P-Rep nodes will have a “much stronger incentive to hold and stake ICX” thanks to a new bond mechanism coming to ICON.
Scott Smiley of Balanced announced the development on Twitter on Tuesday, likening the new mechanism to how Tezos nodes must bond XTZ.
Smiley explained that under the current system, nodes earn ICX based on how many votes they receive. That is to say, more votes equals more ICX.
With rewards perpetually maximized, however, ICX provides no more utility to P-Rep nodes than it does to a regular staker.
Enter the new bond mechanism, which Smiley says will “change the playbook” for P-Reps by creating a “competitive game of bonding the most ICX.”
Now, P-Rep nodes earn the capacity to earn more ICX the more votes they have, but to put that capacity to use, they should bond ICX. The more ICX they bond, the more node rewards they earn.
The bond also forces P-Reps to have skin in the game and discourages misbehavior. For example, the bond can be slashed if a P-Reps steps out of line.
The “optimal” ratio of the bond is 5%, though P-Reps can post more or less.
Smiley writes:
“P-Reps do not need to hit their max bond to earn rewards. If all P-Reps only posted 0.1% bond, then everybody earns the same as before this change. What’s new is the competition to hold and stake as much $ICX as they can.”
On Twitter, FOMOmental makes the math behind the bond a bit easier:
“Aha, so ICX p-rep rewards have their own ‘pool’ of income, and this is shared between them depending on their % of the pool. and the max % they can take from the pool is capped at them putting up 5% to their bond.”
ICON 2.0 product manager Nym told The Iconist, “The new bond mechanism incentivizes P-Reps to adopt more proactive behavior on the network and figure out the best way to allocate their ICX. It also reduces the vote buying issue because simply increasing your delegation will not have any impact anymore.”
