Centralized Decentralization: Does Voting Matter? Simple Economics of the DPoS Blockchain Governance

21 Pages Posted: 5 May 2020 Last revised: 22 Jun 2021

See all articles by Seungwon (Eugene) Jeong

Seungwon (Eugene) Jeong

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Date Written: April 21, 2020

Abstract

In the Delegated Proof-of-Stake blockchain, block producers (BP) are elected by stake-weighted vote. The supermajority of BPs can change the rule of the blockchain; thus, preventing the centralization of votes is important. We find the optimal number of votes per account (VPA) that minimizes takeover risks yet maximizes voting flexibility. A smaller VPA requires more stake for takeover, but only up to a certain point, implying that the ``one vote per account'' rule adopted by some major blockchains to mitigate centralization may be unnecessary. Our results are applicable to any environments in which multiple decision makers are elected by voting.

Keywords: cryptocurrency, blockchain, governance, consensus mechanism, takeover, DPoS, Steem, Tron, EOS, Lisk, Steemit

JEL Classification: E42, G34, D72

Suggested Citation

Jeong, Seungwon (Eugene), Centralized Decentralization: Does Voting Matter? Simple Economics of the DPoS Blockchain Governance (April 21, 2020). Available at SSRN: https://ssrn.com/abstract=3575654 or http://dx.doi.org/10.2139/ssrn.3575654

Seungwon (Eugene) Jeong (Contact Author)

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Daejeon, 34141
Korea, Republic of (South Korea)

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