Introducing Syscoin 5 (Codename Nexus): A New Era of Decentralized Services

Syscoin 5 (Codename Nexus) is a proposal from the Syscoin Foundation for what we believe is a crucial upgrade that advances decentralized infrastructure, governance, and trustless cross-chain interoperability—laying the groundwork for Bitcoin-secured Web3 scalability. This upgrade empowers developers, node operators, and the broader ecosystem with new capabilities designed to enhance Syscoin’s efficiency, decentralization, and economic sustainability.

*Updated February 16th: Added a cap on the Dynamic governance.

 

Key Features

1. NEVM Registry for Sentry Nodes

    This registry-based system brings new functionality that enhances decentralization, security, and economic incentives within the network. This evolution is critical to ensuring Syscoin remains a premier modular blockchain secured by Bitcoin.

Decentralized Sequencing

  • Sentry nodes will now be registry-based, allowing them to serve as decentralized sequencers for higher-layer networks, including Bitcoin+ and Edgechains like zkSYS.
  • Why this matters: Decentralized sequencing prevents censorship, enhances fairness, and ensures Syscoin’s modular architecture remains trustless and efficient.

AI and “Based” Services

  • Beyond sequencing, sentry nodes are incentivized to opt into additional services, such as AI-powered execution, for extra rewards.
  • This lays the foundation for "Based" rollups, where staked & registered sentry nodes can manage rollup stacks, improving security, economic stability, and permissionless access
     

Seniority Mechanism in Sentry Nodes

  • Syscoin’s sentry node seniority rewards long-standing, well-reputed nodes for maintaining honest behavior and consistent uptime. Over time, these nodes earn higher rewards, reinforcing network stability and security.
  • Future iterations may introduce EVM-based seniority tracking for AI-powered Sentry Nodes, further incentivizing reliable participation and honest execution.

This registry-based upgrade transforms sentry nodes from passive infrastructure into dynamic participants in Syscoin’s modular ecosystem, strengthening both economic incentives and decentralized network security.

2. Forced Inclusion of Chainlocks per Epoch

    Syscoin 5 introduces a mandated chainlock per epoch, strengthening trustless cross-chain interoperability, ZK verification, and Bitcoin integration via BitVM. This ensures that every epoch has an immutable cryptographic proof, reinforcing security at the protocol level.

ZK Light Clients

  • By enforcing at least one chainlock per epoch, Syscoin L1 provides irrefutable cryptographic proof that enables lightweight, decentralized validation.
  • Why this matters: ZK light clients can now verify transactions without relying on centralized intermediaries, significantly boosting trustless cross-chain integrations.

PoW + Chainlock Synergy

  • This upgrade enhances Syscoin’s Proof-of-Work security model by ensuring every epoch is cryptographically signed by authorized sentry nodes.

Why this matters

Chainlocks serve as an additional security layer, allowing provers to validate epochs with certainty—forming the backbone of secure, decentralized cross-chain solutions

Unlocking Trustless Bitcoin Interoperability via BitVM

  • Chainlocks and ZK light clients work in tandem to facilitate a two-way, trustless bridge between Syscoin and Bitcoin.
  • Why this matters: This paves the way for Bitcoin-native rollups, trustless BTC bridging, and deeper integration with Bitcoin+, ensuring Syscoin becomes the key of choice to unlock unmitigated Web3 proliferation on Bitcoin’s foundation.

By combining PoW security, chainlocks, and zero-knowledge verification, this upgrade fortifies Syscoin’s role as the leading facilitator of Bitcoin-aligned scalability and interoperability, leading Bitcoin’s transition to become the unrivaled base and home of the world’s most dominant Web3 ecosystem.
 

3. Dynamic Governance

    Syscoin 5 introduces Dynamic Governance, a major enhancement to Syscoin’s on-chain governance system that allows the treasury budget to adapt based on real demand. This ensures funding remains efficient, sustainable, and community-driven, eliminating rigid budget constraints while maintaining financial stability.

Previously, Syscoin operated with a fixed monthly governance budget (superblock funding pool). With Dynamic Governance, the system can now increase or decrease the budget by up to ±10% per cycle, ensuring optimal resource allocation based on actual network needs.

How It Works

Network participants, including contributors, project teams, and community members, can propose network upgrades, development, marketing, running cost budgets.Sentry nodes then vote to approve or reject these proposals. Dynamic governance integrates seamlessly into this process by automatically adjusting the treasury size based on proposal allocations. 

Automated governance adjustment conforms to the following logic:

  • If total approved funding exceeds 105% of the available budget, the system automatically increases the budget by 10% in the next cycle, up to a maximum cap of 5 million SYS per month. Reaching this cap would require 10 consecutive months of approved proposals exceeding the budget by at least 5%.*
  • If total approved funding falls below 95%, the system reduces the budget by 10% in the next cycle.
  • If funding remains within 95-105% of the budget, no change occurs.
  • Adjustments happen automatically at the start of each governance cycle (aligned with superblocks, occurring approximately monthly).

This adjustment process happens automatically when a superblock is processed, with the node consensus logic writing the new budget value to the governance database. This flexible system ensures that governance funding expands when necessary—such as for major protocol upgrades or ecosystem expansion—while also scaling down when less funding is needed, preventing waste and maintaining economic balance.

Initial Parameters & Long-Term Vision

  • The first superblock under this model will start at 2 million $SYS per month, ensuring a robust foundation for funding critical developments.
  • This introduces an approximate 2.86% annual inflation, but the rate can increase or decrease dynamically based on governance participation and network growth.
  • Over time, as network adoption scales, EIP-144 optimizations will help reduce costs, introduce fee burns, and potentially make $SYS deflationary, balancing emissions while maintaining security.

Key Benefits of Dynamic Governance

  • Adaptive Public Goods Funding: Enables community-driven funding for essential Syscoin services, including core development.
  • Flexible Monthly Governance Thresholds: The budget can be adjusted by ±10% per cycle, ensuring funding avoids stagnation, remaining responsive yet accountable.
  • Efficient Resource Allocation: Reduces inefficiencies, preventing overfunding or underutilization by dynamically adjusting treasury size based on real demand.
  • Enhanced Decentralization: Empowers  sentry nodes and community members to directly influence funding priorities, reinforcing Syscoin’s decentralized and transparent governance model.

Why This Upgrade is Essential

By eliminating rigid governance constraints, Syscoin 5 creates a self-adjusting, community-driven funding model that ensures long-term sustainability. This allows Syscoin to evolve dynamically while maintaining economic balance, security, and decentralization

 

Current Status and Next Steps

    Our team has already implemented and is thoroughly testing these new features. However, because this upgrade impacts both governance and node operations, it will require approval through a community governance vote.

The Superblock this vote will be based on is SB114 at blockheight 1997280. This currently has a voting deadline of March 13th 2025 with a Superblock date of March 16th 2025.

Syscoin 5 is a major milestone that builds on everything we’ve learned over the years. It brings new capabilities for node operators, fosters better on-chain governance, and sets the stage for truly trustless, BTC-pegged cross-chain solutions via BitVM. It also embodies our commitment to transparency, security, and community-driven progress.

If you’re a sentry node operator, we strongly encourage you to participate in the upcoming governance votes. Your voice is essential in determining how Syscoin continues to evolve.

Make sure  you have your nodes ready for voting, you may check your local Syscoin full node by calling ‘protx_list_wallet 2’ in your console to see if you have your voting keys (hasVotingKey should be true). If you do not you may contact your hosting provider to provide or create these keys.
 


How to cast your vote (sentry node operators):

  1. Open up Syscoin QT and let it sync.
  2. Go to Windows > Console
  3. If you have multiple wallets, make sure you click the dropdown wallet and select the wallet that holds your voting keys/sentry nodes.
  4. In console you will need to unlock your QT wallet via the command:
    1. walletpassphrase “yourPassPhrase” 300
    2. You will now be able to vote via one of the following commands:
  5. You can vote YES/NO/ABSTAIN
    • To VOTE YES
      • gobject_vote_many a522f067d0f3bf8737e2bc5d4d83d36dff11f8cbfd3e67949967bf0578b6e330 funding yes
    • To VOTE NO
      • gobject_vote_many a522f067d0f3bf8737e2bc5d4d83d36dff11f8cbfd3e67949967bf0578b6e330 funding no
    • To VOTE ABSTAIN
      • gobject_vote_many a522f067d0f3bf8737e2bc5d4d83d36dff11f8cbfd3e67949967bf0578b6e330 funding abstain
  6. This should return you with a successfully voted response.
  7. You can now lock your wallet via the following command in console:
    1. walletlock
       

Thank you for your continued support. Together, we are shaping a future where Bitcoin’s security meets cutting-edge interoperability, forging a blockchain ecosystem that can scale to meet real-world demands. We look forward to collaborating with you in shaping Syscoin’s future. Here’s to a bold new chapter—represented by Syscoin 5 (Codename Nexus)—and a thriving, decentralized ecosystem built on innovation, and community-first principles.

 

Join the Conversation

  • Discord & Telegram: Jump in to discuss Syscoin 5, governance proposals, or to learn about operating a sentry node.
  • GitHub: Keep track of updates and code changes related to Syscoin 5.
  • X: Follow us for quick announcements and developer highlights.
Feb 15, 2025 by Syscoin Foundation