Staking in Blockchain Communities

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Jaya Klara Brekke, Kate Beecroft and Francesca Pick:

"Staking is an attempt at automating the deliberation process by sending out economic signals to nudge the direction of a governance process or outcome. It is a key part of “emergent” ideas around governance: staking is considered a mechanism to communicate the intensity of preference, or conviction about the success of a certain path of action. In practice, it is a process of holding and locking funds in a cryptocurrency wallet, giving currency holders some decision power in the system. Typically just holding coins is not enough to entitle voting; users must take some action to stake their coins, usually locking it to a smart contract as a vote or as a bet on an outcome.

An increasing trend is to place predictions (like bets) about whether a proposal being voted on will pass or fail and to stake tokens to back predictions up. These have given rise to prediction markets, where successful predictors who have staked for proposals that “pass” or attract the requisite votes are compensated, while unsuccessful ones lose their stake. Similarly, actors might be compensated for staking against proposals that “lose” (Field 2018). Staking is intended to enable actors to gain access to a governance process, to signal preference for and against proposals, and to have the potential to influence the outcome of a vote or decision, as well as to financially benefit from it. In this sense, deliberation is to some degree considered in the design of staking processes in blockchain governance. But yet, again it is sought to be formalized and automated into signals that can be registered in a blockchain system, through what are considered a more neutral and legitimate forms of coordinating differences, namely, protocols and market mechanisms.

A cursory reading of research on blockchain governance shows that there is a bias toward determining who has authority and how they are endowed to influence a “consensus” in the form of token economics. Rarely are actual moments of dissensus considered necessary and productive aspects of dissensus, which will usually unfold through other channels, in chats, repositories, email lists at conferences, and in informal discussion and interactions. The ideological hangovers in blockchain governance, in particular the idea that blockchains represent neutral objective technical solutions to otherwise messy, subjective human relations, have given rise to a peculiar dynamic: the need to encode more and more interactions to take place on-chain via the protocol. The ideological project that this represents in the meantime also means that groups form around the very idea of blockchain governance. In other words, governance for governance sake rather than as a means to achieve something together, which entails that often the only thing at stake, so to speak, are the tokens themselves."