Balancing Participation and Decentralization in Proof-of-Stake Cryptocurrencies
<|reference_start|>Balancing Participation and Decentralization in Proof-of-Stake Cryptocurrencies: Proof-of-stake blockchain protocols have emerged as a compelling paradigm for organizing distributed ledger systems. In proof-of-stake (PoS), a subset of stakeholders participate in validating a growing ledger of transactions. For the safety and liveness of the underlying system, it is desirable for the set of validators to include multiple independent entities as well as represent a non-negligible percentage of the total stake issued. In this paper, we study a secondary form of participation in the transaction validation process, which takes the form of stake delegation, whereby an agent delegates their stake to an active validator who acts as a stake pool operator. We study payment schemes that reward agents as a function of their collective actions regarding stake pool operation and delegation. Such payment schemes serve as a mechanism to incentivize participation in the validation process while maintaining decentralization. We observe natural trade-offs between these objectives and the total expenditure required to run the relevant payment schemes. Ultimately, we provide a family of payment schemes which can strike different balances between these competing objectives at equilibrium in a Bayesian game theoretic framework.<|reference_end|>
@article{kiayias2024balancing,
    title={Balancing Participation and Decentralization in Proof-of-Stake
  Cryptocurrencies},
    author={Aggelos Kiayias, Elias Koutsoupias, Francisco Marmolejo-Cossio,
  Aikaterini-Panagiota Stouka},
    journal={arXiv preprint arXiv:2407.08686},
    year={2024},
    archivePrefix={arXiv},
    eprint={2407.08686},
    primaryClass={cs.GT}
}