ICON’s Contribution Proposal System (CPS) is a decentralized grant program operated by validators on the ICON network. The CPS is designed to fund development, marketing, and community-building initiatives that benefit the ICON network in a transparent manner. Compared to other grant programs, ICON’s CPS offers a few key advantages such as distribution of funds via a stablecoin and KYC-less application process. In this article, you’ll learn how to take advantage of ICON’s CPS to bootstrap your next project idea.
The Advantages of ICON’s Contribution Proposal System
Before we dive into how the CPS works, let’s first discuss the advantages of the CPS versus traditional funding mechanisms. Traditional grant programs require an applicant to submit a funding proposal through a private form of communication, and the funding decision is typically made by a single entity.
On the other hand, a decentralized grant program like ICON’s CPS offers a much higher degree of transparency into the application and decision making process. All CPS proposals are submitted directly to the ICON blockchain, and are publicly available on the CPS portal.
The decision making process for CPS proposals is also fully transparent. After a proposal is submitted, it’s voted on by 23 ICON validators. In order for a proposal to pass, it must receive at least 67% approval during the voting period.
The 67% threshold is based on two factors:
- 67% of the registered validators.
- 67% of the ICX delegation towards registered validators.
The intrinsic qualities of ICON’s governance model plays an important role in the CPS as well. On ICON, validators are largely supported by ICX delegation from the broader community. This means the ICON community is able to influence CPS proposal decisions by expressing opinions to the validators they delegate to. Practically speaking, this transparent governance model provides CPS applicants with a way to rally community support for their proposal.
Another advantage of ICON’s CPS is its KYC-less application process. It’s common for traditional grant programs to ask applicants for personally identifiable information (PII) like their name, address, identification documents, and more. ICON’s CPS takes a radically different approach. To make a CPS proposal, all you need is an ICX wallet, which also serves as your identity. The KYC-less design of ICON’s CPS makes it more open, convenient, and accessible for applications around the world.
Unlike blockchain grant programs that denominate funding in a volatile asset, ICON’s CPS distributes funds in Balanced Dollars (bnUSD), an algorithmic stablecoin backed by ICX.
While funding distributions via an unpegged asset can be profitable during a crypto bull market, the opposite can occur during a market downtrend. By distributing funds with a stablecoin, ICON’s CPS gives applicants a predictable stream of funding that retains value, even during periods of market volatility.
How the CPS Works
Since ICON is a DPoS network, ICX is minted on a consistent basis to pay for network-related activities. At this time, the ICON blockchain mints 3 million ICX per month, and allocates it into the following buckets like so:
- CPS - 10%
- validator Rewards - 13%
- BTP Relayer Rewards - 0%
- Voter Rewards - 77%
Thus, the CPS has access to 300,000 ICX (10% of 3 million ICX) per month for funding proposals. Since the CPS pays out in bnUSD, the 300,000 ICX is automatically converted to bnUSD at market price (the conversion from ICX to bnUSD is split across a number of transactions to prevent execution of a single larger order). Currently, this works out to 160,000 bnUSD of funding per month.
The CPS is best viewed as a marketing cost for the ICON network. While some may argue that allocating 10% of ICX issuance to the CPS inflates supply and devalues ICX, it’s important to consider the other side of the coin as well.
In order for the ICON network to succeed in the long run, transactions (a lot of them) are needed. The most sure-fire way to increase transaction count is to build dApps that make transactions, which in turn requires funding development teams. As CPS demand gets more competitive, higher quality proposals will have a higher chance of getting funded, which in turn results in a better ROI from the network’s perspective.
CPS Applicants and validators
Generally speaking, the CPS rotates between an “application period” and “voting period” on a biweekly basis. During an application period, applicants can submit new proposals or progress reports for existing proposals. Following the conclusion of an application period, the CPS shifts to a voting period where a subset of ICON validators, who have registered to participate in the CPS, vote on each proposal and progress report. Validators also vote on the priority of projects to receive funding, which ensures the highest quality proposals are eligible for funding first. After a voting period ends, the CPS will automatically distribute funds based on the vote results.
The CPS is primarily targeted towards two groups of stakeholders – applicants and validators. Let’s take a closer look at how the CPS works from the perspective of these two groups.
The CPS for Applicants
If you’re interested in contributing to the ICON ecosystem and have a concrete idea in mind, chances are the CPS will be able to help you bootstrap your idea. Since its inception, the CPS has funded a variety of projects from dApps to marketing initiatives, and beyond.
Here are a few examples of notable projects that were made possible by the CPS:
As you can see, the CPS isn’t only catered towards development and technology projects. Proposals related to marketing, community building, and more are also great use cases for CPS funding.
The CPS rotates between an application period and voting period every two weeks. For applicants, the grant submission process starts with an optional post on the ICON community forum. While this step isn’t required or enforced on-chain, it’s a good way to get feedback on a proposal before it’s formally submitted to the CPS.
In order to submit a CPS proposal, an applicant must find a validator to sponsor their proposal. The validator sponsor mechanism helps ensure a baseline quality for proposals because it requires the validator to provide 10% of the proposed budget for the project as a bond. With the 10% bond at stake, sponsor validators are motivated to perform due diligence on an applicant’s proposal before agreeing to sponsor it.
With a sponsor in place, an applicant can submit a new CPS proposal at any point during the two-week application period. The submission process is very simple, and only requires basic information like project name, category, duration, proposed budget, description, and a few other items.
It’s important to note that the CPS is designed to ensure funding is not abused. In other words, there is no free lunch when it comes to ICON’s CPS. Applicants with active proposals must submit a monthly progress report, which is then voted on by validators. If a progress report receives more than 67% approval, funds are automatically distributed to the applicant. On the other hand, applicants will not receive the funds if the progress report is not approved.
The CPS for ICON validators
Participating in the CPS is a great way for ICON validators to directly influence the growth of the ICON ecosystem. Even if your validator node doesn’t have a large amount of ICX delegation, participating in the CPS is still worthwhile because the 67% approval threshold for proposals takes both the number of validators and their respective delegations into consideration.
validators that register for the CPS will need to participate in the voting period. During the voting period, validators will review new proposals and progress reports for existing proposals, and vote whether or not to approve them.
Another way for validators to get involved with the CPS is through sponsorships. Every CPS proposal requires a sponsor validator to put up 10% of the requested amount as a bond. For example, a proposal requesting 50,000 ICX would require a 5,000 ICX bond from the sponsor validator in order to be submitted. In exchange for providing the bond, sponsor validators receive 2% of the funding amount upon successful completion of the project (a 20% ROI).
Summary
ICON’s Contribution Proposal System (CPS) is one of the most innovative and accessible grant programs in the blockchain ecosystem. It’s operated in a fully transparent and decentralized manner, and doesn’t require KYC checks for applicants. Lastly, the CPS pays out via the bnUSD stablecoin, which means you won’t have to worry about market volatility while working on your project.
If you’re interested in contributing to the ICON ecosystem, put together a proposal and start a discussion on the ICON community forum. Whether your focus is development, marketing, or community building, ICON’s CPS is here to support you!