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	<entry>
		<id>https://wiki.internetcomputer.org/w/index.php?title=Staking,_voting_and_rewards&amp;diff=1150</id>
		<title>Staking, voting and rewards</title>
		<link rel="alternate" type="text/html" href="https://wiki.internetcomputer.org/w/index.php?title=Staking,_voting_and_rewards&amp;diff=1150"/>
		<updated>2021-12-17T22:05:48Z</updated>

		<summary type="html">&lt;p&gt;JWiegley: &lt;/p&gt;
&lt;hr /&gt;
&lt;div&gt;== Staking &amp;amp; Voting Rewards ==&lt;br /&gt;
&lt;br /&gt;
Stakeholders can earn significant returns on their staked ICP tokens in&lt;br /&gt;
the form of voting rewards. The Internet Computer is a decentralized&lt;br /&gt;
platform whose evolution is decided by the voting power of its&lt;br /&gt;
stakeholders. This scheme ensures that those making decisions impacting&lt;br /&gt;
the future of the Internet Computer are personally vested in the&lt;br /&gt;
outcome. In return the Internet Computer gives out voting rewards.&lt;br /&gt;
Voters can vote actively, or they can use the liquid democracy on the&lt;br /&gt;
Internet Computer to automatically follow other voters.&lt;br /&gt;
&lt;br /&gt;
== Key Concepts ==&lt;br /&gt;
&lt;br /&gt;
=== Neurons ===&lt;br /&gt;
&lt;br /&gt;
In order to become vested and obtain voting power, ICP tokens must first&lt;br /&gt;
be staked, and then locked up for a length of time greater than 6&lt;br /&gt;
months, to at most 8 years.&lt;br /&gt;
&lt;br /&gt;
Just as tokens are held in a user&#039;s account, stake is held in a special&lt;br /&gt;
account called a &amp;quot;neuron&amp;quot;. Each neuron has its own identifier, and&lt;br /&gt;
several attributes relating to its stake. These include:&lt;br /&gt;
&lt;br /&gt;
* the length of time it is locked for (the &amp;quot;dissolve delay&amp;quot;);&lt;br /&gt;
* whether it is currently dissolving toward liquidity;&lt;br /&gt;
* and how much reward it has accrued as a result of voting on proposals (the &amp;quot;maturity&amp;quot;).&lt;br /&gt;
&lt;br /&gt;
Once a neuron is locked for more than six months, it gains the ability&lt;br /&gt;
both to submit proposals and to vote on them. Voting in turn generates&lt;br /&gt;
voting rewards, based on how active a neuron is in voting on proposals.&lt;br /&gt;
If you vote on every open proposal, you gain the maximum reward.&lt;br /&gt;
&lt;br /&gt;
A neuron can also &amp;quot;follow&amp;quot; ather neurons, which causes it to&lt;br /&gt;
automatically vote the same as the majority ofr the neuron that it&lt;br /&gt;
follows. All new neurons by default follow neuron 27 held by the ICA, so&lt;br /&gt;
any newly staked neuron will generate voting rewards as soon as it is&lt;br /&gt;
locked for more than six months. The default following is applied to&lt;br /&gt;
most proposal topics, except for proposals with topic Governance, where&lt;br /&gt;
neuron holders have to explicitly vote to earn rewards.&lt;br /&gt;
&lt;br /&gt;
=== Voting Power ===&lt;br /&gt;
&lt;br /&gt;
The voting power of a locked neuron is determined by several factors:&lt;br /&gt;
&lt;br /&gt;
* Principally, by its stake. 1 ICP = the power of 1 vote.&lt;br /&gt;
* Next, by its lock up duration, or dissolve delay. 6 months grants a 1.06x voting power bonus, and 8 years grants 2x. All other durations scale linearly between.&lt;br /&gt;
* Lastly, by its age, or length of time spent locked up without dissolving. 4 years grants a 1.25x bonus, multiplicative with any other bonuses. All other durations between 0 seconds and 4 years scale linearly between.&lt;br /&gt;
&lt;br /&gt;
This means that the maximum voting power, of 2.5 votes per ICP staked,&lt;br /&gt;
is only achievable by locking up your neuron for 8 years, and leaving it&lt;br /&gt;
in that locked up state for 4 years. At that time you will have the most&lt;br /&gt;
voting power for the stake committed.&lt;br /&gt;
&lt;br /&gt;
=== Maturity ===&lt;br /&gt;
&lt;br /&gt;
Maturity represents the voting rewards accumulated in a neuron. Each day&lt;br /&gt;
the network rewards participants by allocating to every voting neuron a&lt;br /&gt;
portion of the total reward, based both on its voting power at the time&lt;br /&gt;
proposals were made, and the number of proposals it voted on.&lt;br /&gt;
&lt;br /&gt;
Some look at maturity as similar to a &amp;quot;dividend&amp;quot; or &amp;quot;interest&amp;quot;, but&lt;br /&gt;
please note that your tax authority may take a different view on the&lt;br /&gt;
subject. Please consult the appropriate professionals before deciding on&lt;br /&gt;
an interpretation of when maturity becomes income.&lt;br /&gt;
&lt;br /&gt;
For those who wish to compound the gains in their neuron, the most&lt;br /&gt;
natural activity is to &amp;quot;merge maturity&amp;quot; at intervals, which has the&lt;br /&gt;
effect of minting the neuron&#039;s maturity and adding that minted amount&lt;br /&gt;
back into the neuron&#039;s stake. If you wish to harvest income from the&lt;br /&gt;
neuron, you would &amp;quot;spawn&amp;quot; maturity into a reward neuron, which mints the&lt;br /&gt;
parent neuron&#039;s, and moves this maturity into the stake of a new neuron.&lt;br /&gt;
It should be noted that if you do neither, and leave those gains in the&lt;br /&gt;
form of maturity, it will not add to the minted total of ICP, nor&lt;br /&gt;
contribute to your voting power.&lt;br /&gt;
&lt;br /&gt;
== Why Staking Matters ==&lt;br /&gt;
&lt;br /&gt;
To some, staking is seen as an income generator, a way to perform &amp;quot;yield&lt;br /&gt;
farming&amp;quot; by locking up ICP and enjoying the benefits of the accrued&lt;br /&gt;
maturity. However, staking is not intended solely as an income vehicle.&lt;br /&gt;
It is a way of allowing those who invest in the Internet Computer to&lt;br /&gt;
decide what happens next with the platform.&lt;br /&gt;
&lt;br /&gt;
When the Internet Computer first launched, all proposals required a&lt;br /&gt;
majority vote to pass. Gradually, however, this is changing. After a&lt;br /&gt;
recent update it is now possible for proposals to pass with only a&lt;br /&gt;
majority among 3% of the total voting power, meaning that proposals&lt;br /&gt;
stand a chance even if large entities abstain and the majority of the&lt;br /&gt;
network does not vote.&lt;br /&gt;
&lt;br /&gt;
== Staking Rewards ==&lt;br /&gt;
&lt;br /&gt;
Even if you stake only for the purpose of voting on proposals, NNS&lt;br /&gt;
rewards are an important aspect of a voting neuron. At the very least,&lt;br /&gt;
such returns can be compounded to increase your total voting power. So&lt;br /&gt;
to better understand staking and reward, it may be helpful to look at&lt;br /&gt;
staking from two perspectives:&lt;br /&gt;
&lt;br /&gt;
=== Short-term: NNS rewards each day ===&lt;br /&gt;
&lt;br /&gt;
Every day, rewards are granted by the network to each voting neuron. The&lt;br /&gt;
percentage of those rewards received by each neuron depend on the&lt;br /&gt;
following factors:&lt;br /&gt;
&lt;br /&gt;
* Amount of ICP staked&lt;br /&gt;
* Length of dissolve delay&lt;br /&gt;
* &amp;quot;Age&amp;quot; of the neuron (time spent in a non-dissolving state)&lt;br /&gt;
* Number of eligible proposals the neuron has voted on&lt;br /&gt;
&lt;br /&gt;
For example, if on a single day the NNS has generated 1000 ICP in total&lt;br /&gt;
rewards (see below for more on how this is computed), and there were 10&lt;br /&gt;
proposals submitted which only two neurons voted on, and:&lt;br /&gt;
&lt;br /&gt;
* Neuron A has a voting power of 20, and voted on all 10 proposals&lt;br /&gt;
* Neuron B has a voting power of 80, and voted on all 10 proposals&lt;br /&gt;
&lt;br /&gt;
Then the 1000 ICP would be divided between these two neurons by their&lt;br /&gt;
proportional voting power:&lt;br /&gt;
&lt;br /&gt;
* Neuron A with voting power of 20, gets 20% of the total = 200 ICP&lt;br /&gt;
* Neuron B with voting power of 80, gets 80% of the total = 800 ICP&lt;br /&gt;
&lt;br /&gt;
If either Neuron had only voted for X% of those 10 proposals, it&#039;s&lt;br /&gt;
reward would be decreased to X% of its maximum eligibility, with the&lt;br /&gt;
remainder distributed among the other neurons.&lt;br /&gt;
&lt;br /&gt;
=== Long-term: NNS rewards over years ===&lt;br /&gt;
&lt;br /&gt;
As of December 2021, here is the long-term NNS rewards curve: https://dashboard.internetcomputer.org/circulation&lt;br /&gt;
&lt;br /&gt;
In the first year, the NNS allocates 10% of the total supply to generate&lt;br /&gt;
NNS Rewards. Note the term &amp;quot;allocates&amp;quot; rather than &amp;quot;mints&amp;quot;, because&lt;br /&gt;
rewards are not minted until they are spawn, merged or the neuron is&lt;br /&gt;
disbursed, so total supply is not automatically increased by rewards&lt;br /&gt;
alone. This allocation rate drops linearly until it reaches 5% by year&lt;br /&gt;
8. Like all parameters in the NNS, the minting rate can be changed via&lt;br /&gt;
NNS proposals, but this is the current rate schedule.&lt;br /&gt;
&lt;br /&gt;
Because the total supply of ICP is a dynamic system with deflation and&lt;br /&gt;
inflation, it is impossible to predict what NNS Rewards will be on any&lt;br /&gt;
given day or year in the future. It is relatively easy to predict what&lt;br /&gt;
the percentage allocation rate will be months from now, but it is much&lt;br /&gt;
harder to predict what the total supply will be both because of&lt;br /&gt;
potential changes to the rate, and how often stakeholders will mint&lt;br /&gt;
their maturity.&lt;br /&gt;
&lt;br /&gt;
=== Inflationary and Deflationary Mechanisms ===&lt;br /&gt;
&lt;br /&gt;
Deflationary mechanisms for ICP:&lt;br /&gt;
&lt;br /&gt;
* Minting cycles to pay for compute and storage burns ICP to create cycles&lt;br /&gt;
* Burning of transaction fees&lt;br /&gt;
* Burning of the 1 ICP deposit for failed proposals; note that this only happens at disbursement or merging of neurons, so accumulated fees can persist for a while before finally contributing to deflation.&lt;br /&gt;
&lt;br /&gt;
Inflationary mechanisms for ICP:&lt;br /&gt;
&lt;br /&gt;
* Node providers are paid by minting ICP&lt;br /&gt;
* NNS Rewards are paid by minting ICP, although this minting only happens at the moment rewards are spawned, maturity is merged, or the neuron is disbursed.&lt;br /&gt;
&lt;br /&gt;
=== Network Factors Affecting Annual Percentage Yield ===&lt;br /&gt;
&lt;br /&gt;
When considering potential Annual Percentage Yield (APY) for ICP staked&lt;br /&gt;
in a voting neuron, in addition to the primary factors of the dissolve&lt;br /&gt;
delay, neuron age, and amount of stake, there are also network factors&lt;br /&gt;
that can affect potential yield. Chief among them are:&lt;br /&gt;
&lt;br /&gt;
* The amount of supply allocated each year to pay rewards;&lt;br /&gt;
* The total voting power across all neurons, since rewards are divided equally among neurons according to their voting power;&lt;br /&gt;
* Inflationary and deflationary pressures: primarily, minting to pay node providers and spawn rewards, burning to fuel canister cycles, and the other factors mentioned in the previous section.&lt;br /&gt;
&lt;br /&gt;
These factors can affect future returns significantly. Firstly, the&lt;br /&gt;
amount of supply began at 10% at genesis, but will fall to 5% after the&lt;br /&gt;
first eight years. Secondly, as staking becomes more common and there&lt;br /&gt;
are better user interfaces to do it, there will naturally be more&lt;br /&gt;
competition. If no one else were staking, returns would be astronomical;&lt;br /&gt;
but if nearly everyone is staking, returns will be lower.&lt;br /&gt;
&lt;br /&gt;
Economics are always at play, however. If staking is very popular, it&lt;br /&gt;
means the amount of liquid supply would reduce, which would drive up&lt;br /&gt;
demand and hence prices. So although returns would drop significantly,&lt;br /&gt;
price appreciation should offset the loss in income. Conversely, if most&lt;br /&gt;
people dissolve their neurons to trade on the open market, price would&lt;br /&gt;
likely drop while returns increase. It is reasonable to assume that over&lt;br /&gt;
time an equilibrium will be established, where rates and prices&lt;br /&gt;
fluctuate in sympathy based on the macro factors driving demand for ICP&lt;br /&gt;
tokens.&lt;/div&gt;</summary>
		<author><name>JWiegley</name></author>
	</entry>
	<entry>
		<id>https://wiki.internetcomputer.org/w/index.php?title=Staking,_voting_and_rewards&amp;diff=1149</id>
		<title>Staking, voting and rewards</title>
		<link rel="alternate" type="text/html" href="https://wiki.internetcomputer.org/w/index.php?title=Staking,_voting_and_rewards&amp;diff=1149"/>
		<updated>2021-12-17T22:05:13Z</updated>

		<summary type="html">&lt;p&gt;JWiegley: &lt;/p&gt;
&lt;hr /&gt;
&lt;div&gt;== Staking &amp;amp; Voting Rewards ==&lt;br /&gt;
&lt;br /&gt;
Stakeholders can earn significant returns on their staked ICP tokens in&lt;br /&gt;
the form of voting rewards. The Internet Computer is a decentralized&lt;br /&gt;
platform whose evolution is decided by the voting power of its&lt;br /&gt;
stakeholders. This scheme ensures that those making decisions impacting&lt;br /&gt;
the future of the Internet Computer are personally vested in the&lt;br /&gt;
outcome. In return the Internet Computer gives out voting rewards.&lt;br /&gt;
Voters can vote actively, or they can use the liquid democracy on the&lt;br /&gt;
Internet Computer to automatically follow other voters.&lt;br /&gt;
&lt;br /&gt;
== Key Concepts ==&lt;br /&gt;
&lt;br /&gt;
=== Neurons ===&lt;br /&gt;
&lt;br /&gt;
In order to become vested and obtain voting power, ICP tokens must first&lt;br /&gt;
be staked, and then locked up for a length of time greater than 6&lt;br /&gt;
months, to at most 8 years.&lt;br /&gt;
&lt;br /&gt;
Just as tokens are held in a user&#039;s account, stake is held in a special&lt;br /&gt;
account called a &amp;quot;neuron&amp;quot;. Each neuron has its own identifier, and&lt;br /&gt;
several attributes relating to its stake. These include:&lt;br /&gt;
&lt;br /&gt;
* the length of time it is locked for (the &amp;quot;dissolve delay&amp;quot;);&lt;br /&gt;
* whether it is currently dissolving toward liquidity;&lt;br /&gt;
* and how much reward it has accrued as a result of voting on proposals (the &amp;quot;maturity&amp;quot;).&lt;br /&gt;
&lt;br /&gt;
Once a neuron is locked for more than six months, it gains the ability&lt;br /&gt;
both to submit proposals and to vote on them. Voting in turn generates&lt;br /&gt;
voting rewards, based on how active a neuron is in voting on proposals.&lt;br /&gt;
If you vote on every open proposal, you gain the maximum reward.&lt;br /&gt;
&lt;br /&gt;
A neuron can also &amp;quot;follow&amp;quot; ather neurons, which causes it to&lt;br /&gt;
automatically vote the same as the majority ofr the neuron that it&lt;br /&gt;
follows. All new neurons by default follow neuron 27 held by the ICA, so&lt;br /&gt;
any newly staked neuron will generate voting rewards as soon as it is&lt;br /&gt;
locked for more than six months. The default following is applied to&lt;br /&gt;
most proposal topics, except for proposals with topic Governance, where&lt;br /&gt;
neuron holders have to explicitly vote to earn rewards.[]{#anchor-3}&lt;br /&gt;
&lt;br /&gt;
=== Voting Power ===&lt;br /&gt;
&lt;br /&gt;
The voting power of a locked neuron is determined by several factors:&lt;br /&gt;
&lt;br /&gt;
* Principally, by its stake. 1 ICP = the power of 1 vote.&lt;br /&gt;
* Next, by its lock up duration, or dissolve delay. 6 months grants a 1.06x voting power bonus, and 8 years grants 2x. All other durations scale linearly between.&lt;br /&gt;
* Lastly, by its age, or length of time spent locked up without dissolving. 4 years grants a 1.25x bonus, multiplicative with any other bonuses. All other durations between 0 seconds and 4 years scale linearly between.&lt;br /&gt;
&lt;br /&gt;
This means that the maximum voting power, of 2.5 votes per ICP staked,&lt;br /&gt;
is only achievable by locking up your neuron for 8 years, and leaving it&lt;br /&gt;
in that locked up state for 4 years. At that time you will have the most&lt;br /&gt;
voting power for the stake committed.&lt;br /&gt;
&lt;br /&gt;
=== Maturity ===&lt;br /&gt;
&lt;br /&gt;
Maturity represents the voting rewards accumulated in a neuron. Each day&lt;br /&gt;
the network rewards participants by allocating to every voting neuron a&lt;br /&gt;
portion of the total reward, based both on its voting power at the time&lt;br /&gt;
proposals were made, and the number of proposals it voted on.&lt;br /&gt;
&lt;br /&gt;
Some look at maturity as similar to a &amp;quot;dividend&amp;quot; or &amp;quot;interest&amp;quot;, but&lt;br /&gt;
please note that your tax authority may take a different view on the&lt;br /&gt;
subject. Please consult the appropriate professionals before deciding on&lt;br /&gt;
an interpretation of when maturity becomes income.&lt;br /&gt;
&lt;br /&gt;
For those who wish to compound the gains in their neuron, the most&lt;br /&gt;
natural activity is to &amp;quot;merge maturity&amp;quot; at intervals, which has the&lt;br /&gt;
effect of minting the neuron&#039;s maturity and adding that minted amount&lt;br /&gt;
back into the neuron&#039;s stake. If you wish to harvest income from the&lt;br /&gt;
neuron, you would &amp;quot;spawn&amp;quot; maturity into a reward neuron, which mints the&lt;br /&gt;
parent neuron&#039;s, and moves this maturity into the stake of a new neuron.&lt;br /&gt;
It should be noted that if you do neither, and leave those gains in the&lt;br /&gt;
form of maturity, it will not add to the minted total of ICP, nor&lt;br /&gt;
contribute to your voting power.&lt;br /&gt;
&lt;br /&gt;
== Why Staking Matters ==&lt;br /&gt;
&lt;br /&gt;
To some, staking is seen as an income generator, a way to perform &amp;quot;yield&lt;br /&gt;
farming&amp;quot; by locking up ICP and enjoying the benefits of the accrued&lt;br /&gt;
maturity. However, staking is not intended solely as an income vehicle.&lt;br /&gt;
It is a way of allowing those who invest in the Internet Computer to&lt;br /&gt;
decide what happens next with the platform.&lt;br /&gt;
&lt;br /&gt;
When the Internet Computer first launched, all proposals required a&lt;br /&gt;
majority vote to pass. Gradually, however, this is changing. After a&lt;br /&gt;
recent update it is now possible for proposals to pass with only a&lt;br /&gt;
majority among 3% of the total voting power, meaning that proposals&lt;br /&gt;
stand a chance even if large entities abstain and the majority of the&lt;br /&gt;
network does not vote.&lt;br /&gt;
&lt;br /&gt;
== Staking Rewards ==&lt;br /&gt;
&lt;br /&gt;
Even if you stake only for the purpose of voting on proposals, NNS&lt;br /&gt;
rewards are an important aspect of a voting neuron. At the very least,&lt;br /&gt;
such returns can be compounded to increase your total voting power. So&lt;br /&gt;
to better understand staking and reward, it may be helpful to look at&lt;br /&gt;
staking from two perspectives:&lt;br /&gt;
&lt;br /&gt;
=== Short-term: NNS rewards each day ===&lt;br /&gt;
&lt;br /&gt;
Every day, rewards are granted by the network to each voting neuron. The&lt;br /&gt;
percentage of those rewards received by each neuron depend on the&lt;br /&gt;
following factors:&lt;br /&gt;
&lt;br /&gt;
* Amount of ICP staked&lt;br /&gt;
* Length of dissolve delay&lt;br /&gt;
* &amp;quot;Age&amp;quot; of the neuron (time spent in a non-dissolving state)&lt;br /&gt;
* Number of eligible proposals the neuron has voted on&lt;br /&gt;
&lt;br /&gt;
For example, if on a single day the NNS has generated 1000 ICP in total&lt;br /&gt;
rewards (see below for more on how this is computed), and there were 10&lt;br /&gt;
proposals submitted which only two neurons voted on, and:&lt;br /&gt;
&lt;br /&gt;
* Neuron A has a voting power of 20, and voted on all 10 proposals&lt;br /&gt;
* Neuron B has a voting power of 80, and voted on all 10 proposals&lt;br /&gt;
&lt;br /&gt;
Then the 1000 ICP would be divided between these two neurons by their&lt;br /&gt;
proportional voting power:&lt;br /&gt;
&lt;br /&gt;
* Neuron A with voting power of 20, gets 20% of the total = 200 ICP&lt;br /&gt;
* Neuron B with voting power of 80, gets 80% of the total = 800 ICP&lt;br /&gt;
&lt;br /&gt;
If either Neuron had only voted for X% of those 10 proposals, it&#039;s&lt;br /&gt;
reward would be decreased to X% of its maximum eligibility, with the&lt;br /&gt;
remainder distributed among the other neurons.&lt;br /&gt;
&lt;br /&gt;
=== Long-term: NNS rewards over years ===&lt;br /&gt;
&lt;br /&gt;
As of December 2021, here is the long-term NNS rewards curve:&lt;br /&gt;
&lt;br /&gt;
[*https://dashboard.internetcomputer.org/circulation*](https://dashboard.internetcomputer.org/circulation)&lt;br /&gt;
&lt;br /&gt;
In the first year, the NNS allocates 10% of the total supply to generate&lt;br /&gt;
NNS Rewards. Note the term &amp;quot;allocates&amp;quot; rather than &amp;quot;mints&amp;quot;, because&lt;br /&gt;
rewards are not minted until they are spawn, merged or the neuron is&lt;br /&gt;
disbursed, so total supply is not automatically increased by rewards&lt;br /&gt;
alone. This allocation rate drops linearly until it reaches 5% by year&lt;br /&gt;
8. Like all parameters in the NNS, the minting rate can be changed via&lt;br /&gt;
NNS proposals, but this is the current rate schedule.&lt;br /&gt;
&lt;br /&gt;
Because the total supply of ICP is a dynamic system with deflation and&lt;br /&gt;
inflation, it is impossible to predict what NNS Rewards will be on any&lt;br /&gt;
given day or year in the future. It is relatively easy to predict what&lt;br /&gt;
the percentage allocation rate will be months from now, but it is much&lt;br /&gt;
harder to predict what the total supply will be both because of&lt;br /&gt;
potential changes to the rate, and how often stakeholders will mint&lt;br /&gt;
their maturity.&lt;br /&gt;
&lt;br /&gt;
=== Inflationary and Deflationary Mechanisms ===&lt;br /&gt;
&lt;br /&gt;
Deflationary mechanisms for ICP:&lt;br /&gt;
&lt;br /&gt;
* Minting cycles to pay for compute and storage burns ICP to create cycles&lt;br /&gt;
* Burning of transaction fees&lt;br /&gt;
* Burning of the 1 ICP deposit for failed proposals; note that this only happens at disbursement or merging of neurons, so accumulated fees can persist for a while before finally contributing to deflation.&lt;br /&gt;
&lt;br /&gt;
Inflationary mechanisms for ICP:&lt;br /&gt;
&lt;br /&gt;
* Node providers are paid by minting ICP&lt;br /&gt;
* NNS Rewards are paid by minting ICP, although this minting only happens at the moment rewards are spawned, maturity is merged, or the neuron is disbursed.&lt;br /&gt;
&lt;br /&gt;
=== Network Factors Affecting Annual Percentage Yield ===&lt;br /&gt;
&lt;br /&gt;
When considering potential Annual Percentage Yield (APY) for ICP staked&lt;br /&gt;
in a voting neuron, in addition to the primary factors of the dissolve&lt;br /&gt;
delay, neuron age, and amount of stake, there are also network factors&lt;br /&gt;
that can affect potential yield. Chief among them are:&lt;br /&gt;
&lt;br /&gt;
* The amount of supply allocated each year to pay rewards;&lt;br /&gt;
* The total voting power across all neurons, since rewards are divided equally among neurons according to their voting power;&lt;br /&gt;
* Inflationary and deflationary pressures: primarily, minting to pay node providers and spawn rewards, burning to fuel canister cycles, and the other factors mentioned in the previous section.&lt;br /&gt;
&lt;br /&gt;
These factors can affect future returns significantly. Firstly, the&lt;br /&gt;
amount of supply began at 10% at genesis, but will fall to 5% after the&lt;br /&gt;
first eight years. Secondly, as staking becomes more common and there&lt;br /&gt;
are better user interfaces to do it, there will naturally be more&lt;br /&gt;
competition. If no one else were staking, returns would be astronomical;&lt;br /&gt;
but if nearly everyone is staking, returns will be lower.&lt;br /&gt;
&lt;br /&gt;
Economics are always at play, however. If staking is very popular, it&lt;br /&gt;
means the amount of liquid supply would reduce, which would drive up&lt;br /&gt;
demand and hence prices. So although returns would drop significantly,&lt;br /&gt;
price appreciation should offset the loss in income. Conversely, if most&lt;br /&gt;
people dissolve their neurons to trade on the open market, price would&lt;br /&gt;
likely drop while returns increase. It is reasonable to assume that over&lt;br /&gt;
time an equilibrium will be established, where rates and prices&lt;br /&gt;
fluctuate in sympathy based on the macro factors driving demand for ICP&lt;br /&gt;
tokens.&lt;/div&gt;</summary>
		<author><name>JWiegley</name></author>
	</entry>
	<entry>
		<id>https://wiki.internetcomputer.org/w/index.php?title=Staking,_voting_and_rewards&amp;diff=1148</id>
		<title>Staking, voting and rewards</title>
		<link rel="alternate" type="text/html" href="https://wiki.internetcomputer.org/w/index.php?title=Staking,_voting_and_rewards&amp;diff=1148"/>
		<updated>2021-12-17T22:04:31Z</updated>

		<summary type="html">&lt;p&gt;JWiegley: An explanation of staking and how it relates to voting and rewards&lt;/p&gt;
&lt;hr /&gt;
&lt;div&gt;== Staking &amp;amp; Voting Rewards ==&lt;br /&gt;
&lt;br /&gt;
Stakeholders can earn significant returns on their staked ICP tokens in&lt;br /&gt;
the form of voting rewards. The Internet Computer is a decentralized&lt;br /&gt;
platform whose evolution is decided by the voting power of its&lt;br /&gt;
stakeholders. This scheme ensures that those making decisions impacting&lt;br /&gt;
the future of the Internet Computer are personally vested in the&lt;br /&gt;
outcome. In return the Internet Computer gives out voting rewards.&lt;br /&gt;
Voters can vote actively, or they can use the liquid democracy on the&lt;br /&gt;
Internet Computer to automatically follow other voters.&lt;br /&gt;
&lt;br /&gt;
== Key Concepts ==&lt;br /&gt;
&lt;br /&gt;
=== Neurons ===&lt;br /&gt;
&lt;br /&gt;
In order to become vested and obtain voting power, ICP tokens must first&lt;br /&gt;
be staked, and then locked up for a length of time greater than 6&lt;br /&gt;
months, to at most 8 years.&lt;br /&gt;
&lt;br /&gt;
Just as tokens are held in a user&#039;s account, stake is held in a special&lt;br /&gt;
account called a &amp;quot;neuron&amp;quot;. Each neuron has its own identifier, and&lt;br /&gt;
several attributes relating to its stake. These include:&lt;br /&gt;
&lt;br /&gt;
* the length of time it is locked for (the &amp;quot;dissolve delay&amp;quot;);&lt;br /&gt;
* whether it is currently dissolving toward liquidity;&lt;br /&gt;
* and how much reward it has accrued as a result of voting on&lt;br /&gt;
  proposals (the &amp;quot;maturity&amp;quot;).&lt;br /&gt;
&lt;br /&gt;
Once a neuron is locked for more than six months, it gains the ability&lt;br /&gt;
both to submit proposals and to vote on them. Voting in turn generates&lt;br /&gt;
voting rewards, based on how active a neuron is in voting on proposals.&lt;br /&gt;
If you vote on every open proposal, you gain the maximum reward.&lt;br /&gt;
&lt;br /&gt;
A neuron can also &amp;quot;follow&amp;quot; ather neurons, which causes it to&lt;br /&gt;
automatically vote the same as the majority ofr the neuron that it&lt;br /&gt;
follows. All new neurons by default follow neuron 27 held by the ICA, so&lt;br /&gt;
any newly staked neuron will generate voting rewards as soon as it is&lt;br /&gt;
locked for more than six months. The default following is applied to&lt;br /&gt;
most proposal topics, except for proposals with topic Governance, where&lt;br /&gt;
neuron holders have to explicitly vote to earn rewards.[]{#anchor-3}&lt;br /&gt;
&lt;br /&gt;
=== Voting Power ===&lt;br /&gt;
&lt;br /&gt;
The voting power of a locked neuron is determined by several factors:&lt;br /&gt;
&lt;br /&gt;
* Principally, by its stake. 1 ICP = the power of 1 vote.&lt;br /&gt;
* Next, by its lock up duration, or dissolve delay. 6 months grants a&lt;br /&gt;
  1.06x voting power bonus, and 8 years grants 2x. All other durations&lt;br /&gt;
  scale linearly between.&lt;br /&gt;
* Lastly, by its age, or length of time spent locked up without&lt;br /&gt;
  dissolving. 4 years grants a 1.25x bonus, multiplicative with any&lt;br /&gt;
  other bonuses. All other durations between 0 seconds and 4 years&lt;br /&gt;
  scale linearly between.&lt;br /&gt;
&lt;br /&gt;
This means that the maximum voting power, of 2.5 votes per ICP staked,&lt;br /&gt;
is only achievable by locking up your neuron for 8 years, and leaving it&lt;br /&gt;
in that locked up state for 4 years. At that time you will have the most&lt;br /&gt;
voting power for the stake committed.&lt;br /&gt;
&lt;br /&gt;
=== Maturity ===&lt;br /&gt;
&lt;br /&gt;
Maturity represents the voting rewards accumulated in a neuron. Each day&lt;br /&gt;
the network rewards participants by allocating to every voting neuron a&lt;br /&gt;
portion of the total reward, based both on its voting power at the time&lt;br /&gt;
proposals were made, and the number of proposals it voted on.&lt;br /&gt;
&lt;br /&gt;
Some look at maturity as similar to a &amp;quot;dividend&amp;quot; or &amp;quot;interest&amp;quot;, but&lt;br /&gt;
please note that your tax authority may take a different view on the&lt;br /&gt;
subject. Please consult the appropriate professionals before deciding on&lt;br /&gt;
an interpretation of when maturity becomes income.&lt;br /&gt;
&lt;br /&gt;
For those who wish to compound the gains in their neuron, the most&lt;br /&gt;
natural activity is to &amp;quot;merge maturity&amp;quot; at intervals, which has the&lt;br /&gt;
effect of minting the neuron&#039;s maturity and adding that minted amount&lt;br /&gt;
back into the neuron&#039;s stake. If you wish to harvest income from the&lt;br /&gt;
neuron, you would &amp;quot;spawn&amp;quot; maturity into a reward neuron, which mints the&lt;br /&gt;
parent neuron&#039;s, and moves this maturity into the stake of a new neuron.&lt;br /&gt;
It should be noted that if you do neither, and leave those gains in the&lt;br /&gt;
form of maturity, it will not add to the minted total of ICP, nor&lt;br /&gt;
contribute to your voting power.&lt;br /&gt;
&lt;br /&gt;
== Why Staking Matters ==&lt;br /&gt;
&lt;br /&gt;
To some, staking is seen as an income generator, a way to perform &amp;quot;yield&lt;br /&gt;
farming&amp;quot; by locking up ICP and enjoying the benefits of the accrued&lt;br /&gt;
maturity. However, staking is not intended solely as an income vehicle.&lt;br /&gt;
It is a way of allowing those who invest in the Internet Computer to&lt;br /&gt;
decide what happens next with the platform.&lt;br /&gt;
&lt;br /&gt;
When the Internet Computer first launched, all proposals required a&lt;br /&gt;
majority vote to pass. Gradually, however, this is changing. After a&lt;br /&gt;
recent update it is now possible for proposals to pass with only a&lt;br /&gt;
majority among 3% of the total voting power, meaning that proposals&lt;br /&gt;
stand a chance even if large entities abstain and the majority of the&lt;br /&gt;
network does not vote.&lt;br /&gt;
&lt;br /&gt;
== Staking Rewards ==&lt;br /&gt;
&lt;br /&gt;
Even if you stake only for the purpose of voting on proposals, NNS&lt;br /&gt;
rewards are an important aspect of a voting neuron. At the very least,&lt;br /&gt;
such returns can be compounded to increase your total voting power. So&lt;br /&gt;
to better understand staking and reward, it may be helpful to look at&lt;br /&gt;
staking from two perspectives:&lt;br /&gt;
&lt;br /&gt;
=== Short-term: NNS rewards each day ===&lt;br /&gt;
&lt;br /&gt;
Every day, rewards are granted by the network to each voting neuron. The&lt;br /&gt;
percentage of those rewards received by each neuron depend on the&lt;br /&gt;
following factors:&lt;br /&gt;
&lt;br /&gt;
* Amount of ICP staked&lt;br /&gt;
* Length of dissolve delay&lt;br /&gt;
* &amp;quot;Age&amp;quot; of the neuron (time spent in a non-dissolving state)&lt;br /&gt;
* Number of eligible proposals the neuron has voted on&lt;br /&gt;
&lt;br /&gt;
For example, if on a single day the NNS has generated 1000 ICP in total&lt;br /&gt;
rewards (see below for more on how this is computed), and there were 10&lt;br /&gt;
proposals submitted which only two neurons voted on, and:&lt;br /&gt;
&lt;br /&gt;
* Neuron A has a voting power of 20, and voted on all 10 proposals&lt;br /&gt;
* Neuron B has a voting power of 80, and voted on all 10 proposals&lt;br /&gt;
&lt;br /&gt;
Then the 1000 ICP would be divided between these two neurons by their&lt;br /&gt;
proportional voting power:&lt;br /&gt;
&lt;br /&gt;
* Neuron A with voting power of 20, gets 20% of the total = 200 ICP&lt;br /&gt;
* Neuron B with voting power of 80, gets 80% of the total = 800 ICP&lt;br /&gt;
&lt;br /&gt;
If either Neuron had only voted for X% of those 10 proposals, it&#039;s&lt;br /&gt;
reward would be decreased to X% of its maximum eligibility, with the&lt;br /&gt;
remainder distributed among the other neurons.&lt;br /&gt;
&lt;br /&gt;
=== Long-term: NNS rewards over years ===&lt;br /&gt;
&lt;br /&gt;
As of December 2021, here is the long-term NNS rewards curve:&lt;br /&gt;
&lt;br /&gt;
[*https://dashboard.internetcomputer.org/circulation*](https://dashboard.internetcomputer.org/circulation)&lt;br /&gt;
&lt;br /&gt;
In the first year, the NNS allocates 10% of the total supply to generate&lt;br /&gt;
NNS Rewards. Note the term &amp;quot;allocates&amp;quot; rather than &amp;quot;mints&amp;quot;, because&lt;br /&gt;
rewards are not minted until they are spawn, merged or the neuron is&lt;br /&gt;
disbursed, so total supply is not automatically increased by rewards&lt;br /&gt;
alone. This allocation rate drops linearly until it reaches 5% by year&lt;br /&gt;
8. Like all parameters in the NNS, the minting rate can be changed via&lt;br /&gt;
NNS proposals, but this is the current rate schedule.&lt;br /&gt;
&lt;br /&gt;
Because the total supply of ICP is a dynamic system with deflation and&lt;br /&gt;
inflation, it is impossible to predict what NNS Rewards will be on any&lt;br /&gt;
given day or year in the future. It is relatively easy to predict what&lt;br /&gt;
the percentage allocation rate will be months from now, but it is much&lt;br /&gt;
harder to predict what the total supply will be both because of&lt;br /&gt;
potential changes to the rate, and how often stakeholders will mint&lt;br /&gt;
their maturity.&lt;br /&gt;
&lt;br /&gt;
=== Inflationary and Deflationary Mechanisms ===&lt;br /&gt;
&lt;br /&gt;
Deflationary mechanisms for ICP:&lt;br /&gt;
&lt;br /&gt;
-   Minting cycles to pay for compute and storage burns ICP to create&lt;br /&gt;
    cycles&lt;br /&gt;
-   Burning of transaction fees&lt;br /&gt;
-   Burning of the 1 ICP deposit for failed proposals; note that this&lt;br /&gt;
    only happens at disbursement or merging of neurons, so accumulated&lt;br /&gt;
    fees can persist for a while before finally contributing to&lt;br /&gt;
    deflation.&lt;br /&gt;
&lt;br /&gt;
Inflationary mechanisms for ICP:&lt;br /&gt;
&lt;br /&gt;
-   Node providers are paid by minting ICP&lt;br /&gt;
-   NNS Rewards are paid by minting ICP, although this minting only&lt;br /&gt;
    happens at the moment rewards are spawned, maturity is merged, or&lt;br /&gt;
    the neuron is disbursed.&lt;br /&gt;
&lt;br /&gt;
=== Network Factors Affecting Annual Percentage Yield ===&lt;br /&gt;
&lt;br /&gt;
When considering potential Annual Percentage Yield (APY) for ICP staked&lt;br /&gt;
in a voting neuron, in addition to the primary factors of the dissolve&lt;br /&gt;
delay, neuron age, and amount of stake, there are also network factors&lt;br /&gt;
that can affect potential yield. Chief among them are:&lt;br /&gt;
&lt;br /&gt;
* The amount of supply allocated each year to pay rewards;&lt;br /&gt;
* The total voting power across all neurons, since rewards are divided&lt;br /&gt;
  equally among neurons according to their voting power;&lt;br /&gt;
* Inflationary and deflationary pressures: primarily, minting to pay&lt;br /&gt;
  node providers and spawn rewards, burning to fuel canister cycles,&lt;br /&gt;
  and the other factors mentioned in the previous section.&lt;br /&gt;
&lt;br /&gt;
These factors can affect future returns significantly. Firstly, the&lt;br /&gt;
amount of supply began at 10% at genesis, but will fall to 5% after the&lt;br /&gt;
first eight years. Secondly, as staking becomes more common and there&lt;br /&gt;
are better user interfaces to do it, there will naturally be more&lt;br /&gt;
competition. If no one else were staking, returns would be astronomical;&lt;br /&gt;
but if nearly everyone is staking, returns will be lower.&lt;br /&gt;
&lt;br /&gt;
Economics are always at play, however. If staking is very popular, it&lt;br /&gt;
means the amount of liquid supply would reduce, which would drive up&lt;br /&gt;
demand and hence prices. So although returns would drop significantly,&lt;br /&gt;
price appreciation should offset the loss in income. Conversely, if most&lt;br /&gt;
people dissolve their neurons to trade on the open market, price would&lt;br /&gt;
likely drop while returns increase. It is reasonable to assume that over&lt;br /&gt;
time an equilibrium will be established, where rates and prices&lt;br /&gt;
fluctuate in sympathy based on the macro factors driving demand for ICP&lt;br /&gt;
tokens.&lt;/div&gt;</summary>
		<author><name>JWiegley</name></author>
	</entry>
	<entry>
		<id>https://wiki.internetcomputer.org/w/index.php?title=Internet_Computer_wiki&amp;diff=1147</id>
		<title>Internet Computer wiki</title>
		<link rel="alternate" type="text/html" href="https://wiki.internetcomputer.org/w/index.php?title=Internet_Computer_wiki&amp;diff=1147"/>
		<updated>2021-12-17T21:59:49Z</updated>

		<summary type="html">&lt;p&gt;JWiegley: /* For blockchain &amp;amp; crypto enthusiasts */&lt;/p&gt;
&lt;hr /&gt;
&lt;div&gt;&amp;lt;strong&amp;gt;Welcome to the Internet Computer Wiki!&amp;lt;/strong&amp;gt; Feel free to join in. All are welcome!&lt;br /&gt;
== Topics Central ==&lt;br /&gt;
&lt;br /&gt;
* [[Internet computer]]&lt;br /&gt;
* [[Internet Computer vision]]&lt;br /&gt;
* [[Index of dapps on the Internet Computer]]&lt;br /&gt;
* [[ICP token]]&lt;br /&gt;
* [[Internet Identity]]&lt;br /&gt;
* [https://dashboard.internetcomputer.org/ Internet Computer dashboard] &lt;br /&gt;
* [[Internet Computer Performance]]&lt;br /&gt;
* [[DFINITY]]&lt;br /&gt;
* [[Custody, Staking, and Voting]]&lt;br /&gt;
*[[Network Nervous System]]&lt;br /&gt;
*ICP is expected to outgrow every crypto in the known universe. ICP coins will be used to power the future of the world. &lt;br /&gt;
== For blockchain &amp;amp; crypto enthusiasts ==&lt;br /&gt;
* [[Myths and facts]]&lt;br /&gt;
* [https://www.reddit.com/r/dfinity/ r/dfinity]&lt;br /&gt;
* [[How to stake on the Internet computer]]&lt;br /&gt;
* [[Staking and Voting]]&lt;br /&gt;
* [[Tokenomics of the Internet Computer]]&lt;br /&gt;
* [[Governance of the Internet Computer]]&lt;br /&gt;
&lt;br /&gt;
== For dapp developers ==&lt;br /&gt;
* [[Internet Computer for dapp developers]]&lt;br /&gt;
* [[Canister smart contracts]]&lt;br /&gt;
* [https://forum.dfinity.org/ IC community developer forum]&lt;br /&gt;
* [[Best practices for a high traffic dapp launch]]&lt;br /&gt;
* [[Best practices for NFT drops]]&lt;br /&gt;
* [[Current limitations of the IC]]&lt;br /&gt;
&lt;br /&gt;
== For computer scientists ==&lt;br /&gt;
* [[The Internet Computer for Computer Scientists]]&lt;br /&gt;
&lt;br /&gt;
== For node owners ==&lt;br /&gt;
* [[Internet Computer for node owners]]&lt;br /&gt;
&lt;br /&gt;
== FAQs ==&lt;br /&gt;
&lt;br /&gt;
* [[FAQ]]&lt;br /&gt;
== How-To section ==&lt;br /&gt;
How-Tos are step-by-step instructions for specific, narrow goals.&lt;br /&gt;
* [[How-To: Claim neurons for seed participants]]&lt;br /&gt;
&lt;br /&gt;
== Tutorial section ==&lt;br /&gt;
Tutorials are guided introductions to user stories, intended for first-time users and characterized by a shallow learning curve.&lt;br /&gt;
* [[Tutorial: Neuron control]]&lt;br /&gt;
&lt;br /&gt;
== Contributors ==&lt;br /&gt;
&lt;br /&gt;
=== Housekeeping Rules ===&lt;br /&gt;
&lt;br /&gt;
* Please refrain from redundancy, such as referring to the Internet Computer in article titles. This is, after all, the Internet Computer Wiki.&lt;br /&gt;
* Please carefully consider your use of capitalisation. Most words in titles should be capitalised. DFINITY is always stylised in all-caps.&lt;br /&gt;
&lt;br /&gt;
=== How to Contribute ===&lt;br /&gt;
Consult the [https://www.mediawiki.org/wiki/Special:MyLanguage/Help:Contents User&#039;s Guide] for information on using the wiki software.&lt;br /&gt;
* [https://www.mediawiki.org/wiki/Special:MyLanguage/Manual:Configuration_settings Configuration settings list]&lt;br /&gt;
* [https://www.mediawiki.org/wiki/Special:MyLanguage/Manual:FAQ MediaWiki FAQ]&lt;br /&gt;
* [https://lists.wikimedia.org/postorius/lists/mediawiki-announce.lists.wikimedia.org/ MediaWiki release mailing list]&lt;br /&gt;
* [https://www.mediawiki.org/wiki/Special:MyLanguage/Localisation#Translation_resources Localise MediaWiki for your language]&lt;br /&gt;
* [https://www.mediawiki.org/wiki/Special:MyLanguage/Manual:Combating_spam Learn how to combat spam on your wiki]&lt;br /&gt;
&lt;br /&gt;
Use this page to test editing&lt;br /&gt;
* [[Test editing the Internet Computer Wiki]]&lt;br /&gt;
&lt;br /&gt;
Number of articles: {{NUMBEROFARTICLES}}&lt;/div&gt;</summary>
		<author><name>JWiegley</name></author>
	</entry>
</feed>