Collusion-Proof Decentralized Autonomous Organizations

Abstract

We uncover severe collusion vulnerabilities in decentralized autonomous organizations on the blockchain. When voters act strategically and the system is poorly decentralized, payoff matching bribes compromise the punishment of malfeasant actors under conventional decentralized governance. We show that this issue can be mitigated through alternative voting mechanisms. Stochastic voting effectively decouples a tokenholder's influence from the voting behavior of others. Thus, collusion-proofness can be restored in the presence of sufficiently centralized governance tokenholders. In addition, masked voting increases collusion resilience through the obfuscation of individual voting behavior. Our findings are applicable to the blockchain oracle problem and, more generally, to the design of incentive-compatible and collusion-proof decentralized systems.

Keywords: Decentralized Autonomous Organization, Blockchain, Incentives, Collusion

JEL Classification: D02, D23, D82, G22