Supercharging the Network Nervous System (NNS)

Wu-Tang Clan’s ‘Once upon a time in Shaolin’ album was once owned by the US Government having seized the single physical copy CD album (yes - only one produced in the entire world) from Martin Shrekeli, a former pharmaceutical company owner convicted for securities fraud, who paid (in an auction) $2 million for it.

Only just recently, it was revealed that this album was on-sold to PleasrDAO, ‘a collective [of defi leaders, early NFT collectors, and digital artists] that has existed for less than a year but has already built a reputation for acquiring high-profile digital works for an eye-watering $4 million.

So how is this relevant to supercharging the NNS?

Read on, and you will soon find out.

In the meantime, let’s explore the steps that can be taken now and in the near future to ‘supercharge’ the NNS.

STEP 1: LEVERAGE THE NNS

How has the NNS performed so far?

The first step is to leverage the NNS, which has already been running relatively well (with minimal downtime) since the launch of the Internet Computer in May 2021.

For those who are not aware, the NNS is the ‘brains’/central governing hub of the Internet Computer. It has (as of November 2021) processed over 25,000 proposals ranging from ‘upgrading node machines, updating the Internet Computer protocol, applying security fixes, tweaking economic parameters, forming new subnet blockchains to increase network capacity, rewarding node providers, setting exchange rates, etc.
Dominic Williams has liked the NNS to a ‘DAO 2.0’ (basically an evolved version of the traditional Decentralized Autonomous Organization). This is consistent with DFINITY’s vision of the NNS allowing the Internet Computer to be genuinely decentralized.

It allows the Internet Computer network to be governed in an open, decentralized, and secure manner where it has complete control over all aspects of the network.

A Brief Overview of How the NNS Functions

Before we learn how to leverage the NNS, it would be helpful to have a visual understanding of how the NNS works.

We can see from the above diagram that the NNS is comprised of 3 main components:

Governance Canister

This is where the Neurons (the ICP that you stake are residing in these neurons) and Proposals (suggestions on how the Internet Computer should evolve that can be made and voted upon by any neuron holder (stakeholder) reside.
Please take note of this canister as it will play an essential role in ‘supercharging’ the NNS.

Ledger Canister

This is where all the ICP contained within principals reside (and the amounts), including transaction history.

Registry Canister

This is where the configuration for the Internet Computer is stored (for example, a subnet contains four nodes, etc.).

Of the above canisters, the one most relevant for leveraging / supercharging the NNS is the Governance canister, where locked-up ICP reside (within neurons).

How do we leverage the NNS?

In the first few months, investors who have staked ICP in neurons on the NNS for eight years have seen returns of around 29% per annum (although this is likely to decrease over time).

Leveraging the NNS includes:

Depending on your financial circumstances, staking for eight years without dissolving your neuron until after four years has passed since you first started staking will ensure your neuron maximizes rewards, including an additional ‘age bonus’ (this effectively means you will be staking for a total of 12 years). The above table illustrates staking rewards in an easy-to-read graph (based on a recent Community Conversation). - Source.
Ensuring you ‘merge maturity’ regularly (be it daily, weekly, monthly). This ensures any ICP generated from staking is merged back into your neurons, increasing your voting power and overall future rewards. For more information on how merging increases rewards, check out this post - Source.
Where possible, try to stake into a single neuron instead of splitting up your ICP into multiple neurons. This will bring forward the time required to generate/spawn a reward. DFINITY has plans to ‘merge neurons’; however, the time frame for this to occur has not been finalized. - Source

If you have completed the above steps, you are well on your way to leveraging the NNS.

Step 2: VIRTUAL PEOPLE PARTIES (coming soon)

Over 1.4 million Internet Identities have been created in the 5+ months since the Internet Computer’s launch. It is also of no coincidence that the number of new users joining DSCVR and distrikt have also increased with bot-like/spam activity on these platforms becoming evident (more so since all the NFT airdrops that have launched on the Internet Computer). It would be best to go no further than looking at any recent post on DSCVR and distrikt to encounter one of these bots with numerous single-word comments and upvotes.

This has not gone unnoticed by DFINITY and, in particular Dominic, who has recently proposed various measures, including:

‘in-game captchas’ ;
‘virtual people parties.’

Features of Virtual People Parties

According to Dom, ‘a vast, automated, fully decentralized and open "people party", may run globally in weeks’ (subject to community approval on the NNS) to address the issue of bots/spammers on the IC and could include the following features:

Anyone can participate easily (no limits)
Participation is anonymous
Participation benefits include:
- Boost one neuron (whereby you get more voting power and rewards)
- Get granted special privileges by IC dApps (subject to whether these dApps implement this feature) including being allowed to access specific ‘portals’ on a social media dApp etc.
Banning of ‘bad actors’.

How could Virtual People Parties work?

So how would these people work in real life? A clue could refer to Bryan Ford’s paper ‘An Offline Foundation for Online Accountable Pseudonyms.’

Online anonymity often appears to undermine accountability, offering little incentive for civil behavior, but accountability failures usually result not from anonymity itself but from the disposability of virtual identities.

Based on Ford’s vision, these people parties could be as follows:

Users are randomly allocated to be in a group of say 5 to 10 users via Zoom or an online video conferencing portal.
There will be multiple groups of users attending different people party sessions simultaneously (as one person cannot be in 2 places or, in this case, 2 Zooms at one time).
These parties could be held regularly (monthly, quarterly, etc.).
Each user will verify each other’s attendance at a party against, say, a Principal/Neuron ID/Internet Identity by clicking a ‘verify’ button on the People Party dApp.
Once all attendees have been verified, the People Party ends. The dApp will automatically generate a Proof of Humanity/Attendance token/NFT (POA-NFT) (which is set to expire shortly before the next Virtual People Party), certifying that one person has been verified against 1 Principal/Neuron ID/ Internet Identity.
This POA-NFT generated could be used as a key to unlock bonus voting for up to one neuron and could also be used as verification for multiple dApps once (this is speculation for the time being).

Optional:

As an option, users could be required to ‘register’ for these parties by placing a small deposit (ICP) into, say, a Virtual People Party canister (if a person that controls many IIs happens to be placed into the same group of users at a Virtual People Party). The deposit paid is then refunded once the proof of POA-NFT is generated for the Internet Identity linked to a particular user).

Sources: bford arxiv people.epfl.ch proofofindividuality

How will People Parties minimize bots/spam?

Wouldn’t it be nice if we could all receive a Motoko NFT(all sold out at the time of this article) as a POA-NFT for being a verified stakeholder?

It is possible that dApps could allow users to sign-up without a POA-NFT; however, dApps could implement measures whereby dApp functions are limited unless a user has a POA-NFT. This will mean DSCVR or distrikt; a user could sign up and attach a POA-NFT to the Internet Identity used to sign up. This same user could still sign-up with another Internet Identity; however, the POA-NFT will not work with this new Identity as it has already been assigned to your earlier one, thereby negating the benefits of signing up to say DSCVR with a second Identity.

For example, suppose you have multiple Internet Identities for different types of dApps. In that case, you can use the same POA-NFT to verify your Internet Identity/pseudonym that you use for, say, DSCVR once (granting you special access/benefits to DSCVR not available to unverified users without a POA-NFT).

This will ensure that it will not be advantageous for a potential spammer/bot to create a new Internet Identity (in addition to the one that they have already created previously and verified at a People Party) for the following reasons:

The spammer/bot will have to wait three months before creating verifying a 2nd Internet Identity under their control at a People Party.
Even if this new II has been verified, the NFT linked to his old II would have expired, rendering his original II useless (he will not be able to login to any dApp given the NFT has expired).

So what can go wrong?

With technology progressing at such a pace, it could be possible for one person controlling multiple deep fakes to infiltrate multiple virtual ‘people parties’ simultaneously. This could be easily mitigated by holding real-life people parties (instead of virtual ones) requiring people to attend such a party in person.
Also, additional rewards for boosted neurons will mean that more ICP will need to be minted (and accordingly, we wonder how this would affect ICP’s tokenomics / price in the long run).

How does this ‘supercharge’ the NNS?

So, in addition to earning rewards from staking, stakeholders who have been verified at the Virtual People Parties could now potentially earn additional staking rewards from the higher voting power accorded to such users. This could be in addition to other rewards earned from dApps (that participate in this scheme) in terms of airdrops and/or discounted NFT purchases.

Finally, if you thought ‘people parties’ sounded familiar, this was also suggested as a requirement for node providers that wanted to host nodes under DFINITY's ‘Badlands’ concept.

If you would like to contribute to this discussion, do check out the DFINITY Reddit post.

The idea of the Service Nervous System or SNS has been floating around for some time now, more so, as one of the contributing factors to the open internet service (refer to this post).

Dominic has also posted about this on DSCVR in June 2021 regarding his vision for open internet services powered by the SNS.

Open Chat, DSCVR and Distrikt will all presumably become "open internet services" once the Service Nervous System/SNS feature becomes available soon. That means they will get their own governance tokens (i.e. equiv. NNS and ICP). In the long run, these governance tokens can become valuable since when revenue systems are incorporated, revenues can be shared amongst governance token holders (e.g. through distributions of cycles). Everybody will want to get their hands on these tokens!

The SNS could also supplement the grants given by the DFINITY Foundation to developers building on the IC. In this regard, some may have argued that the grants from the DFINITY Foundation are low compared to grants provided by other blockchain eco-system. In response to this, Dominic (in his recent interview with Charlie Shrem) noted that although the DFINITY grants were relatively small, the funds that could be generated through the SNS by developers will far outweigh the grants received from DFINITY (source).

Dom’s vision for the SNS being a ‘super DAO’ may become a reality soon as this will be the backbone of any Web 3.0 dApp on the Internet Computer.

As it is, DAOs have recently become popular again (think Uniswap and Maker, both of which have recently become DAOs). According to Deepdao*, which tracks DAOs and assets under their management (AUM), DAOs managed around $13.2B of assets in October 2021, which is a significant increase from the total AUM of $953m in March 2021 (source).

*DeepDAO does not provide information from all the DAOs in the considered ecosystems. Instead, it focuses on the most important ones and still covers a large number of them.

Given the role the SNS will play in allowing dApps to become open internet services, we should, at the very least, have a basic understanding of what the SNS is and how the SNS will work.

The above diagram illustrates the basic principle whereby the NNS will create and control the SNS, which controls a dApp.

The SNS** is created as follows:

A proposal is made to the NNS to form an SNS.
If approved, the NNS releases the SNS functionality to the developer.
The developer can then solicit bids from the community for a stake in their dApp via a closed auction using cycles (resulting in a single clearing price for the governance tokens).
At the end of the auction, the community is allocated a certain number of governance tokens based on the final clearing price, allowing the community to have a say as to the future direction of the dApp. It is envisioned that a majority of this stake is ‘locked’ away (with a small percentage available for immediate use/trading), preventing the tokens from being dumped on the open market, thereby ensuring the long-term success of the dApp.

Dominic has noted that SNS tokens should be released ‘on the basis of participation and contribution’ instead of on the basis of simply signing up where people leave the dApp after that (hence the proposal for a majority of SNS tokens to be staked upon release). This sentiment is also echoed in a recent tweet by Linda Xie whereby tokens are distributed to the ‘highest potential value users, higher token voting weight to those with a stronger reputation in the DAO’ (source). The dApp developer relinquishes control of the dApp to the community.

** the SNS is still in the planning stage with specifics being considered by the DFINITY team, having received feedback from the community and may change, so do keep a lookout here.

To find out more about the SNS and how it will work in detail, please check out these articles:

DSCVR

A decentralized social news aggregator built on the Internet Computer

The main benefits of the SNS to dApp developers and users include:

Allows developers to secure investments to grow the dApp.
Attract new users (to drive network effect to the dApp).
Allows users to own a stake in the dApp and govern how the dApp should operate/grow (for example, with updates/bug fixes) decentralized.
Reward users for early adoption/engagement with the dApp.

If you are interested in this, the following article will provide you with compelling reasons why decentralizing dApps wins and how to do it.

How does this ‘supercharge’ the NNS?

As the SNS is based on the NNS code base, the SNS could be seen as an extension of the NNS (in Dominic’s words, ‘a turnkey Super DAO).

In summary, the same investors who have:

staked ICP for eight years (earning 29% returns).
Verified their identities at a People Party.

Now have the option to purchase ICP (converted into cycles) and bid on SNS tokens that will allow them to have a stake in a dApp (and corresponding benefits from being a stakeholder of a DAO).

This is where things get interesting.

Dominic recently tweeted about a possibility whereby the NNS could put funds staked in the NNS to work by investing in dApps via the SNS. If this is well thought out, the NNS could eventually become a DAO having a stake in many DAOs. If you think Uniswap and MakerDAO are large, the NNS DAO will probably be even larger!

This concept is summarized as follows:

There will be the option to convert voting neurons into "community fund neurons" (Dom is expecting $1B+ of funding to be made available).
This will make the ICP staked inside them available for investment by the NNS into ecosystem projects via the SNS.
NNS will soon process proposals to participate in SNS decentralization auctions (this is a feature that is subject to community approval and may change), whereby voting rewards will be partly paid in tokens issued via the SNS.

How will this all work?

We imagine users who have staked on the NNS to vote on particular projects that they wish the NNS to support. This is similar to what occurs in projects outside the IC, including MakerDAO, which stakeholders recently voted to allow real-world assets/projects as collateral in its vaults (source: https://finance.yahoo.com/news/makerdao-governance-votes-real-world-054519171.html) or even Pleasr DAO which stakeholders voted to approve the purchase of Wu-Tang Clan’s ‘Once upon a time in Shaolin’ album for $4 million (source).

Further, instead of having to purchase additional ICP (converted into cycles) to fund dApps, stakeholders can instead choose to use a portion or all of their locked ICP in neurons (or possibly just their staking rewards) to invest in dApps via the SNS (partly in return for rewards in the form of tokens issued by the SNS and possibly ICP).

Questions that may arise

This concept is still very new, and further community discussion is required to determine the specifics as to how this will work. Some questions that may arise include:

How will this affect the ICP price if ICP will need to be sold/converted into cycles to participate in the SNS auctions?
What happens if a dApp fails? Does this mean that the staked ICP would not be available to be released upon maturity?

How does this ‘supercharge’ the NNS?

As the NNS will have a stake in dApps launched on the Internet Computer (via SNS), it would provide stakeholders of the NNS governing rights over some (or a majority) of dApps launched on the Internet Computer (together with the corresponding benefits from being stakeholders of these dApps). In summary, the NNS would be the supercharged ‘mother of all DAOs on the Internet Computer.’

CONCLUSION

The NNS is already rewarding its stakeholders with one of the highest returns on investments in any blockchain project. These returns will decrease over time; however, they will be partly offset by the additional rewards that may accrue from People Parties, SNS, and NNS investing in SNS tokens (if the IC community eventually approves these concepts), which will only serve to ‘supercharge’ the NNS.

And finally, we can get back to Wu-Tang Clan. If you were not aware, Wu-Tang Clan was a rap group formed in the 90s which reinvented the way hip hop was structured (whereby the group gave its members creative control and the freedom to negotiate solo projects with other labels, something that was a novelty back in the 90s when the group was created).

As for its single copy (making it one-of-a-kind) album ‘Once Upon a Time in Shaolin,’ it was produced over a number of years and was not released publicly. Instead, it was put up for auction in 2015. It was eventually sold for $2 million to a pharmaceutical CEO on the proviso that the album could not be commercially exploited until 2103.

The CEO was eventually convicted of securities fraud leading to the seizure of the album by the US government. As part of its efforts to recover funds, the US government put the album up for auction ending with PleasrDAO (a DAO formed to invest in NFTs who have acknowledged in their recent blog that Wu-Tang Clan is the ‘OG DAO’ ) purchasing the album for $4 million.

Wu Tang Clan were way ahead of their time, and if they were formed today, this album would have easily been minted as a NFT (with a timed released to the general public set for 2103) on the IC with the Clan potentially having their own dApp (which allows its owners/stakeholder to play the album or portions of it over time) launched on the IC with governance tokens issue via the SNS to its fanbase.

The concepts discussed here today in ‘supercharging’ the NNS are best summed up in the following tweet by Linda Xie:

DeFi built the foundation for NFTs to take off as it allowed assets to be exchanged without permission. NFTs enabled the growth of DAOs as there were more interesting, valuable things to govern. DAOs will lead to a major use of identity/reputation as we need to improve governance
— Linda Xie (@ljxie) October 15, 2021

If you have some spare time, the following articles provide a glimpse of what we could expect for the future of Web 3.0 and DAOs:

Why Web 3 matters 🧵
— Chris Dixon (@cdixon) September 26, 2021

If you have additional time, check out MakerDAO’s journey from a DAO to a Foundation and back to a DAO.

Could the DFINITY Foundation be headed in this direction?

Disclaimer: The views and opinions expressed on this website are solely those of the original author and other contributors. These views and opinions do not necessarily represent those of the Dfinity Community staff and/or any/all contributors to this site.