On-chain BlockChain Governance

A utility token with cold staking feature can also be used for an electoral process of choosing a representative. This good governance process would show the tokenholders deliberate commitment to a transparent decision-making and the strong desire to implement such decisions.

Good governance means having a process of decision-making that are:

a. participatory,

b. consensus oriented,

c. accountable,

d. transparent,

e. responsive,

f. equitable and inclusive, and

g. effective and efficient.

What is the Value of a DPoS Token

What is a DPoS Blockchain? 

A Delegated Proof Stake (DPoS) blockchain is an advanced ledger system. It is a record-keeping system that is immutable, censorship-resistant and trustless. It simply means that when a sender transfer one (1) token,  another party will receive 1 token (less transaction fees) without a guarantee of an intermediary third party.

The token has no intrinsic value, as it is.  There is no funds held for safekeeping on the blockchain.  It is not the same as having gold bars inside a vault. The expression “funds are safe on the blockchain” means that a certain record is safe from any tampering. There are no actual fiat backing it up. This is what Satoshi is saying when he said there is no central authority that is issuing the token. This record cannot be presented to any bank, treasury or custodian for corresponding value so that it can be withdrawn and spend it. This is because a DPoS token is a utility token, a governance mechanism device. This token will be used to validate wealth by  1)electing an honest node, and 2)making sure that the node will play under the rules and will not undermine the system.

What is the value of the DPoS token recorded in a blockchain?

This can be explain by this illustration:

There were these two accountants, both recorded a transaction. They exactly presented it the same way on a piece of paper. One accountant sign his name, ABC. The other sign it DEF, CPA.

Which one do people rely with and put value on it? Obviously, the one prepared by DEF, not because he is DEF, but because he signed it professionally and attesting that he recorded the transaction based on a set of generally-accepted rules of accounting. If later on, someone will find out that he had been dishonest on the recording of the transaction, his title as a CPA could be revoked.

This is what Satoshi is implying about “honest nodes” and the “validity of his own wealth”. Nodes will continue to create wealth if it stay honest and will play by the rules. This is all forward looking statements.  The supposed wealth recorded on the blockchain does not yet exists, but has to be earned from the users of the blockchain.  It should be based on the future cumulative value of yet to be performed recording services by honest nodes that will play by the rules. In other words, a token represents the value of the incentives to be received in the future because of the efficient, effective and ethical prospective bookkeeping services.

Therefore, the value of a DPoS token is largely depends on  the exercise of good governance of the tokenholders over their elected delegates.  Such that, the validity of wealth creation or the offering of the record-keeping services largely relies on the continued operations of honest nodes that will not undermine the system or  be perceived to be dishonest.


On blockchains that uses DPoS consensus*,  it takes only  (1) one misbehaving delegate, or (2) a perception of misbehaviour by a delegate who is not being punished for said perception to make a DPoS token without any corresponding value.

*See previous blog (The Need For Soft Infrastructures For Public Blockchains) on how DPoS consensus resolved the “trillema” of a blockchain and item 6, incentive, of the bitcoin paper.

The Need For Soft Infrastructures For Public Blockchains


A blockchain is a tool

A Delegated Proof of Stake (DPoS) token is a means to access a public blockchain. It is not a deposit-like product that earns interest nor a share of stocks that receives dividends.

A public blockchain is an advanced ledger system and it is not a bank. It is not a company, DPoS token is not a share of stocks.

The DPoS token’s utility is a governance mechanism device.

Governing or making sure a node stay honest and will play by the rules would make a tokenholder entitled for an incentive which is the share in the forging rewards. A tokenholder completed a task, that is why a corresponding compensation was due to him/her. This task includes the concluding with community of network users (i.e. validating their wealth) that the recording of transactions by a delegate was done efficiently, effectively and ethically.

Therefore, when the tokenholder received an incentive, it is not the same as receiving a passive income. This compensation is for a dynamic work completed that entails a constant research on what his/her elected delegate is doing on the blockchain. Included in the said task is the execution of immediate mitigating measures if there is a misbehavior or a perception of it against a delegate that will affect the safety, soundness and fairness of the operations of the blockchain.

The records are immutable and transparent on the Blockchain; there is no need for advanced skills to make any findings of unethical practice or violations of community values. It is the duty of every tokenholder to be aware of all the transactions of their respective delegates.

Otherwise, if enough tokenholders, become passive holders of this utility token and not use it as intended. The tokenholders failed to conduct the necessary governance to punish a dishonest delegate (node). With that, the security of a DPoS Blockchain is compromised and general acceptability for fairness of recorded transactions on the blockchain became weak. Enterprise value of the Blockchain will suffer and the value of the share of the forging rewards is worthless. Thus, if there is no work being done by a tokenholder, there is no pay due to him/her.

Soft Infrastructures

The market knows that DPoS is not the same as POS in terms of security. In the “trillema” of a blockchain, a DPoS Blockhain did not prioritised security. Therefore, it is essential for every tokenholder to use the token for governance and secure the network. In the other words, while the POW blockchains relies on the hash power to secured the network, the DPoS leverages on the wisdom of the crowd.

The reiterates that, the strength of the security of the DPoS Blockchain depends on how strong is its weakest link which could be anyone of the delegates and the readiness, i.e. the soft infrastructures, of the community to punish said dishonest delegate.

The collective’s main purpose is to compensate the failings of the hard infrastructure of a DPOS blockchain by building the necessary soft infrastructures.

Post Script

The collective assumes that the reader is already familiar with DPoS and Satoshi Nakamoto’s Bitcoin: A Peer-to-Peer Electronic Cash System paper (Bitcoin White Paper).

This is just an implementation of item 6. Incentive of the Bitcoin White Paper on a DPoS platform which discusses how the validity of the value of the wealth was being upheld by honest node who plays by the rules and will not undermine the system.

To clarify some ideas, please see below:

The “trillema” of a blockchain refers to 1) Decentralization, 2) Security and 3) Scalibility. It has been said that a designer of a blockchain can only prioritise 2 out 3 of the factors affecting the operations of the blockchain.

When the collective posits that a blockchain is immutable, censorship-resistant and trust-less, the practical application of that is a successful transaction of a sender of 1 token to a receiver without a guarantee of a third party.

On the other hand, when the collective states that the general acceptability for fairness of the recorded transactions on the blockchain, it means that when a sender of 1 token valued in fiat, by the time the receiver possess said token, the value in fiat remains the same.

We are also the operators of the website that contains a collection of pro-forma community charters, and  draft policy papers and exposure articles on good governance and risk management for public blockchains.

Community’s Various Advisories

Social Theories, Ideological Foundation