On May 10, the Internet Computer underwent “Genesis” and became a public blockchain, now running at web speed and with internet scale. The Internet Computer was produced by the largest multi-year R&D effort ever undertaken in the industry, which reimagined blockchain from first principles using novel cryptography.
The new architecture of the blockchain is one of many changes from the past. Within the Internet Computer network ecosystem, one community provides the dedicated physical devices (node machines) that host the blockchain, and another broader community manages the governance of the network — scheduling upgrades to the blockchain’s protocol, for example, or tweaking important economic parameters.
Anyone can participate in the governance of the network by staking ICP utility tokens (ICP tokens), and earn rewards that are as high as 28.9% on an annualized basis (as of June 8, 2021).
The Network Nervous System
The permissionless governance system that controls the Internet Computer blockchain is called the Network Nervous System, or NNS. It functions by processing proposals, which anyone in the world can submit, that it adopts or rejects after a short delay. It then executes adopted proposals automatically. The special node machines that are used to host the blockchain automatically follow every instruction from the NNS. The NNS can direct the nodes to run software updates to upgrade the protocol, combine into a subnet blockchain to increase network capacity, and induct new nodes into the network, among many such things. All actions result from the community expressing its desires by submitting proposals. In less than a month since launch, the NNS has processed more than 3,500 proposals, enabling the Internet Computer to be the world’s first fully adaptive, self-directed blockchain.
Get Started Using the ICP Wallet and Network Nervous System Dapp on the Internet Computer
The NNS dapp lets you engage in Internet Computer governance, create computation cycles, and send and receive ICP…
The NNS decides to adopt proposals through the activity of “voting neurons” that are formed when community members stake ICP tokens to participate in governance. Token holders lock staked ICP tokens in reward-earning neurons, from which withdrawals can only be made after a fixed notice period. The notice period takes the form of a “dissolve delay” that neuron owners can configure to be longer, but it can only be reduced by dissolving the neuron until the staked ICP tokens are finally unlocked. The dissolve delay can be configured up to a maximum of 8 years, and must be 6 months or greater for a neuron to be able to vote.
How Voting Rewards for Staking Are Calculated
Every day, the NNS calculates a fixed “neurons reward” according to a schedule, which it then divides among all eligible neurons according to their relative claims. For neurons that have participated in all votes, their relative claim derives proportionally from the number of ICP tokens locked inside and the dissolve delay remaining before the locked ICP tokens will be released (more marginally, it is also increased by the age of the neuron). Since many of the proposals submitted to the NNS are technical in nature, neurons can be configured to vote automatically by following the votes of other neurons, in an advanced form of “liquid democracy.” Neurons that vote automatically still receive their full share of the voting reward, as they enable the NNS to securely reach decisions quickly.
When neurons receive rewards individually, their “neuron maturity” increases. Once a neuron’s maturity is sufficiently large, it is possible to “spawn” a new neuron, which in expectation will contain a quantity of newly minted ICP tokens equal to a proportion of the locked ICP tokens, where the proportion is equal to the maturity number. The spawning process can take as long as a day, and is slightly non-deterministic in the sense that the actual quantity of ICP tokens obtained in the newly spawned neuron may be slightly increased or decreased from the expected amount, according to an inverse relationship with the volume of spawning taking place at that moment.
Neurons that have been configured with the maximum dissolve delay of 8 years are receiving up to 28.9% in annualized voting rewards (as of June 8, 2021).
How to Stake ICP Tokens as Neurons
Today, there are three ways to create and manage neurons and earn voting rewards by participating in governance:
- The NNS Dapp
The NNS dapp is served directly from the Internet Computer blockchain and is currently at the special address https://nns.ic0.app. You can learn how to get started here or view a more technical walkthrough here. The NNS dapp is easy to use, but it is a self-custody option that relies upon Internet Identity, so you should exercise some caution regarding how you manage your authentication, especially if you are a non-technical person.
If you are comfortable using the command line of the DFINITY Canister SDK, then you can use it to create and manage neurons in conjunction with popular HSM devices such as YubiKey (Ledger will also soon be available). Air-gapped operation is also possible. This is the more technical of the self-custody options. Learn how to get started here.
- Third-Party Custodians
We expect third-party token custody services to support Internet Computer neuron operation from mid-to-late June. If you’re interested, stay tuned for announcements.
If you wish to configure your neuron to vote automatically by following the DFINITY Foundation and/or the Internet Computer Association, then the following neurons can be used:
- DFINITY Foundation Beacon (Neuron ID: 27)
- Internet Computer Association Beacon (Neuron ID: 28)
The full mechanics of the Network Nervous System (NNS) and its purpose is explained in “The Network Nervous System: Governing the Internet Computer.”
Since Genesis, the DFINITY Foundation, Internet Computer Association, and their team members and affiliates have always maintained less than 50% of the total voting power within the Network Nervous System, ensuring control over the Internet Computer network remains fully decentralized and that governance actions express the will of the broader community.
Both the DFINITY Foundation and the Internet Computer Association are not-for-profit organizations, and they are both committed to reapplying voting rewards they receive by staking portions of their endowments to their specific purposes, including R&D efforts that support the blockchain technology used by Internet Computer network, as well as initiatives that support ecosystem participants.