There are two fundamental consensus mechanisms (ways to determine or agree on what has happened) for blockchains: proof of work and proof of stake. Proof of work (like Bitcoin) uses expensive computational power (the “work” part) to validate what has happened. Proof of stake on the other hand, allows anyone with a laptop to verify transactions and is much less computationally expensive.
The Internet Computer uses a modified version of proof of stake, which is what we will discuss in this article.
The Network Nervous System (NNS)
One of the reasons that the Internet Computer is different from other blockchains is the governance of the Internet Computer is decentralized via something called the Network Nervous System (NNS).
The Network Nervous System (NNS) is essentially a way for many different people to vote on changes to the Internet Computer. DFINITY can’t decide to make a broad sweeping change to the Internet Computer without first submitting a proposal to the NNS. Then, people can vote on the proposal and if it is accepted, then the change is officially merged into the Internet Computer and the update is pushed out to all of the nodes in the network.
This means that every change (or GitHub pull request essentially), whether it be a typo fix, bug fix, new feature, or documentation, must go through the NNS. The community has complete control over the Internet Computer! This is the first decentralized governance system and is one of the exciting pieces of the Internet Computer.
Voting on NNS Proposals
Notice how I keep talking about “people” that get to vote on NNS proposals? Well the people that get to vote on NNS proposals are people that have staked ICP. So by staking ICP you get voting power with which you can vote on NNS proposals. This means that staking ICP gives you a piece of the pie of governance over the Internet Computer! Cool!
You also get rewards if you stake your ICP. This incentivizes people to stake their ICP and participate in the NNS proposal voting.
Staking rewards go up as you lock up your ICP for longer amounts of time. This is beneficial for the network because it incentivizes long term thinking. If I have to lock up my ICP for 8 years to get the max reward, that means I can’t withdraw my ICP for 8 years, and that’s if I started dissolving now. If I wait to dissolve, then I won’t get access until 8 years after I hit “Dissolve”. 8 years is a long time… meaning all of my votes between now and then will be trying to make the Internet Computer as valuable as possible so my ICP will go up in value.
I hope you’ve learned a little bit more about how ICP staking works and how staking fits into the grand scheme of the NNS and the Internet Computer. If you want to stake any of your ICP, check out the How Do I Stake My ICP article.