In a traditional bank, you can open a savings account and deposit capital to earn interest.

On the Internet Computer (IC), a similar mechanism exists, you can lock up your $ICP tokens and get yield through the Neural Nervous System (NNS). Those rewards are called voting rewards - and scale from 6 months pictured above to 8 years - pictured below.

This system is wonderful as it is a guaranteed yield (DEFI word for interests). However, much like in the traditional system, your capital is locked up, and if you move your capital, you might have a diminished yield or not yield. Now this is causing a capital efficiency problem in the IC ecosystem, as other DEFI solutions have failed to create products with similar yields, as a result, 46.8% of $ICP tokens are locked in the NNS:

Enter WaterNeuron, where both your locked $ICP and yield are liquid and represented by the same token $nICP:

With the liquid asset you are still exposed to the NNS yield + you can use the token for any DeFi endeavors.

Now, let's visualize the yield—it ranges from 2646% and tends to 7.5% with time.

How is that possible? Let's dive deeper into the actual mechanisms of the protocol

With multiple SNS (Service Nervous System) rounds. People deposit 420'000 $ICP three times in different eras. This ICP is then staked in an 8-year neuron. 90% of the rewards generated by this neuron are distributed to the nICP holders, making the yield of the nICP holder appealing.

Now how do you redeem them once you are content with that yield? You have to either swap nICP to ICP on markets or you can always unstake with the protocol, wait 6-month and get the full ICP amount back.

Is a bank run possible? No, the design offers no unsustainable mechanism like a buffer for instant unstake. The protocol has been designed to be fair and robust.

Last updated