Effects of Vote Delegation in Blockchains: Who Wins?

TL;DR

This paper analyzes how vote delegation affects decision outcomes in blockchain governance, revealing it benefits minorities in balanced settings and majorities in unbalanced ones, with negligible effects in large equal-weight communities.

Contribution

It provides a theoretical and simulation-based analysis of vote delegation effects across different voting weight distributions in blockchain governance.

Findings

Vote delegation benefits the ex-ante minority under equal-weight distribution.

Vote delegation benefits the ex-ante majority under dominant-weight distribution.

In large communities with equal weights, delegation has minimal impact.

Abstract

This paper investigates which alternative benefits from vote delegation in binary collective decisions within blockchains. We begin by examining two extreme cases of voting weight distributions: Equal-Weight (EW), where each voter has equal voting weight, and Dominant-Weight (DW), where a single voter holds a majority of the voting weights before any delegation occurs. We show that vote delegation tends to benefit the ex-ante minority under EW, i.e., the alternative with a lower initial probability of winning. The converse holds under DW distribution. Through numerical simulations, we extend our findings to arbitrary voting weight distributions, showing that vote delegation benefits the ex-ante majority when it leads to a more balanced distribution of voting weights. Finally, in large communities where all agents have equal voting weight, vote delegation has a negligible impact on the outcome. As a practical consequence, vote delegation can be beneficial for blockchains with highly unbalanced voting rights, but not for those with balanced rights. In decentralized finance (DeFi), vote delegation is widely adopted to streamline governance and increase participation. However, it remains unclear when delegation actually aligns outcomes with community preferences.