Da Hongfei believes that Neo’s new dynamic on-chain governance mechanism is the most “important and sophisticated” change in Neo3. Da outlined his thoughts in a keynote speech delivered at the 2nd Nova Global Blockchain Investment Institutions Summit in Sanya, China, on Dec. 21, 2020.

Neo3 will feature a brand new economic and governance model designed to decentralize the Neo network and its decision-making. Under the new model, NEO holders will vote in a Neo Council consisting of 21 members. Of these 21, the top seven will become consensus nodes responsible for producing blocks. The Neo Council will oversee the management of network upgrades, fees, and other Neo operation-based issues.

Da noted that Neo’s new governance system enables “Elastic Manageability,” or an ability to adapt to various social jurisdictions.

The results of NEO votes are updated every 21 blocks, meaning that voters have a lot of flexibility in their voting strategies. Da believes that the Neo Council will likely be diverse, made of members with varying degrees of openness and anonymity across different regions around the world.

Combined, this allows the Neo network to be responsive to evolving regulatory conditions.

“For example, [consider] the case of a particular type of transaction, [where] more than 1/3 of the consensus nodes are influenced by local jurisdiction and cannot pass this type of transaction. The effect of regulation on this particular type [of] transaction is simultaneously reflected in the Neo network. Under the framework of dynamic elections, NEO holders will then decide whether to continue to vote for the affected nodes in the next term.”

Over time, Da expects Neo’s operational philosophy and council make up to be “shaped in a recurring game-theory between voters and node candidates.”

In any functioning democracy, voter participation is key. To this end, changes have been made to Neo3’s GAS distribution model to incentivize NEO holders to take an active interest in the platform’s governance.

Neo3 will generate GAS at a rate of 5 per block. Of this amount, 10% will be distributed to the Neo Council as rewards. A further 10% will be distributed to NEO holders for actively voting, while the remaining 80% will be distributed to voters who have successfully voted for a candidate elected to the Neo Council.

The intended effect is that NEO holders will have to vote responsibly to claim the maximum amount of GAS.

“This is a brand-new beginning, and we are looking forward to everything new in Neo3,” Da concluded.

Da’s full speech can be found at the link below: