Incetivising BTP assets through staking

tldr: ICON is on the verge of releasing its interoperability product, for ICON to have great network effect, it should attract strong liquidity. At the same time, ICON has a high number of staking, many of which seem to be ‘sleepers’ and not engaged, this proposed method, will incentivise the three important components; Interoperability, Staking and Engagement (for ICON).

DPOS is a voting model that involves Staking rewards as an incentive for users to stake their tokens in return for voting for nodes to act in correctness. After a certain amount of stake is voted by the community, for example 51%, the network is deemed to be secure and therefore, the rewards distrbitued can negatively outweigh the demand for security on the chain.
Additionally, ICON lacks any mechanism to reward ‘engaged’ users over ‘sleeper’ users, as voters/stakers are still rewarded if they are staked/voting to a node that has been turned off for years. Also stakers are rewarded if a node has no bond.

Promoting ICON as an interoeprability hub
The best way to promote ICON as an interoperability hub is by incentives. Although BTP will give interoperability several usecases such as Arbitrary Call Service, this does not guarantee a long-last network effect, that is because no value is necessarily built up for a user to ‘bound’ to stay there. Dapps can switch to future solutions. On the other hand, ‘trapping’ value on the ICON chain will give BTP and ICON a better footholding as an interoperability strong hold.

Proposal

To promote; staking, engagement and interoperability. I propose we redirect part of the staking rewards (eg. 10%) to liquidity pools that bond sICX (staked ICX) with - only strong cryptocurrencies - eth and btc. eg.

sICX - ETH
sICX - BTC

this would enocurage the use of ICON as an interoperability hub, promote BTP assets, staking.

This can be done through two ways:

  1. A seperate dapp that incentivises these pairs

OR

  1. Incentives are sent to existing DEX’s on ICON that enable sICX-ETH and sICX-BTC pairs.

This will be voted on by the community.

As a result of this, staking $ICX, interoperability, BTP assets and engagement will enhance in the ICON ecosystem. It will also help allieviate the use of Market Makers as it enhances engagement and usecase for the product. Similarly, more arb opportunities by the most used tokens and most valuable tokens will open up for the sICX token.

Hey, I’ve carefully read this 2 times but I don’t have the necessary knowledge to comprehend the ramifications and long term consequences of that incentive mechanism so I can’t give a direct opinion.

What I can say is that paraphrasing Warren Buffet, a business usually creates more value when it’s earnings (in this case emissions) are re-invested instead of distributing dividends to its investors. Basically the business is compounding back to itself.

Having said that, we already have a significant portion of inflation directed to self-growth trough CPS, which is pretty cool and unique in the industry. Using more inflation to compound into ICON is something I could support but we also need to consider staking rewards as a form of marketing, some people (probably a lot) use staking reward APY as a very important investment decision.

Another thing to consider is security. While sICX is a key part of ICON ecosystem, is it a good idea to promote sICX at a protocol level? sICX use will keep growing based on demand, but promoting it at a protocol level leaves the network exposed to smart contract risks. Taking it to an extreme, if 100% of stakers are using sICX the entire blockchain is just a hack away from collapse.

These are the 2 considerations I can add: Staking APY as marketing / sICX security risks. Overall I’m not against of touching some (probably a small part) of inflation to further compound back somehow.

This is something we’re actively discussing and will hope to have a proposal out very soon to fix this issue.

I’m still trying to think through your proposal a bit more, but my main concern is this coordination issue. I think it will be very difficult to coordinate these votes and the logistics behind them.

One other concern is what @RooK5677 mentioned regarding smart contract risk. I believe there is currently a discussion occurring in the Balanced forums regarding productizing sICX, which would mean we are now talking about directing a % of inflation towards at least three different teams and sets of smart contracts (sICX, Balanced & Convexus).

Overall I agree with your stance that incentives are needed for our hub to attract liquidity and will continue to think of ways to implement these incentives along w/ you.

@RooK5677 CPS does not incentivise Capital into ICON directly, only the building of dapps, for example, one can fork a dapp on an evm chain, but recipe for success is liquidity incentives. A great example of the need for liquidity incentives is that all the major chains that ‘mooned’ and saw great traffic on their chains in the recent bull-run all had big incentive programmes.

I disagree, staking no longer holds the ‘absorbing’ power it once did, people have seen their tokens drop in value by 75% would not hold a token to gain 7% in token value, whilst their $ value drops by 75%. It is not a rational economic decision. The crypto industry has matured more, from experience of governance tokens on dapps. Also other designs of Cosmos adopting ‘delegating’ without locking in funds, https://twitter.com/zmanian/status/1480494458592534531
Nevertheless, my proposed strategy incentivises people to stake more.

Sure sICX has smart contract risk, but I wouldn’t put that as road block, social consensus always wins and a hardfork wouldn’t hurt (I don’t see the SC too risky). Additionally, smart contracts are tested and tried, they start to become standard and more rigorous.

If the worry is with regards to the staked icx being used for proposal changes, we can put a timer on proposals to activate.

@shikamaru

Coordination doesn’t need to be constant on a venture like this, only when initiating it and stopping it, this is because the rewards and pairs stay constant.