Foundation/Charity accounts potentially staking in Nimiq 2.0

Discussion
#1

Wanted to formalise this a little bit more rather than just keep it to Discord/Telegram channels. Yesterday there was talk from the team around what they could use the staking rewards from the foundation/charity vested accounts for (e.g. use it for promotions).

I found this to be very concerning, as both these accounts hold a significant proportion of NIM that the team gained since the Genesis block. When the shift to PoS was being discussed last year, we were assured that these accounts would not be able to stake in Nimiq 2.0 - something which myself and others were strongly against.

I thought having a more formal discussion around these accounts being able to stake is necessary, as it does potentially offer both benefits to network security, as well as disadvantaging community members who wish to stake in Nimiq 2.0 by reducing their rewards.

Thoughts?

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#2

Hi! I brought up the topic after some discourse from the community and it was hypothetical discussion of wether or not Charity and Foundation funds should be staked, under which conditions, and, in case those were staked, what would be a good idea to do with the rewards.

Just want to be clear that everything are hypothetical discussions. Please do share your thoughts as I think this is something interesting to discuss, But please donā€™t take these discussions as something official. Nothing to be concerned about it as the current decision is actually for those funds not to be used in staking.

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#3

I think the funds should be staked to increase network security regardless of how the rewards are used. I donā€™t see any ethical issue with staking as long as it isnā€™t being used to enrich individual team or community members. The neutral option would be to simply redistribute rewards to stakers. Personally I donā€™t have an issue with using the funds to advance the project in various ways, but others feel that this is a bad idea.

Perhaps it can be voted upon by the community, and the rewards divided accordingly? It would be easy to copy the structure of the emission curve vote, starting with: Should the foundation and charity stake their NIM? If yes, what should be done with the rewards?

  1. Marketing

  2. Distribution to stakers

  3. Lottery

  4. New exchange listings

  5. Keep for foundation and charity use

  6. Community outreach/promotion

A new vote every ā€˜Xā€™ number of years would allow a rebalancing of priorities, for example if Nimiq is eventually on all of the major exchanges, then there wouldnā€™t be as much need to divert funds towards that.

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#4

I disagree with the security argument and the ethical argument. I also donā€™t think having these accounts just stake and then give it out evenly to other stakers is feasible, and all of those other suggestions are nice but I donā€™t think they should compromise community stakersā€™ rewards - but I do acknowledge that itā€™s a bit of a double edge sword.

  • I donā€™t buy the security argument outside of early deployment of the network, and even then I donā€™t wish for the foundation/charity funds to be used - Iā€™m sure there would be a better way to do this without touching the vested funds. If 1 billion NIM are staked from community members as an example, then someone would need 333,333,333 NIM to be able to attack the network - roughly about $205,000 USD assuming that a buyer could somehow buy that much NIM at the current price. At that financial cost, I donā€™t believe there would be any financial incentive to subsequently attack the networkā€¦ what is going to be the gain for an attacker doing that? Generate a bunch of extra NIM for themselves and then have to try and sell them after the attack is recognised? Double spend on exchanges with insufficient volume? If we use the current amount of NIM that is in the vote (~500 mil NIM), then youā€™d need about $102,500 USD of NIM to attack the network. Again, whereā€™s the financial incentive for someone to do that? I get that every little bit helps, but I do have serious reservations around whether or not it is even necessary to have the team stake NIM from a vested account for the purpose of security.

Iā€™d like to make clear for the record that NIM which has been released from those vested accounts to their personal accounts is 100% fine to stake imo. Thatā€™s their reward as agreed to since the Genesis block. Iā€™m against touching the vested funds which havenā€™t yet been released.

  • The ethical argument is definitely a valid one. The question I would pose to you and others would be why it is ok for the team to (1) Collect funds from an ICO to kickstart the project, (2) Allocate themselves premined NIM from the genesis block for various reasons, and then (3) Be able to effectively earn interest on the premined NIM that they gave themselves already? Even if the funds are used in ā€œgood faithā€ or on things chosen by votes, why does the Nimiq team get the power to allocate those funds vs them not staking and regular old stakers get the rewards distributed accordingly based on stake? I understand the benefits of having that extra NIM to promote the project, but I donā€™t think staking vested accounts is the way to do that. The Nimiq Team also said a year ago in discord/telegram that these accounts would not be allowed to stakeā€¦ subsequently allowing them to stake 18 months later is a dangerous precedent to set IMO (I am big on not altering the blockchain rules wherever possible - itā€™s why I have voted against changing the emissions curve as well).

I guess if the emission curve decision has gone to a community vote then thereā€™s precedent to put this to a similar community vote, but I would be hard campaigning against it and I donā€™t think the counterpoints like ā€œsecurityā€ and ā€œpromoting of NIM or donationsā€ are valid excuses to alter vested accounts to enable them to stake.

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#5

To answer your question, I donā€™t think it would be okay for team members to stake using the vesting accounts that are allocated to the creators. This raises serious ethical issues and I doubt that option would even be discussed for those reasons. The foundation/charity is another story. Staking those NIM and distributing the rewards to community stakers so that monetary gain/loss for all parties equals zero, seems like a no-brainer to me. Iā€™m not a coder so I donā€™t know what is involved, but including those rewards at the end of each epoch seems like it would be feasible. If it is revenue neutral and helps secure the network, then why not? The issue here seems to be more one of ideology than anything else.
As for using the rewards to promote the projectā€¦ personally I donā€™t feel strongly one way or the other. Those ideas are just to stir up some discussion and engage the community. There have been people in various channels that are unhappy with the marketing, or feel we should pay the money to go on big exchanges. So here is an opportunity to possibly increase the budget for those things.
A note on security, keep in mind we are aiming to compete with major financial services companies, banks, and other cryptos. $200k, even $20M is peanuts compared to the amount of money and market cap attributed to these entities. The network might be attacked not to gain money in NIM, but to drive the project into the ground in order to protect existing market share. Sure, itā€™s unlikely to happen, but not impossible.

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#6

To be honest I donā€™t feel strongly enough on this topic to try to sway people to one side or the other. Itā€™s a good discussion to be having out in the open, but if it ends up in a community vote I would abstain from voting myself.

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#7

The Nimiq Foundation and Charity vesting accounts make up 945 Million NIM together (but those are not yet available(!), read on for more info).

https://nimiq.watch/#NQ09+VF5Y+1PKV+MRM4+5LE1+55KV+P6R2+GXYJ+XYQF
https://nimiq.watch/#NQ19+YG54+46TX+EHGQ+D2R2+V8XA+JX84+UFG0+S0MC

Those 945 Million NIM are vesting over 10 years from mainnet launch (until 2028). At this moment right now only 189 Million NIM are usable.

We plan to honor vesting contracts also through the hard-fork to Albatross (Nimiq 2.0). Vesting contracts will be adapted so that their original vesting schedule is continued (switching from a schedule defined by block height to one defined by timestamps).

NIM locked in Vesting Contracts CANNOT be used for staking.

This means the amount of NIM the Foundation and Charity can stake is limited by the vesting schedule. The next release of funds is currently estimated for October 3rd, 2020 (as be the block explorer), releasing an additional 47.25 Million NIM.

So Nimiq is far from being able to stake 1 Billion NIM. Currently, thereā€™s only ~190 Mil available to be stakedā€¦

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#8

I can only reconfirm:

NIM locked in Vesting Contracts CANNOT be used for staking.

Nor can they be moved or sold or anything else. That counts for the Nimiq Foundation and ImpactX Charity as much as it does for the creators contracts. The whole point of a vesting contract is that control over the coins and their use is limited to whatever coins the respective vesting contract releases in time.

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#9

How do both yourā€™s and Elchā€™s posts relate back to the OPs concerns? From what Iā€™ve read of the thread I didnā€™t think the exact amount that could be staked by Nimiq was the concern, but the idea of staking accounts that were previously promised not to be staked.

On that note, could OP provide the original promise made? Maybe it was misinterpreted and the option to stake these vesting accounts always existed?

#10

The original concern of staking vested accounts is based in the wrong idea that vested accounts can be staked.

As @elch and @NimiqSoeren explained before:

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#11

I donā€™t think thereā€™s any formal discussion I can link you to but it was a discussion that myself and other community members at the time remember taking place in Discord/Telegram channels in 2019 when the change to PoS and the introduction of Albatross was being discussed.

Soeren and elch confirming that the vested accounts cannot be used for staking closes this discussion as it should not be technically possible. I made the original OP because Richy was discussing the idea in Telegram and I thought it was concerning, but my concerns are relieved knowing that itā€™s not possible to stake those accounts.

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#12

@Sandman
How do you feel about foundation/charity staking coins that have already been released?

#13

Coins that have already been released are fine as theyā€™re no longer apart of the vesting contracts and are apart of the circulating supply. Being against that would be like being against people being able to put money they have earned into a savings account to gain interest.

My primary concern was around the vested accounts themselves. NIM released from those accounts is apart of the circulating supply so that is fine in my view.

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#14

Good to know. This is a topic you have a strong opinion on, and Iā€™m sure a lot of people agree with you.