The Contribution Proposal System (CPS) is a governance and funding mechanism that is being developed to support contributions to the ICON (ICX) ecosystem. The CPS will allow users to request funding for specific projects, to which the community can subscribe funds from their own BFT tokens. The allocated funds will be held by the system until it is time to execute the work, at which time it will be released.
The CPS allows the ICON Network to grow extensively, by allowing different entities to receive funding. The CPS also contributes to turning ICON into a Decentralized Autonomous Organization (DAO). This is made possible through its ongoing development and fine-tuning.
With the Contribution Proposal System (CPS), validators on the ICON network operate a decentralized grant system. In a transparent manner, the CPS funds development, marketing, and community-building initiatives for the benefit of the ICON network. A few key advantages of ICON’s CPS over other grant programs include that funds are distributed via a stablecoin and KYC is not required. The purpose of this article is to show how ICON’s CPS can help you bootstrap your next project idea.
ICON’s Contribution Proposals Have Many Advantages
In order to better understand how the CPS works, let’s first look at what the CPS offers over traditional funding methods. The funding decision is typically made by a single entity in traditional grant programs, and applicants submit funding proposals through private communication.
However, with a decentralized grant system like ICON’s CPS, decision-making and application processes are much more transparent. The CPS portal provides public access to all CPS proposals submitted directly to the ICON blockchain.
CPS proposals are also subject to a fully transparent decision-making process. 23 ICON validators vote on a proposal once it has been submitted. During the voting period, a proposal must receive at least 67% approval to pass.
Based on two factors, 67% is the threshold:
- The percentage of registered validators is 67%.
- Registered validators account for 67% of ICX delegation.
As well as its governance model, ICON’s intrinsic qualities play an important role in its CPS. As part of the ICX delegation on ICON, validators receive a lot of support from the community in general. By expressing opinions to the validators to who they delegate authority, the ICON community can influence CPS proposal decisions. As a result, CPS applicants are able to rally support for their proposals through this transparent governance model.
In addition to KYC-less application processes, ICON’s CPS is also an advantage. Traditionally, grant programs ask for personally identifiable information (PII) such as an applicant’s name, address, and identification documents. This is where ICON’s CPS differs from the competition. Your ICX wallet, which also functions as your identity, is all you need to make a CPS proposal. With ICON’s KYC-less CPS, global applications can continue to use it without requiring KYC.
A blockchain grant program typically distributes funds in volatile assets. The ICON Community Rewards Program distributes funds in Balanced Dollars (bnUSD), an algorithmic stablecoin backed by ICX.
In a bull market for crypto, unpegged assets can generate profits, but in down markets, they can do the opposite. Even during periods of market volatility, ICON’s CPS provides applicants with a predictable stream of funding with a stablecoin.
How the CPS – Contribution Proposal System Works
ICON is a DPoS network, which means that ICX is constantly minted to pay for network-related activities. As of now, there are 3 million ICX available each month on the ICON blockchain, which is divided into the following buckets:
- CPS – 10%
- validator Rewards – 13%
- BTP Relayer Rewards – 0%
- Voter Rewards – 77%
Thus, the CPS is able to fund proposals using 300,000 ICX per month (10% of 3 million ICX). A conversion from ICX to bnUSD is made automatically since the CPS pays out in bnUSD (the conversion ICX to bnUSD is split across a number of transactions to prevent large orders from being executed simultaneously). The monthly funding amount currently stands at 160,000 billion USD.
In the ICON network, the CPS is best viewed as a marketing expense. ICX allocation to the CPS may be argued as devaluing ICX and inflating supply, but consider the other side of the coin as well.
ICON requires a lot of transactions to succeed in the long run. Building dApps that make transactions is the best way to increase transaction count, which in turn requires funding development teams. Due to an increase in competition among CPS providers, higher quality proposals have a greater chance of funding, resulting in a better ROI for the network.
CPS Applicants and validators
In general, the CPS alternates between an “application period” and a “voting period” every two weeks. New proposals can be submitted during an application period, or progress reports can be submitted for existing proposals. Upon completing the application period, the CPS moves into a voting period in which registered ICON validators vote on each proposal and progress report.
In addition to voting on project priority, validators also select funding priorities, making sure that only the best proposals receive funding. As soon as a voting period ends, funds will be distributed automatically by the CPS according to the results of the vote.
Applicant and validator stakeholders are the primary targets of the CPS. In order to better understand how the CPS functions, let’s take a closer look at their perspectives.
An overview of the CPS for applicants
The CPS may be able to help you bootstrap your idea if you’re interested in contributing to the ICON ecosystem. In its short history, the CPS has supported a wide range of projects, from dApp development to marketing initiatives, to name a few.
CPS has made possible a number of noteworthy projects, including:
It is evident that the CPS isn’t just a technology and development organization. Additionally, CPS funding is a great option for marketing and community-building projects.
In the CPS, application periods alternate with voting periods every two weeks. An optional post on the ICON community forum kicks off the grant submission process for applicants. In addition to getting feedback on your proposal before submitting it to the CPS, this step is not mandatory or enforced on-chain.
The application must be sponsored by a validator in order to be considered for CPS. Providing a bond of 10% of the proposed budget for the project is one of the strengths of the validator sponsor mechanism in terms of ensuring a baseline quality for proposals. An applicant’s proposal must be thoroughly reviewed by the sponsor validator before it is accepted. The 10% bond motivates them to do so.
Any time during the two-week application period that an applicant has a sponsor in place, he or she can submit a new CPS proposal. Several basic pieces of information are required during the submission process, including the project name, category, duration, budget, and description.
In terms of funding, the CPS has been designed to prevent abuse. The bottom line is that ICON does not offer a free lunch when it comes to its CPS. Validators vote on applicants’ monthly progress reports based on their active proposals. Applicants automatically receive funds if their progress reports receive more than 67% approval. A non-approved progress report will, however, prevent applicants from receiving funds.
How CPS work for ICON validators
CPS participation offers ICON validators a great opportunity to directly influence the development of the ICON ecosystem. It is still worthwhile to participate in the CPS even if your validator node does not have a large amount of ICX delegation since the proposal’s approval threshold of 67% takes into account both the number of validators and the delegations of those validators.
Validators registering for the CPS must vote during the voting period. Voting will be conducted during the voting period by validators, who will review new proposals and progress reports for existing proposals.
Validators can also participate in the CPS by sponsoring. Sponsor validators must put up a bond equal to 10% of the requested amount for every CPS proposal. The sponsor validator would be required to post a 5,000 ICX bond for a proposal requesting 50,000 ICX, for example. Upon successful completion of the project, sponsor validators receive 2% of the funding amount (a 20% return on investment).
Summary
In the blockchain ecosystem, ICON’s Contribution Proposal System (CPS) is among the most innovative and accessible grant programs. It operates decentralized and transparently, and does not require KYC checks for applicants. Additionally, you won’t have to worry about market volatility when working with the CPS, because payouts are made using the bnUSD stablecoin.
Start a discussion on the ICON community forum if you’re interested in contributing to the ICON ecosystem. ICON’s CPS supports all aspects of development, marketing, or community building.
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