ICON’s Contribution Proposal System Explained

ICON

Mar 11, 2020

5 min read

ICON’s Contribution Proposal System Explained

Hi ICONists👩‍💻,

In this article, we’ll be giving you an extensive introduction to the Contribution Proposal System and the latest updates of CPS 2.0. The second ICON community paper regarding this system has recently been shared; therefore, we will provide you with everything you need to know to be able to share your opinion on its specifications and implementations.

🤓 What is the Contribution Proposal System

The Contribution Proposal System (CPS) is a governance and funding mechanism that is being developed to support contributions to the ecosystem. The CPS should enable any ICONist to apply for funding within the network, and the Registered P-Reps will decide to grant this funding. The funding mechanism of the CPS is still under debate.

🙋‍♂️ The importance of CPS

The significance of the Contribution Proposal System has two aspects. First, the CPS allows the ICON Network to grow extensively, by allowing different entities to receive funding. The CPS also contributes to turning ICON into a Decentralized Autonomous Organization (DAO).

Now, the second aspect of the CPS’s importance is the significant role within the distribution of wealth and power in the ICON Ecosystem. With the CPS, anyone who wishes to contribute to the ecosystem will have the opportunity to obtain funding from the network. This is unlike many other blockchain networks, where only those who verify and produce blocks receive such privileges.

One of the ways distribution will happen is through the Contribution Proposal Fund (CPF). The CPF will be managed by the Registered P-Reps and funding will come from the ICX held in the Contribution Proposal Fund (a smart contract on the ICON Network, funded with block rewards). The maximum size of the CPF will be 1,000,000 ICX, which can still change, however, as this is subject to voting on Network Proposal. The CPF is managed by the Registered P-Reps. however, since the network has the aim of improving its decentralization, the number of Registered P-Reps will be able to grow. And thus, the management pool of the CPF will as well.

The CPF brings the ICON network closer to decentralization. Notably, it equips it with a solid financing mechanism rarely seen in other blockchains, where most of the ecosystem financing is usually decided in a centralized approach with funds managed by the Foundation. In addition to giving power to Registered P-Reps, it is a great opportunity to incentivize these actors to pro-actively seek and look after projects building on ICON. At Stakin, we firmly believe that the CPF will spur the growth of a thriving ICON ecosystem.

Besides the decisions about the CPF, the Contribution Proposal 2.0 Paper illustrates that the ICON Network has made its mind up about Sponsor P-Reps. As part of the new application process, applicants must ensure the sponsorship of a P-Rep that is listed in the top 100, before submitting their Contribution Proposal. It will be the responsibility of the Sponsor P-Rep to stake 10% of the approved budget, called Sponsor Bond, into a smart contract that is held for the duration of the Contribution Proposal and returned at the end of the project. Whenever the proposal is approved, the Sponsor P-Rep obtains 1% of the approved budget as a Sponsor Reward. In the case of disqualification of the proposal, the Sponsor P-Reps investment will be burned.

With the Sponsor P-Rep mechanism and the 10% staked bond requirement, the ICON Foundation gives incentives to P-Reps to look for solid projects and conduct their own due diligence before submitting these to the community. But it’s not all about punishing the ones who would have submitted bad projects, as 1% Sponsor Reward will also be offered to the P-Rep who sponsored a successful project. With such an interesting economic mechanism, we can imagine that some P-Reps will start to offer value-added services in order to attract the best projects and sponsor them.

🧐 CPS 1.0 Updates

In the first CPS paper, we read that CPS will be based on delegation. However, shortly after that, this fact was undone. ICON also announced they removed the concept of DBP versus EEP, which we see come back in this 2.0 paper. Furthermore, there was decided that there would be only one general category of contribution proposals. Which can be used to fund DApps or anything else. A big debate subject was that ICON has suggested that the CPS will be a budget-based system; this means that individuals can submit a request, after which, the Main P-Reps review and approve or reject the proposal. It will work almost identical to the ICON grant program, with the differentiation of the decision-makers being the Main P-Reps instead of the ICON Foundation. Additionally, to redistribute wealth, it is possible that Main P-Reps will have to contribute to the funding of the CPS ICX pool.

💡 CPS 2.0 Updates

After closely going over the Contribution Proposal Paper 2.0, which can be found here, we’ve noticed the following updates apart from the Sponsor P-Reps and the CPF.

First, in regards to voting, all Registered P-Reps will be responsible for evaluating and voting on pending Contribution Proposals and re-evaluating Active Contribution Proposals. They will also vote on how to invest the funds in the CPF. Pending Contribution Proposals pass, with the same requirements as Network Proposals, at least 67% of Registered P-Reps must vote to approve and at least 67% of the stake-weighted vote (of Registered P-Reps) must approve.

The second update is that all approved Contribution Proposals need to submit monthly Progress Reports. In case they fail to do so, they will automatically be disqualified, with all consequences for the Sponsoring P-Rep coming with that. The decision to have progress reports as a requirement was made to increase the transparency of the network. Furthermore, it should increase active community engagement and participation in the ecosystem.

Thirdly, every approved contribution proposal is expected to execute the project in perfect accordance with the original proposal and should start to work as soon as they receive the first instalment payment. Moreover, proposals can be paused, when the progress report is unsatisfactory. Pausing will stop the funding for the proposal until the next voting period, Registered P-reps are responsible for this.

It is also possible for proposers to request an adjustment of the Contribution Proposal’s budget, for example, to change the scope of the project over time or account for ICX price changes. Requests can be submitted with their Progress Report, which will be reviewed during the voting period by the Registered P-Reps.

👉 Conclusion

While some discussion relating the development of the Contribution Proposal System is still ongoing, we felt that it is essential to share our opinion and why we believe it is vital for the ICON Network’s decentralized, distributed and autonomous future. The Beta version of this governance design eliminates the need for central authority within the decision making processes. It will be beneficial for the funding and therefore initiatives within the ICON network, and will bring us closer towards a true and fully decentralized ecosystem.

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DISCLAIMER: This is not financial advice. Staking, delegation, and cryptocurrencies involve a high degree of risk, and there is always the possibility of loss, including the failure of all staked digital assets. Additionally, delegators are at risk of slashing in case of security or liveness faults on some protocols. We advise you to do your due diligence before choosing a validator.

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