Greetings ICONists,

Decentralization and staking are rapidly approaching and the ICON team has been making progress on deciding the finer details of IISS — ICON Incentives Scoring System.

We have released version 2.0 of the IISS Yellow Paper, and have introduced some key changes that were made in order to encourage true decentralization.

If you do not understand any terminology mentioned in this update, we encourage you to look at our FAQ Portal.

>>>Yellow Paper — IISS 2.0

Update Overview

The new incentives model includes more details on the penalty system, a new ICX issuance system that creates a situation where ICX can be burned during high network activity, and a change in the transaction fee policy.

Penalty System

ICON’s penalty system now has a token burning component. There are 3 types of penalties outlined in the IISS paper: Validation Penalty, Low Productivity Penalty, and Disqualification Penalty.

If a P-Rep suffers a Low Productivity Penalty or a Disqualification Penalty, 6% of the delegation toward such a P-Rep will be burned. This makes it extremely important for ICONists to delegate towards reliable and quality P-Reps.

We encourage ICONists to delegate across multiple P-Reps to diversify the risk of having their tokens burned.

ICX Issuance System

IISS has introduced a system that burns tokens during high network activity and mitigates the amount of inflation on the ICON Network. When a block is produced, there will always be a certain amount of ICX required in order to reward the 4 different contributors in the ICON ecosystem: Voters, Representatives, DApps, and EEPs. With the new system in place, transaction fees will now be used to reward these 4 parties rather than being used as an additional incentive for P-Reps.

Additionally, if the amount of transaction fees within a block exceeds the amount of ICX necessary to reward all 4 parties, that excess ICX will be burned.

As an example, assume that 10 ICX would be necessary to reward all 4 parties. If there were 3 ICX worth of transaction fees in the block, only 7 ICX would be minted. If there were 15 ICX worth of transaction fees in the block, then 5 ICX would be burnt and no ICX would be minted. This creates a deflationary environment in the situation of high network utilization.

Transaction Fee Policy

Finally, Step Price — the base transaction fee on the ICON Network, is now easily adjustable via consensus of P-Reps on a Network Proposal (Specifically, a Step Price Proposal). We have included a specific proposal type into the ICON core service allowing P-Reps to vote to change the transaction fee, and the network will automatically implement the change once agreed upon. Previously, this would have required a hard fork.

Additional Changes

Representative Term: A Representative Term on the ICON Network is 43,120 blocks. Governance variables, P-Rep ranking, and more minor details are fixed during a block cycle.

A Representative Term on the ICON Network is 43,120 blocks. Governance variables, P-Rep ranking, and more minor details are fixed during a block cycle. Maximum Inflation : The maximum combined annualized inflation from governance variables (i_rep, i_eep, and i_dapp) is 14%. P-Rep submissions that violate this rule will be ignored.

: The maximum combined annualized inflation from governance variables (i_rep, i_eep, and i_dapp) is 14%. P-Rep submissions that violate this rule will be ignored. Governance Variable:

i_rep submission by P-Reps: Must be in the range of +/- 20% from the i_rep from the previous Representative Term.

i_rep starting value: The ICON Network will start with an i_rep of 50,000 ICX.

Network Proposal:

Proposal Voting: To pass a proposal, at least 66% of Top 22 P-Reps must vote to pass and at least 66% of the stake-weighted vote must vote to pass.

Malicious SCORE Proposal: The ability for Top 22 P-Reps to automatically freeze a malicious SCORE contract via an on-chain vote.

P-Rep Disqualification Proposal: The ability for Top 22 P-Reps to automatically disqualify a malicious P-Rep via an on-chain vote.

Text Proposal: A text proposal can be just about anything regarding upgrading the ICON Network. If a text proposal is passed, however, text proposals are not automatically executed by the network, the changes must be manually developed.

Revision Proposal: The ability for Top 22 P-Reps to automatically activate updated features via an on-chain vote.

StepPrice Proposal: The ability for Top 22 P-Reps to automatically decide a StepPrice via an on-chain vote.

We encourage you to read the updated IISS paper to familiarize yourself with the finer details before staking begins. The ICON Team is excited about these changes and we look forward to the launch of IISS in September.

Hyperconnect the World,

ICON

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