Current IISS System:

As the IISS Yellow Paper states, the goal of IISS is to provide a “system for accurately measuring and rewarding the contributions of various ICONists within the ICON Network.” The contributions are outlined as direct and indirect. Direct contributions involve:

Running a node: Public Represenative (P-Rep) Developing a popular decentralized application: DApp Booster Program (DBP) Executing an Ecosystem Expansion Project (EEP)

The indirect contributions involve staking and delegating to entities carrying out these three items.

Public Representatives (P-Reps):

In the second half of 2019, the ICON P-Rep system successfully launched and the ICON network became decentralized (shifting block production and validation responsiblity from ICON to P-Reps). According to the yellow paper, a P-Rep “contributes to the ecosystem through participation in block validation and on-chain governance.” ICONists can stake and vote for P-Reps who they support to run the network. From the yellow paper, “All ICONists delegate their stake in the network to representatives who, in their opinion, can reliably operate the ecosystem.” By voting for a P-Rep and securing the network, ICONists receive rewards in return for their contribution. P-Reps are also rewarded for governing, running, and securing the ICON network, according to the Yellow Paper. There are now over 100 P-Reps to choose from and many are qualified to run nodes, govern, and secure the network. Thus P-Reps often will do additional work beyond the requirements and contribute to the ICON network in unique ways — such as through outreach, marketing, education, or development as a few examples. P-Reps are still included in IISS 3.0, however, the reward structure has been changed.

DApp Booster Program (DBP):

The Yellow Paper describes the DBP as a “program that selects and rewards DApps to help grow the value of the ICON Network.” The top 100 DApps would be voted on by ICONists, and rewarded based on the percentage of votes they receive. In return for voting, ICONists would receive rewards. The DBP was not implemented, and will not be. With IISS 3.0, DApps can be submitted through the Contribution Proposal Fund (CPF), for consideration for funding. CPF funding and approval will be determined by P-Reps. Once IISS 3.0 is implemented, ICONists will be able to see which CPF activities different P-Reps support (through on-chain voting). ICONists can then align votes for P-Reps who vote for the DApp projects they support.

Ecosystem Expansion Project (EEP):

The Yellow Paper describes EEPs as “a project or activity that can contribute to the growth and expansion of the ICON Network,” with example ideas for submissions being those that “include, but are not limited to: ICON Network development, 3rd Party App development, community activities, and education activities.” The original design involved ICONists to stake and vote for EEPs, and EEPs would be a major facet of contribution in the ICON Network. However, IISS 3.0 shifted this idea of EEP to the CPF, managed by P-Reps. ICONists will be able to see which CPF activities different P-Reps support (through on-chain voting). ICONists can then align votes for P-Reps who vote for the CPF projects they support.

The reward structure for IISS is programmed into the Core of ICON. Rewards are distributed on-chain based on ICONists staking and voting (rewards to ICONists) and the percentage of votes that P-Reps have (rewards for P-Reps). The reward for P-Reps varies based on I-Rep (a variable submitted by P-Reps to account for changes in ICX price). Rewards for ICONists vary based on the amount of ICX staked on the network. Recall that the responsibility of a P-Rep is to govern, run, and secure the network. As a result, the ICON core code penalizes Main P-Reps who do not properly run a node and secure the network. From the Yellow Paper, “the network must penalize representatives that disrupt the consensus process through malicious behavior or negligence.” Penalties are reserved for on-chain behavior and result from a P-Rep failing to validate or successfully produce a number of blocks. The ICON network depends on P-Reps successfully validating and producing blocks — if they do not, then the network becomes unstable. One can see the current P-Rep productivity measures (block produced / (blocks produced + missed)) on the ICON Tracker. If P-Reps attempt to produce and validate at least 86,240 blocks and have a productivity ratio below 85%, then they incur a Low Productivity Penalty. This penalty disqualifies the P-Rep in question and results in a burn of 6% of the delegated ICX.

Additionally, if a P-Rep is disqualified for malicious behavior, then they are removed and a 6% burn of the delegated ICX is incurred (note that the token burn for delegated ICX was never implemented for either of these penalties). Since a disqualification proposal is submitted manually, there were questions about what should constitute a disqualification. There are no off-chain rules for P-Reps. As long as a P-Rep fulfills their block production and Governance duties (voting on proposals that come up), they are doing what is asked of them (there is actually no implementation or penalties to help ensure P-Reps are voting on Governance proposals). Dr. ICON, a prominent member of the ICON team, clarified in a tweet in November 2019, shown below, that the P-Rep disqualification is only meant to be used for on-chain behaviors (not off-chain). Disruptive or malicious on-chain behaviors could be P-Reps maliciously disrupting the on-chain network or block production, as an example. This tweet by Dr. ICON was in response to concerns about vote buying (where a P-Rep would pay voters in return for votes). Vote buying is discouraged by the ICON network, but there are currently no rules in place to help prevent it. It relies on the integrity of P-Reps to not do it and also the voting of the ICONists who elect P-Reps to ensure they don’t vote for P-Reps who engage in vote buying. An on-chain solution to help prevent vote buying is added in IISS 3.0.