Staking Pools on Blockchains

Hans Gersbach, Akaki Mamageishvili and Manvir Schneider

No 17580, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: On several proof-of-stake blockchains, agents engaged in validating transactions can open a pool to which others can delegate their stake in order to earn higher returns. We develop a model of staking pool formation in the presence of malicious agents and establish existence and uniqueness of equilibria. We then identify potential and risk of staking pools. First, allowing for staking pools lowers blockchain security. Yet, honest stake holders obtain higher returns. Second, by choosing welfare optimal distribution rewards, staking pools prevent malicious agents from receiving large rewards. Third, when pool owners can freely distribute the returns from validation to delegators, staking pools disrupt blockchain operations, since malicious agents attract most delegators by offering generous returns.

Keywords: Delegation; Blockchain; Governance (search for similar items in EconPapers)
JEL-codes: C72 D02 D60 G23 (search for similar items in EconPapers)
Date: 2022-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17580 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17580

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17580

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().