IOTA Rebased Governance Proposal
Simple Summary
With this post, the IOTA Foundation is starting a governance vote on a proposed protocol upgrade called “IOTA Rebased.” This upgrade would fast-track achieving:
- Full decentralization of IOTA L1 governed by Delegated Proof of Stake Validators
- Smart contract capabilities based on the MOVE Virtual Machine on L1
We suggest this upgrade as an alternative to continuing research on other methods for integrating L1 smart contract capabilities in IOTA 2.0, which would require multiple breaking changes before achieving the desired protocol functionality.
Rather than continuing the development of the IOTA 2.0 protocol, we propose implementing an object-based ledger architecture on a DAG, using the Move programming language to enable smart contract functionality directly on the L1 ledger. This approach would incorporate a delegated proof of stake protocol to distribute consensus voting rights to validators and stakers.
The IOTA Rebased protocol would feature very low transaction fees as a congestion control mechanism to regulate network access. It would also introduce a system of epoch-based token minting to reward stakers and validators for establishing the decentralized security of the network. Additionally, IOTA Rebased would also implement a fee-burning mechanism.
- Yes, I support the upgrade to IOTA Rebased
- No, I don’t support the upgrade to IOTA Rebased
The governance process that allows you, as an IOTA token holder, to decide the future of the IOTA protocol starts with today’s proposal announcement phase.
The voting phase will begin on December 2nd. You can then vote on the proposal with your IOTA Tokens in the IOTA Firefly or Bloom Wallet.
The voting phase consists of two parts:
- Voting Open phase (7 days):
- During this phase, voters can cast their ballots before the counting begins. Casting your vote during these seven days will ensure that 100% of your voting power is utilized.
- Counting phase (7 days):
- Each IOTA token used in the vote accumulates voting power over time at a rate of 0.01 votes per IOTA per milestone (milestones are issued every five seconds).
- If you hold your tokens for the full counting period actively voting, 100% of your voting power will be reached. If you stop voting earlier or start voting only after the counting phase has already started, your voting power decreases proportionally to the time you have missed.
- Accumulation of votes will end once the predetermined number of milestones for the counting phase has passed.
The Governance Vote will be available in your Firefly or Bloom wallet, and the option with the majority of votes will prevail. A quorum of 5% of the circulating supply of IOTA tokens at the start of the counting phase must be achieved for the vote to be valid. If the quorum of 5% is not achieved, the vote will be declared invalid, and a new voting process will be initiated.
This governance vote is binding, and the majority’s decision will be implemented as described below in the “Specification” section, provided the quorum is met. The IOTA Foundation, which is responsible for organizing, conducting, and overseeing the vote, ensures the integrity of the process.
The node software automatically counts all votes, tracking and verifying the accumulation of voting power based on Tokens used per milestone. After the counting phase, community node operators are invited to verify and validate the final results before we publicly announce them.
The following proposal outlines our motivation for these changes and describes how we will implement them if IOTA token holders accept the proposal.
Abstract
IOTA Rebased
The technological landscape in which the IOTA Foundation operates today differs tremendously from when IOTA was first launched in 2015. Over the years, IOTA has evolved significantly—both in its underlying technology and in the use cases it now pursues. However, one guiding principle has remained constant: our vision and work on real-world adoption. To continue delivering on this vision, we must adapt our strategy and technology to meet changing demands.
For IOTA to succeed in today’s market, it is clear that we must prioritize programmability on Layer 1 (L1) through smart contracts. The market demands a fast implementation timeline to ensure adoption cases happen on IOTA and don’t move to other networks.
After years of working closely with partners and application builders, it has become clear that L1 programmability is essential for onboarding and automating complex, multi-party processes on-chain. Native smart contracts enable near real-time coordination, trustless execution, and compliance – critical components for scaling real-world solutions. Without this functionality, we risk introducing unnecessary complexity and falling behind market expectations. This shift is necessary to unlock the full potential of IOTA and deliver the innovations our ecosystem requires.
Following months of intensive work and internal debates, we have concluded that a “rebase” would deliver what matters most for IOTA: a faster time to maturity of our technology stack so that we can deliver a scalable and robust L1 network without further breaking changes, helping us to scale adoption efforts and support our ecosystem to build applications that create value on the network.
The proposed rebase, once live on the mainnet, would immediately provide L1 programmability, bypassing the lengthy production timeline of the previously explored IOTA 2.0 protocol. Without this shift, and by continuing the work to integrate the MoveVM to IOTA 2.0, achieving the required technical maturity would take several years.
By implementing the MOVE Virtual Machine, IOTA would gain L1 smart contract capabilities, enhanced by what we have learned from the IOTA 2.0 development.
In addition, IOTA would transition to a delegated Proof of Stake (dPoS) system, achieving the long-desired full decentralization of IOTA, and allowing us to remove centralized and permissioned components.
Rebasing our architecture with one of the most performant and sustainable technologies available gives us a solid foundation to re-integrate some principles of IOTA 2.0. This approach allows us to unlock IOTA’s full potential immediately without disrupting any development in the IOTA ecosystem with the breaking changes that integrating L1 smart contracts into the original IOTA 2.0 protocol would entail.
The IOTA Rebased protocol can already be tested today, with the official launch of the Rebased Testnet. More details can be found under the following links:
IOTA Rebased: Public Testnet and DevNet Guide
Why IOTA Rebased now
The official communication of the IOTA Foundation highlights the main reasons behind the IOTA Rebased; please refer to the official blog post for more information.
The primary objective of this change is to deliver a ready-to-use network for the IOTA ecosystem and all its stakeholders to build upon. This is why the IOTA Foundation strongly advocates rebasing the IOTA ledger onto MoveVM and the Rebased protocol. This has not been an easy decision, as it challenges some of the core principles of our protocol and our long-standing quest for an alternative to fee-based congestion control.
This step is particularly difficult now that the IOTA 2.0 protocol is nearly finished. While IOTA 2.0, with its feeless transactions for token holders, demonstrates an alternative to standard blockchains and fee models, the demand for solutions that reduce already marginal fees has diminished even further. Ultimately, from our partners’ feedback, it was clear that the IOTA protocol needs L1 programmability above anything else.
At the IOTA Foundation, we believe there is no future for IOTA without L1 programmability. We cannot continue on a path that excludes an L1 smart contract solution. We also cannot afford additional years of R&D with uncertain outcomes, and we fear that our greatest asset—our reputation, expertise, and trust with industry and governmental partners—would wither and potentially disappear during years of inactivity and waiting. This is why we have opted to take a pragmatic approach and advocate to focus on delivering value to IOTA and our ecosystem as quickly as possible through the IOTA Rebased protocol.
While this decision is certainly challenging, rebasing onto a Move-based ledger is the right step to ensure adoption and growth. Embracing this new direction would unlock opportunities for more innovation and expansion within the IOTA ecosystem. We are confident that the community will see the benefits of this transition and join us in shaping a brighter future for IOTA. Together, we can harness the full potential of our technology and realize our vision to drive progress and create a lasting impact.
Specification
Vote Option 1: "Yes, I support the IOTA Rebase proposal.”
Rebasing the IOTA ledger onto MoveVM to immediately establish L1 programmability and decentralization. The upgrade itself would happen after the current Public Testnet Phase has concluded and the IF engineering has greenlighted the protocol and is ready to deploy on Mainnet. Please refer to the “Implementation” section below to learn more about what will happen after the vote successfully concludes.
As part of this upgrade, the current IOTA ledger would be migrated to a new technology stack. However, this migration effort and associated downtime are manageable and comparable to what would be required to migrate IOTA 1.5 (codenamed “Stardust”) onto the IOTA 2.0 protocol. The Foundation has designed this process to be seamless for token holders, exchanges, and partners.
The IOTA Rebased protocol change would introduce Move-based smart contracts to IOTA and, with that, also introduce many exciting new features such as:
- Full decentralization of the IOTA L1 DAG through a delegated proof of stake mechanism with 150 permissionless Validator Slots.
- Consensus switch to the Mysticeti protocol for high scalability and low latency.
- Very low transaction fees with an adaptive fee burn mechanism leading to a flexible supply (inflationary/deflationary).
- Ability to earn staking rewards in IOTA tokens for token holders that secure the protocol through staking and delegation.
- Initial target inflation of 6% per year issued to reward stakers and validators.
The rebase onto the MoveVM requires a new set of tools and documentation, which the IOTA Foundation has already built and will provide as part of the upgrade. Since the IOTA base layer currently lacks programmability, the change would not affect existing dApps or applications relying on this feature as they all currently utilize IOTA EVM, which would not be affected.
One significant change would be introducing a fee-based transaction and congestion control model. This has been heavily debated, especially regarding replacing IOTA 2.0’s opportunity-cost-based Mana model. The IOTA Foundation believes that the market and our partners clearly prefer a direct-fee model, especially when it comes to smart contracts. This also massively simplifies the protocol, its development and maintenance.
Tokenomics changes between the current IOTA Stardust protocol and the new IOTA Rebased Protocol, which Voters agree on with this governance vote are summarized in this tweet and displayed in this table:
Adjustments to the IOTA Identity Framework, IOTA Tokenization Framework, and IOTA Smart Contract Framework to anchor EVM chains would need to be made, which have already been evaluated. We expect these adaptations to be ready by the time of the protocol’s mainnet release. The required documentation should be available during the testnet phase and certainly, before the rebase and migration, giving builders ample time to assess any necessary changes to their application logic.
In summary, we anticipate a smooth transition with minimal interruptions or breaking changes, allowing us to gain L1 programmability immediately. For more details on the technical architecture, please refer to our recently published blog post.
Vote Option 2: “No, I don’t support the IOTA Rebased proposal.”
If the community rejects the protocol upgrade, the IOTA network will continue to run as is. At that point, the IOTA Foundation will decide how to continue developing and stewarding the network.
Implementation
If the outcome of this governance vote favors the IOTA Rebased proposal (Vote Option 1), the following will happen:
Verification & Greenlight:
If accepted by the community, the IOTA Rebased protocol could be released as the new IOTA Mainnet if the following conditions are fulfilled:
- Minimum two months testnet phase, including a thorough stress test.
- Readiness review of all real-world validators on the testnet.
- Completion of security audits during that phase.
- Integration of IOTA Rebased by major exchanges.
The mainnet upgrade itself will include the following steps:
- Network Transition: The current IOTA Mainnet (“Stardust protocol”) will be halted. A final snapshot will confirm the exact amount of new tokens to be created on the new IOTA Rebase network, ensuring a 1:1 token transition. The snapshot of all IOTA Stardust balances will be integrated into the genesis ledger state of IOTA Rebased
- IOTA EVM Chain Pause: The IOTA EVM Chain will be paused temporarily during the transition.
- EVM Chain Upgrade: The IOTA EVM Chain will be upgraded to a new ISC version. Once the upgrade is complete, the EVM network will resume normal operations without any disruptions for users or developers.
Although the IOTA EVM Chain will experience a brief downtime for the upgrade, no apps, balances, or functionalities will be affected. Users are advised to avoid dApp activities shortly before the downtime. The IOTA Foundation will actively reach out to EVM builders who are known to us so they can potentially disable functionalities to avoid any issues during downtime. - Wallet Transition: The IOTA Firefly wallet will be discontinued. Users can access their holdings via the new IOTA wallet on IOTA Rebased L1 using the same private keys as in Firefly.
- Token Continuity: No token migration will be necessary. IOTA Stardust tokens will remain on the sunsetted IOTA Stardust network, while an equal number of new tokens will be created on the IOTA Rebased network and made available to users immediately after the launch via their existing IOTA private keys.
- Exchange Support: Major exchanges are expected to support the upgrade, with deposits and withdrawals resuming after a short interruption to conclude the update.