In Progress: NNS Proposal to End the Imminent Unclaimed Seed Neuron Sweep

Dfinity is abstaining from this one, so please help with voting.

All, this is a quick update and explainer regarding an open proposal sitting inside the Network Nervous System, which is currently being voted upon. The Dfinity Foundation will not vote on this proposal itself, so it’s down to the community alone. At the time of writing, it could be decided in 16 hours. You can find it here: https://dashboard.internetcomputer.org/proposal/28756.

The proposal relates to unclaimed ICP from the “Seed” public fundraiser that Dfinity ran using the Ethereum blockchain on the 24th February 2017. In that fundraiser, anonymous individuals outside the USA could donate BTC and ETH to Dfinity (i.e. Dfinity Stiftung, or “Dfinity Foundation”, which is a not-for-profit organization based in Switzerland) using decentralized systems it created. When donations were made, the Ethereum smart contracts first marked the tokens involved to Swiss francs, and then allocated 30 ICP per Swiss franc donated to the donor (how crypto has grown in 4.5 years!). Those making donations had to use a browser extension that generated a unique secret “seed phrase”, from which a cryptographic key could be derived, and the donors had to save a copy so they could use it at network Genesis (which finally took place 10th May 2021, earlier this year) to gain access to ICP allocated to them, which were pre-installed in “voting neurons” inside the Network Nervous System governance system.

As commonly happens in crypto, for a variety of reasons, either immediately, or in the intervening years, some people lost their seed phrase, which meant that they couldn’t gain access to ICP the smart contracts allocated to them in consideration of their donation. Usually, when someone loses their key, for whatever reason, they lose access to their crypto tokens. However, Dfinity decided to help people in this position and designed a special mechanism into the network that was present at Genesis. Per the mechanism, 6 months on from Genesis (on November 10th 2021), this mechanism will sweep unclaimed ICP from Seed into a neuron controlled by Dfinity, with the idea being that Dfinity would verify claims and evidence from people who lost their keys, and then re-create new equivalent neurons for them that they can access. The original thinking was that the 6 month delay would ensure every Seed participant who was able to claim their neurons would have already done so, making it impossible for fraudsters to claim to have lost their key so they can lay claim to someone else’s neurons.

Regarding the solution originally planned, described above, there is a challenge. It has become clear that some Seed participants have not yet claimed their neurons, even though they have not lost their keys. Clearly, the network should not be sweeping the neurons of legitimately held but as yet unclaimed neurons to Dfinity, and subjecting their legitimate owners to the possibility that someone else might lay false claim to them.

If neurons containing ICP were swept to Dfinity on the 10th of November, and Dfinity thereafter inadvertently forwarded them to an illegitimate claimant, then Dfinity could become liable for the loss to the true owner. Therefore, in effect, Dfinity would have to underwrite every single owner whose neurons were swept to it. This would require Dfinity, a not-for-profit organization dedicated to the research and development of Internet Computer technology and catalyzing the ecosystem, to bear enormous risk unnecessarily — and it would be unfair to the wider Internet Computer community to gamble its endowment in this way.

In this proposal, the sweep will be cancelled generally with four narrow exceptions. These are four persons representing themselves accurately as individuals (i.e. while not being syndicates, say), where Dfinity has confidence in the legitimacy of their claims, who have engaged in the procedures once planned in a bonafide way, have accepted the process, have shown good moral character, and raised no flags with respect to the legitimacy of their funding or activities for the purposes of KYC and AML, and thus to whom Dfinity feels comfortable lending its support this one time (naturally, in the unfortunate event that the claims prove to be illegitimate, Dfinity would indemnify the true owners). This limited exposure is appropriate and far safer for Dfinity than the potentially huge exposure of a general sweep.

Perhaps in the future, the community, via the Network Nervous System itself, will decide how to handle other claims that are made. Dfinity believes that this is the correct way forward.

Separately to the above, you may have noticed a “community fund” button appear on neurons inside the Network Nervous System. I will write a post soon discussing what it means.