Year: 2025
Type: article
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 the potential and risk of staking pools. First, allowing for staking pools lowers blockchain security. Yet, honest stakeholders 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 can disrupt blockchain operations, since malicious agents attract most delegators by offering generous returns.
DOI: 10.1145/3769112
Institution: ETH Zurich
Language: English
Subfield: Information Systems
Field: Computer Science
Domain: Physical Sciences
Open Access status: hybrid
OpenAlex ID: W4414449156