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

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