The Definitive Guide to Earning Rewards on the Internet Computer’s NNS

You’ve probably seen the hashtag #8YearGang used a lot when it comes to the Internet Computer. This is a self-assigned term for those who have created an 8-year neuron on the NNS and set it not to dissolve. There’s going to be a lot of terminology in this article, so I’m going to start with a brief glossary for new Internet Computer users. The idea is the make the NNS as understandable as possible for anyone.

After that, we’ll address some frequently asked questions about the NNS and how to earn rewards. Finally, we’ll consider some of the changes that took place during the past 18 months.

· NNS – NNS stands for Network Nervous System. This is the dApp that operates on-chain network governance for the IC. It serves as a wallet that can hold and send ICP. It also allows you to stake your ICP in a neuron. Finally, it allows stakers to vote on network governance proposals and earn rewards.

· Neuron – A neuron is where your ICP stake is stored. It is given an ID number, and it gives you access to voting on network governance proposals.

· Maturity – As your neuron votes on proposals on the NNS, it builds maturity. This is unminted ICP the neuron has earned. If you choose to stake your maturity, the ICP is no longer minted until you dissolve the neuron completely. However, you will get the additional voting power and rewards. Not minting the ICP until the neuron is dissolved protects taxpayers in countries like the United States who have to pay income tax on any maturity that is converted into cryptocurrency.

· Delay – This is the length of time the ICP is staked in the neuron. You can increase the delay of any neuron to increase the rate at which you earn maturity from voting. During the final six months of delay for a dissolving neuron, it can no longer vote or earn rewards.

· Dissolve – When a neuron is dissolving, it gradually decreases in voting power and rewards earned. However, when the dissolve time reaches zero, you unlock the staked ICP and can transfer it out of the neuron.

· Spawning a new neuron – Once you reach a certain amount of maturity, you can spawn a new neuron with it. This new neuron will have a one-week dissolve delay, after which it will be unlocked, and you can transfer it out of the NNS.

· Following a Known Neuron – If you follow a known neuron, you don’t have to vote on every proposal to earn your rewards. When the neuron you are following votes, your neuron will follow it (vote the same way) and will receive the designated rewards.

This isn’t every single detail of the NNS, but it’s enough to be able to understand the FAQ. Remember to do your own research before staking your ICP so you are sure that you fully comprehend how it works.

FAQ Regarding the NNS, Staking, Voting, and Rewards

Now let’s address some of the most common questions regarding how the NNS functions.

How do I earn staking rewards on the NNS?

You don’t. There are no rewards for staking ICP on the NNS. Rewards are only earned for voting. Why is there so much confusion on this topic? You often read articles online with titles like “how to earn staking rewards on the IC,” and misuse of the terminology has created some misunderstandings.

Also, at Genesis, all newly created neurons were set to follow the Internet Computer Association or the DFINITY Foundation for all topics. So everyone was receiving the full amount of rewards, even if all they did was stake a neuron and forget about it. This is no longer the case, as we will address later in the article.

How do I earn voting rewards on the NNS?

Your neuron must vote on proposals to receive rewards. Your neuron will be set to automatically follow the DFINITY Foundation for all proposals that are not related to governance or the SNS and community fund. This will allow you to receive small amounts of rewards for technical protocol votes that include things like subnet management and node administration. However, you will have to manually vote on governance proposals or set a follow neuron.

Why should I set a follow neuron for governance proposals?

Governance proposals are weighted more heavily and are necessary if you want to receive any significant amount of rewards. Setting a known neuron to follow will ensure that you vote and get your rewards, even if you don’t log in for a few days. It will also allow you to follow a trusted neuron when you are unsure how to vote on a specific topic or don’t understand the proposal. This makes it essential to understand the known neuron you follow so that your opinions are accurately represented. Once the known neuron that you follow votes, there is no way to change your vote.

How can I maximize the rewards that I earn?

If your neuron votes on every proposal (especially governance), you should receive the maximum rewards for the amount you have staked and the length of time you have staked your ICP. Therefore, the best way to maximize your rewards is to stake your ICP for eight years and leave the dissolve off. Then follow a known neuron that you are confident will vote on every proposal. You should then receive the maximum voting rewards as stated on the Internet Computer dashboard (this percentage will change based on the total amount of ICP staked on the NNS).

But if I don’t set a dissolve, I'll never get my stake back, right?

That’s true. However, at the current reward rates, you should get your full stake back in maturity in about five years. Thus, this is a long-term investment. Of course, you can also set your stake to dissolve and receive your initial stake back in eight years. However, your rewards and voting power will be reduced immediately once you hit the dissolve button and will continue to decrease until the final six months when you will not receive any more rewards nor be able to vote on proposals.

Alternatively, you also have the option to set a shorter dissolve length. Again, the maximum rewards you can receive will be impacted by the length of time remaining on your dissolve.  

Did The NNS Vote to Reduce Our Rewards?

The voting rewards that you can currently earn on the NNS match the estimated rewards on the Internet Computer dashboard. However, several proposals have changed the way voting rewards work, so here’s a quick breakdown of some of those proposals. This will reduce the confusion that could be caused when you just see a tweet complaining about “rewards being taken away” or “rewards being given to someone else.”

· Genesis (May 2021) – All neurons received rewards based on voting. As mentioned earlier, all neurons automatically did this because they all were preset with a follow neuron. While this ensured all stakers received rewards, it did not meet the ideal of decentralization, and it was always understood that something would have to change so that the DFINITY Foundation didn’t make all the decisions for the NNS.

· Proposal 34485 (December 2021) – The weight of governance proposals increased. The idea was to increase decentralization by encouraging voting on governance proposals by individuals rather than just having everyone follow the DFINITY Foundation. This was further enhanced by having the follow neuron removed from all staked neurons. As a result, a person would either have to manually vote or once again set their follow neuron in order to gain rewards. As always, rewards were based on voting, not staking.

However, now that the follow neuron was no longer preset, this is the first time it would be possible for a staked neuron to not receive rewards due to being inactive. The DFINITY Foundation and Internet Computer Association's combined voting power dropped from over 32% to less than 25% overnight and has continued to decrease (currently 22.75%).

· Various Proposals (December 2021 – September 2022) – This caused some unanticipated issues. For one thing, the rewards from non-voting neurons were still being minted – they were just being divided among those who did vote. So for about ten months, voting neurons were able to get nearly double the rewards.

This led to daily spam proposals once some people realized that they could keep increasing their rewards by making more of the heavily weighted governance proposals. Even though the rejection fee was increased from 1 ICP to 10 ICP, the spam continued with pointless governance proposals being listed on a daily basis. The weight of governance proposals was temporarily reset to a lower value while a solution was sought.

· Proposal 80970 (September 2022) – This proposal did several things. First, it restored the heavier weight to voting on governance proposals (20x that of Node or Subnet proposals). Second, it stopped giving rewards from non-voting neurons to voting neurons. The maximum reward was restored to what is estimated on the Internet Computer dashboard. While this reduced voting rewards for those who were used to getting nearly double rewards, it did eliminate the spam proposals. It may also help to curb token inflation since those ICP rewards are no longer being minted.

As you can see, the only real changes from Genesis until now are:

· Neurons don’t automatically follow known neurons when created. Thus, it is possible not to receive rewards.

· Voting rewards for governance proposals are weighted at 20x that of other proposals.

Everything else is the same. A neuron that doesn’t vote doesn’t get rewards, and those rewards never come into existence unless the NNS decides otherwise (which is the main point of contention being discussed at the moment – some would like to reclaim the rewards from non-voting neurons to create a treasury that can be distributed by the NNS). Additionally, there is significantly more decentralization than at Genesis. The ICA/DFINITY voting power has decreased from nearly 40% to less than 23% over the past 18 months.

You Decide the Future of the Internet Computer

The NNS isn’t just a rewards platform. It is the network governance of the IC. If you want to have a say, stake your ICP, set a follow neuron, and help determine the future of the Internet Computer blockchain!

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