The Community-Led Governance of the Internet Computer
The reins of network governance are firmly in the hands of the broader community, which controls around 60% of the voting power.
Since the Internet Computer underwent “Genesis” and became a public blockchain running at web speed with internet scale, the reins of network governance are firmly in the hands of the broader community, which controls around 60% of the voting power.
As ICP token holders stake tokens to create neurons within the Network Nervous System (NNS), the permissionless governance system that controls the Internet Computer blockchain, they can participate in network governance by using their voting power to vote on proposals to continuously upgrade the Internet Computer. To date, 4,970 proposals have been submitted to the NNS and voted on by the community. Once adopted, proposals are automatically executed by the NNS. In return, community participants in network governance receive “voting rewards.”
As of June 8, 2021, participants in network governance are earning rewards that are as high as 28.9% on an annualized basis. For more details, see “Earn Substantial Voting Rewards by Staking in the Network Nervous System.”
The DFINITY Foundation and the Internet Computer Association will never collectively hold more than 50% voting power. At Genesis, the combined voting power between these two not-for-profit organizations is 40%. As more ICP tokens are distributed, and as token holders stake their tokens to participate in network governance, the collective voting power of the DFINITY Foundation and Internet Computer Association will continue to decrease substantially, enabling the broader community to take on an even greater role in the governance of the Internet Computer network.
The voting power of a neuron is calculated based on three inputs:
- The number of ICP tokens staked.
- The duration of the dissolve delay, which is up to 8 years.
- The neuron’s age, which is the time since the neuron was created or last stopped dissolving.
It’s important to note that anyone can independently verify the total number of votes at any time by viewing the most recent proposal submitted to the Network Nervous System on the NNS front-end dapp.
On May 10, at the Internet Computer’s Genesis launch, ICP token liquidity began propagating around the world, with hundreds of Early Contributors, Seed Donors, more than 50,000 Airdrop participants, various strategic partners, developer partners, and many more unlocking their first liquid ICP tokens.
Note, Seed Donors and Early Contributors received all of their ICP tokens in neurons at Genesis (24.7% and 9.5% of the Genesis token allocation) to immediately participate in the NNS. The Genesis token allocation is already available via Messari’s independent research report, which goes into more detail around the timing, tokenomics, percentages, and pricing of tokens.
Over time, token liquidity is impacted in a number of different ways:
- Across various token cohorts (Seed Donors, Early Contributors, Presale, Strategic, Airdrop, current and former employees, partners, developers, etc.) — ICP tokens will be distributed, or neurons will be dissolved, on a monthly or quarterly basis, where each individual and/or organization will decide to stake ICP tokens into neurons and receive voting rewards, convert them into cycles to pay for computation, or transfer them.
- Newly minted ICP token supply (inflation). There are two token minting types: (1) neuron voting rewards and (2) node provider rewards. For neuron voting rewards, new ICP tokens are minted based on a percentage of total ICP supply. This is 10% at Genesis and is slowly decreasing to 5% over eight years.
- Burning ICP token supply (deflation). There are two ways supply is burned: (1) converting to cycles to charge canisters or (2) for use in DeFi and transaction fees.
- Lastly, as previously mentioned, the DFINITY Foundation will responsibly distribute small amounts of its token endowment over an extended period of time to raise financing to support (1) continuously increasing the size of the Foundation’s technical staff and operations team, (2) continued investment in R&D, (3) and the expansion of developer ecosystem programs, such as the recently announced CHF 200 million developer program.
Finally, the DFINITY Foundation is well-capitalized to continue aggressively investing in R&D to join the broader community in making the Internet Computer more efficient, faster, and easier to use for developers, as well as supporting and accelerating the build-out of the Internet Computer ecosystem with developer programs. As a result, the Foundation did NOT sell ICP tokens from its endowment at or soon after Genesis launch. As previously stated, DFINITY is committed to responsibly divesting its token allocation over time to reinvest back into the Internet Computer and community.
While the broader crypto market wildly oscillates between boom and bust cycles, our thesis remains focused on rapidly contributing to the Internet Computer blockchain technology, accelerating network node provider adoption, growing the developer ecosystem, and providing leadership as the world transitions to an open internet. In that spirit, while we’re focused on the horizon, we’re also excited about the developments that will come to fruition over the coming months. The increased daily volumes and boost of institutional demand has set strong foundations for even faster developer adoption on the Internet Computer blockchain.
Despite Seed Donors divesting their ICP tokens, it’s important to note this community of early supporters helped bootstrap the Internet Computer project. Moreover, many Seed Donors were also early supporters of Ethereum, and contributed to the Internet Computer project in February 2017 using ETH, which at the time was between $6–10. After patiently waiting nearly five years, we are now seeing token diversification from Seed Donors, who had a very low basis, to the broader community. DFINITY is grateful to our Seed Donors for their initial faith in Dominic Williams and early team members, and look forward to seeing them contribute to early Internet Computer ecosystem projects. Unfortunately, a significant portion of the irresponsible token divesting stemmed from former employees. The silver lining is that these tokens are now spread across supporters that continue to strengthen the Internet Computer community.
Thankfully, the over 200 current team members whose brilliance launched the Internet Computer, and the Internet Computer’s many other financial contributors, including major lead investors, all have a “crypto favors the brave” approach, and a shared vision that moonshots such as the Internet Computer have the ability to change everything.