ICON, deconstructed

Part IV: Governance

In the first three parts of our series, 1) we introduced the ICON network at a high level, 2) took a look at the differences between ICON and some of the other leading blockchain technologies, 3) discussed the differences in the blockchain layers and the framework of ICON’s technology and 4) dove into some of the technical details of ICON, including scalability and our smart contract functionality. In Part IV, we’ll spend most of the time focusing on ICON’s unique on-chain governance design.

ICYMI: Here are the first three parts of the ICON, deconstructed series

Part I: What is ICON?

Part II: Blockchain Layers and Architecture Behind ICON

Part III: Scalability and SCORE

Governance

Blockchain governance refers to the mechanisms by which decentralized networks adapt and change over time. At a high level, governance is typically split into two categories: on-chain and off-chain. On-chain governance typically refers to protocol upgrades and changes to parameters that occur autonomously, pending the outcome of an on-chain vote. On-chain governance is unique, mainly because it provides a sense of accountability, transparency, and consistency not reflected in other more traditional governance mechanisms. Off-chain governance requires added social coordination of stakeholders, including miners, developers, and token holders sometimes leading to less democratic outcomes often determined by a smaller subset of stakeholders. There are pros/cons to both, but we won’t go into detail here.

The ICON design uses an on-chain approach with built-in incentive mechanisms (ICON Incentive Scoring System or “IISS”) to align incentives for stakeholders. Importantly, ICON’s DAO-friendly environment and the project’s philosophy of incentivizing community engagement to drive value set it apart from other projects.

Blockchains are dynamic and evolving ecosystems consisting of many anonymous market participants. To grow and flourish, clear and defined governance mechanisms are needed to promote collaboration in the ecosystem. And we’re happy to say that ICON is one of the few blockchains in the entire space to provide such an approach.

We’ll go into more detail below, but before that, let’s review the elected nodes known as Public Representatives or P-Reps who will participate in governance on our network.

What is a Public Representative (P-Rep)?

• A Public Representative (P-Rep) is a block validator on the ICON Network that participates in consensus and governance
• P-Reps consist of the top 22 Main P-Reps and 78 Sub P-Reps and are elected by ICONists (ICX token holders)
• 1 ICX token is worth one vote
• Main P-Reps vote on text and network proposals: needing 15 of 22 and 67% of the total delegations to approve

P-Reps earn rewards based on delegation and block production and have the following responsibilities within the ICON Ecosystem:

• Managing the network: Producing and validating blocks
• Governing the network: Monetary policy, network upgrades and governance changes
• Protecting the network: Maintaining security standards and preventing malicious attacks
• Growing the network: Impacting the growth of the network through on-chain and off-chain activities

In the current IISS design, Public Representatives receive representative rewards according to the votes they receive. Meaning all 100 Nodes on the network receive rewards. However, the main P-Rep Representatives (the top 22 by delegation percentage) also receive a block validation reward. See image below:

Total rewards are decided by the stake weighted average of the i_rep submitted by the main P-Reps. You can see the current P-Rep submissions here.

• i_rep variable is a governance variable that determines the size of the reward fund to be kept in the Public Treasury as determined by IISS
• All P-Reps submit the governance variable (i_rep) based on the number of rewards they deem necessary to fulfill representative responsibilities (i.e. managing, governing, growing and protecting the network)
• Only the submissions of the top 22 P-Reps are factored into the final calculation for i_rep. As noted above, the result is calculated by taking a stake-weighted average of each of the top 22 P-Reps’ submissions
• P-Reps control the ICX issuance rate (or inflation rate of the network) and the size of the reward fund through the use of i_rep

ICX is a governance and utility token, and as an ICONist, you participate in governance by voting for P-Reps that closely align with you’re respective interests and viewpoints. ICONists receive rewards for their participation.

Note: There is currently a proposal to update IISS which you can view here.

On-chain governance breakdown

Currently, P-Reps are the only parties that can vote on governance issues for the ICON network. And more specifically, only the top 22 P-Rep can vote on the outcome. As the network matures, we expect this number to grow.

Recall, the purpose of on-chain governance is to maintain and upgrade the protocol and adjust parameters. In the ICON design, text proposals, for example, are used for agreeing on protocol/parameter changes before spending time on development. Since these are all saved on-chain, there is an immutable history of decision making among Representatives.

Network Proposals are more advanced text proposals that do not require additional development and can update the network autonomously pending the outcome of a vote.

Below is an example of a network proposal submitted by the ICON Foundation to stabilize the network. As you can see it was approved by P-Reps and implemented at a specific block height.

Text proposals, however, are non-binding and rely on good-faith execution. For example, if a non-binding text proposal is submitted and approved by P-Reps, developers will work on the proposed changes.

Once the changes are developed and completed, a revision proposal will be submitted for a re-vote. At this point, it would be considered a network proposal and binding pending the outcome of the vote. Therefore, autonomously implemented at a specific block height (similar to the above example).

• Note, the Foundation is exploring the feasibility of making text proposals referendum style and available to all ICONists (both voting and proposing) — not just the Top 22 P-Reps.

Now that we’ve covered governance at a high level, we’ll move on to our native token ICX, its token economics, and how it’s used in our ecosystem. Stay tuned!