Centralized Decentralization: Does Voting Matter? Simple Economics of the DPoS Blockchain Governance
20 Pages Posted: 5 May 2020 Last revised: 18 May 2020
Date Written: April 21, 2020
In the Delegated Proof-of-Stake (DPoS) blockchain, block producers (BP) are elected by stake-weighted vote. If the supermajority of BPs agree, they can fork the blockchain, i.e., can change the rule of the blockchain. Thus, preventing the centralization of votes is important. Some DPoS blockchains allow users to vote for multiple BPs. One may think that the takeover is more difficult (i.e., a larger stake is needed) if one user can vote for only one BP, or one may think that the number of votes allowed per account (VPA) does not matter, since it applies to everyone in the same way. This paper provides a game-theoretic foundation for an optimal VPA. We introduce the Governance Game and the takeover resistance coefficient (TRC), the minimum ratio of the attacker's stake to the defender's stake for a takeover. Solving the equilibrium of the governance game, we find the optimal VPA that minimizes the takeover risk (i.e., maximizes the TRC) and maximizes the voting flexibility. A smaller VPA requires an attacker to have a more stake for the takeover, but only up to a certain point. Our result implies that the "one vote per account" rule adopted by some major blockchains to mitigate centralization may not be necessary. In contrast, if less than half of BPs are needed for a fork, a smaller VPA requires a less stake.
Keywords: governance game, takeover, voting, consensus mechanism, blockchain, cryptocurrency, virtual asset, DPoS, Steem, Tron, EOS, Lisk, Steemit
JEL Classification: D71, D72, G34, L12
Suggested Citation: Suggested Citation