Blockchain Governance: A Model for Optimal Decision Making using Game Theory

Abstract

Blockchain is an “immutable ledger” a cutting-edge emerging technology that stores and tracks all kinds of data. Whereas Blockchain governance is a decentralized process of proposing, accepting, and rejecting change. Being decentralized in nature has its consequences such as decision-making and achieving mutual consensus is costly and challenging. Existing governance models are not so effective due to a lack of decision-making in the Blockchain environment such that users cannot connect and communicate to make instant decisions for the proposed change. Each proposal takes a long time to get accepted or rejected as a result, the community ends up initiating a fork. To solve these issues, this thesis proposes a unique governance model by the implementation of the game theory approach for instant decision-making. It uses agent-based simulation to implement ON-chain governance in conjunction with percolation theory and voting mechanism to solve connectivity and communication issues. The uniqueness of our framework is shaping opinion by modeling three types of user interaction and their influence on each other after interaction i.e. Confident, unsure and fixed users. Once a majority of the community shares the same opinion at this point with the help of game theory each user will decide to fork or not to fork such that it maximizes their utility and also produce a less resulting impact on the latency of the original Blockchain. The results from the Blockchain governance simulation confirm the validity of our framework and its effect on the latency of the Blockchain network. The research concludes that after interaction when a decision is made with a minority of network agreeing with the proposal and the majority rejecting it, the resultant effect on latency will be less as compared to when a majority of network agrees and forks apart leaving the original Blockchain with higher latency and lower transaction rate.