-Rep Bond Requirement:
This requires a minimum ICX bond of 5% of the vote delegation received by P-Reps. The intent of this bond is to lower the benefit of vote buying, require P-Reps to have “skin in the game,” and also provide a method to enforce P-Reps are actively participating in Governance, one of the primary roles of P-Reps (in addition to running and securing the ICON network). If P-Reps do not post their full bond, they will not receive full rewards, based on votes. The bond percentage posted by P-Reps will directly influence their ranking and rewards. In this manner, it will make vote buying less profitable, as a P-Rep engaging in vote buying would need to increase their bond and would not have as much ICX to pay the voter. While most P-Reps already have a vested interest in ICON, this bond will provide even more incentive to P-Reps to grow the ecosystem!
Rules to enforce more active on-chain Governance:
There is currently no enforcement for P-Reps to participate in on-chain Governance. There are only penalties for Main P-Reps who do not properly run a node and secure the network. This is unsatisfactory, as Governance is a main responsibility of P-Reps and should be enforced. IISS 3.0 does this by adding a penalty to P-Reps who miss a network proposal vote or miss a contribution proposal vote. In adding this feature, votes will no longer close once the decision has been approved, allowing each team to express their Governance position through voting, and ensuring every Main P-Rep participates in Governance! Additionally, the timeline for network proposals has been increased from 1 day to 5 days.
IISS 3.0 presents some very impactful changes to the ICON ecosystem! The changes were thoroughly discussed, and I believe they will truly benefit ICON and provide more growth and stability for the ecosystem. The new system provides more avenues for contribution to the network, through the CPF, without additional inflation. The bond and enforcement of Governance will ensure P-Reps take a more active role in Governance. I appreciate everyone who voiced their opinions in this matter, and especially ICON for putting the changes forward and providing the implementation for them. Im looking forward to IISS 3.0 and a bright future for ICON!
Disclaimer: Not financial advice. Cryptocurrency and blockchain investments are high risk, can incur substantial losses, and are not suitable for everyone. Please consult a professional before considering investment in any cryptocurrency. This article does not encourage or support any specific investments, use of applications or technology, or financial direction. Opinions are my own. This article is for informational purposes only and should be verified and validated externally for 100% accuracy.