Collusion-Proof Decentralized Autonomous Organizations

37 Pages Posted: 19 Jan 2021 Last revised: 14 Jul 2023

See all articles by Alexander Braun

Alexander Braun

Institute of Insurance Economics (University of St. Gallen); Swiss Finance Institute

Niklas Häusle

Institute of Insurance Economics (University St. Gallen)

Date Written: April 22, 2022

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

Suggested Citation

Braun, Alexander and Häusle, Niklas, Collusion-Proof Decentralized Autonomous Organizations (April 22, 2022). Available at SSRN: https://ssrn.com/abstract=3760531 or http://dx.doi.org/10.2139/ssrn.3760531

Alexander Braun

Institute of Insurance Economics (University of St. Gallen) ( email )

Tannenstrasse 19
St. Gallen, 9000
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

HOME PAGE: http://https://www.alexandria.unisg.ch/persons/2621

Niklas Häusle (Contact Author)

Institute of Insurance Economics (University St. Gallen)

Tannenstrasse 19
St. Gallen, 9000
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
718
Abstract Views
2,264
Rank
68,923
PlumX Metrics