Proposal: Remove Voting Rewards and Introduce Native Staking Rewards

[erikzhang]

Motivation

The current governance reward model ties GAS rewards directly to voting behavior. In practice, this has led to several structural issues:

• Voting is often driven by short-term reward optimization rather than governance intent.
• Incentivized voting encourages voter inertia, making it difficult to replace committee members once they are elected.
• Higher voter turnout has not made the system more reliable; instead, it has increased the difficulty of governance.

To address these issues, this proposal separates governance participation from economic rewards and introduces a clearer, more sustainable incentive structure.

Summary of Changes

• Remove vote-based GAS rewards
• Introduce protocol-level NEO staking rewards
• Keep governance voting non-rewarded and purely voluntary
• Ensure total GAS emission remains unchanged (reward redistribution, not inflation)

1. Removal of Voting Rewards

Current Behavior

• GAS rewards are partially allocated to voters.
• Voting becomes an economically incentivized action regardless of governance intent.

Proposed Change

• Remove all GAS rewards that are conditional on voting.
• Voting remains fully functional for:
  • Consensus node selection
  • Governance participation
• Voting carries no direct financial reward.

Expected Effects

• Voting becomes a signal of genuine governance interest.
• Reduces automated or reward-driven voting behavior.
• Clarifies that voting is a governance action, not a yield mechanism.

2. Introduction of Native Staking Rewards

Core Principle

Economic rewards should be tied to capital commitment rather than governance actions.

Definition of Staking

• Staking is an explicit opt-in action to register NEO for reward eligibility.
• Staked NEO:
  • Remains fully owned by the user
  • Earns staking rewards regardless of voting status
  • Does not imply delegation or governance participation

Reward Source

• GAS previously allocated to vote rewards is reallocated to staking rewards.
• Total GAS emission remains unchanged.

3. Staking Reward Mechanism

Eligibility

• Any NEO holder may opt in to staking.
• Staking is permissionless, non-custodial, and on-chain verifiable.

Reward Distribution

Rewards are distributed proportionally to staked NEO amount and staking duration:

reward = (user_staked_neo / total_staked_neo) * staking_reward_pool

4. Backward Compatibility and Migration

• Vote rewards stop accruing at a defined activation height.
• Users may choose to:
  • Continue voting without rewards
  • Stake NEO for rewards
  • Do both
  • Do neither

No forced migration is required.

5. Security and Economic Considerations

Benefits

• Clearer and more predictable incentive model
• Improved alignment with long-term NEO holders
• Easier integration with DeFi and liquidity abstractions

Conclusion

This proposal restructures incentives in the NEO ecosystem:

• Governance participation is not a yield mechanism.
• Economic yield is provided through explicit staking.

By removing voting rewards and introducing native staking rewards, the protocol gains a cleaner incentive model, more meaningful governance signals, and a more extensible long-term economic architecture.

[vang1ong7ang]

maybe setting "follow the crowd" as default voting is a way to increase voting rate
my fault, "follow the crowd" doesn't make sense

[erikzhang]

Optional Mechanism: Fixed-Duration Staking Tiers

This section describes an optional extension to the staking model and is provided for discussion only.

Rationale

• Encourages long-term commitment
• Reduces short-term staking churn
• Improves reward predictability

Example Staking Tiers

Duration	Multiplier
Flexible	1.0x
3 months	1.1x
6 months	1.25x
12 months	1.5x

Reward Calculation

effective_stake = staked_neo * duration_multiplier
reward = effective_stake / total_effective_stake * staking_reward_pool

[vang1ong7ang]

I support the overall direction of this proposal

maybe an unlock period can be added to the staking mechanism for the following reasons:

• prevents rapid capital flight during market volatility
• reduces the risk of coordinated unstaking attacks
• provides economic security similar to proof-of-stake networks
• discourages short-term speculative behavior
• encourages genuine long-term commitment to the network
• smooths out sudden liquidity shocks
• "capital commitment" implies friction when exiting, not instant liquidity
• while voting and staking are separate, an unlock period prevents gaming scenarios where users rapidly stake/unstake around governance events
• creates a more stable validator set over time

[vncoelho]

Well written, @erikzhang .

I fully suport this needed change. Currently voting system is to maximize rewards.

Now we will have a better economics.

[vncoelho]

maybe setting "follow the crowd" as default voting is a way to increase voting rate
my fault, "follow the crowd" doesn't make sense

Agreed, we had this kind of follow the crowd in Brazil and it was removed.

[vncoelho]

I support the overall direction of this proposal

maybe an unlock period can be added to the staking mechanism for the following reasons:

• prevents rapid capital flight during market volatility
• reduces the risk of coordinated unstaking attacks
• provides economic security similar to proof-of-stake networks
• discourages short-term speculative behavior
• encourages genuine long-term commitment to the network
• smooths out sudden liquidity shocks
• "capital commitment" implies friction when exiting, not instant liquidity
• while voting and staking are separate, an unlock period prevents gaming scenarios where users rapidly stake/unstake around governance events
• creates a more stable validator set over time

Agreed,

Some % of the remaining days with a maximum of X days.

[roman-khimov]

I think I don't understand what this kind of staking means economically, there is zero value added in the process (compare that to staking mechanisms tied to validator roles, for example). Just flattening voter rewards is much more preferable to me:

• voting is still needed to have committee/validators and more votes make the system more reliable
• reward flattening is a minimal adjustment while here users have to learn completely new things (again)

Although as long as contracts can vote with their NEO and receive a lot of GAS at the same time FS chains are fine.

[DylanNNT]

I think I don't understand what this kind of staking means economically, there is zero value added in the process (compare that to staking mechanisms tied to validator roles, for example). Just flattening voter rewards is much more preferable to me:

• voting is still needed to have committee/validators and more votes make the system more reliable
• reward flattening is a minimal adjustment while here users have to learn completely new things (again)

Although as long as contracts can vote with their NEO and receive a lot of GAS at the same time FS chains are fine.

It seems to impact potential market movements. I believe the value-add with this model is that NEO will be locked in a staking contract, and from a market perspective, difficult to sell. In theory this method would... decrease volatility?

I'm still debating myself as to whether removing rewards from voting is a good option. Almost every single blockchain I've ever used has tied delegating a node for network security to staking rewards.

[roman-khimov]

difficult to sell

OK, everyone will sell a bit later. But to me token value is built in a different way and locking doesn't add any value on its own.

[i359]

Suggest increasing staking multiplier for encouraging long-term investment.

Duration   | stakingMultiplier  倍数

Flexible   | 1x
3 months   | 2x
6 months   | 3x
12 months | 4x

[vncoelho]

@erikzhang @shargon,

Maybe voting can reduce accounts system fees, that would be a good incentive for voting. Usually, accounts that operate frequently on dApps do not have much holding, while those with higher holding operates less (and those would consequently be more interested in voting due to their stacking).

[deanragnarok]

I've been thinking about this one the last few days, and I think where I've landed is I'm not convinced the “no rewards for voting + rewards for staking” split is the right fix.

1. First thing: Neo already has one of the lowest-friction reward models out there. One vote, no lock, no staking flow, and claiming is simple. Yet participation is still low. So I’m not sure why we expect adding an explicit staking action (and potentially lockups, depending on implementation) to increase engagement. Feels like we might just trade “low voting participation” for “low staking participation,” without fixing the underlying apathy/awareness problem.

2. Second: I agree the current incentive is distorted. The real issue is that you’re effectively punished for voting outside the currently-rewarded set, which entrenches incumbents. That dynamic needs to change, and this proposal does address it. But the other side of the coin is: if voting has zero upside, why would most people bother at all? The choice becomes “stake for yield” or “vote for governance out of goodwill.” I worry the default equilibrium becomes everyone stakes, nobody votes. We've already proven that people will just default to whatever action provides the best personal economic outcome, and under this plan, it's not voting.

3. And if turnout drops further, governance/consensus selection ends up being dominated by exchanges/custodians or a tiny group of engaged whales. That might be ideologically “clean,” but it’s not obviously healthier for the network. (Worth calling out because one of the main arguments against flattening was “votes should be aimed at securing the network,” and this seems to push in the opposite direction.) Maybe it's a little alarmist, but perhaps then the main economic voting incentive for people with large amounts of NEO then actually becomes to gain control of the network 🤷‍♂️

I’m generally supportive of anything that reduces circulating supply / improves holder morale — but I don’t love getting there by making voting basically optional charity.

Feels like we should at least explore middle-ground options, e.g.:

• fix the punishment dynamic (flatten/neutralize vote rewards) rather than remove them entirely, or
• some form of hybrid where staking yield isn’t completely disconnected from governance participation, or
• non-yield perks for voting (@vncoelho's “fee reductions” idea etc.). Not sure it’s enough on its own, but I think ideas like that are worth throwing around.

Bottom line, I’m aligned with the problem statement, I’m just not sold that this structure won’t lead to even less voting - which creates its own set of risks. Before we go too far, I’d really like to see some basic modeling / scenarios for how this plays out in reality.

Given current voting participation, what % of NEO do we actually expect (or hope) would move to staking under this change? And if a big chunk does move, what does that leave for voting turnout?

From there, it’d be good to sanity-check the security side: with the remaining voting supply, how much NEO would a single entity need to gain meaningful control over node selection under a few plausible turnout scenarios (current turnout, -25%, -50%, etc.)?