Trust Delegation

A consensus mechanism where token holders vote to elect a limited set of validators or witnesses to produce blocks on their behalf. This creates a representative system that balances decentralization with performance.

• Key Feature: Enables high transaction throughput by reducing the number of consensus participants.
• Example: Networks like EOS and TRON use DPoS, where top-voted delegates are responsible for block production and network governance.

Tokens representing a claim on staked assets, allowing users to delegate stake to a professional validator while maintaining liquidity. The derivative token can be used in DeFi protocols while the underlying assets secure the network.

• Key Feature: Unlocks capital efficiency by separating the staking yield from the staked asset's utility.
• Example: Lido's stETH on Ethereum allows users to delegate ETH to node operators and receive a liquid staking token in return.

A governance model where token holders can delegate their voting power to other participants or specialized delegates without transferring asset ownership. This enables informed decision-making by concentrating voting power with knowledgeable parties.

• Key Feature: Mitigates voter apathy and improves governance quality through expertise delegation.
• Example: In Compound Governance, COMP token holders can delegate their votes to an address, which then votes on proposals on their behalf.

A hierarchical structure where a primary delegate can further delegate received authority. This creates layers of specialization, such as in meta-governance, where a protocol uses its treasury assets to vote in other protocols' governance systems.

• Key Feature: Enables complex, cross-protocol governance strategies and specialized management.
• Example: A DeFi protocol's treasury, holding UNI tokens, may delegate them to a sub-committee specifically tasked with voting on Uniswap governance proposals.

The cryptoeconomic security mechanism that penalizes malicious or negligent delegates (e.g., validators) by seizing a portion of their staked assets. This aligns incentives and ensures delegates act in the network's best interest.

• Key Feature: Provides a trust-minimized enforcement mechanism, making delegation viable in adversarial environments.
• Example: In Cosmos, validators can be slashed for double-signing blocks or extended downtime, with penalties applied to their own stake and that of their delegators.

A delegation model where the delegator sets specific, bounded authorizations or intents for the delegate, rather than granting broad, open-ended power. This is often implemented via signed messages or smart contract permissions.

• Key Feature: Increases security and granularity by applying the principle of least privilege to delegated authority.
• Example: An ERC-20 approve function allows a token holder to delegate a specific spending allowance to a smart contract, limiting the delegate's power to a defined amount and duration.

In Proof-of-Stake networks, token holders delegate their staking power to a validator node without transferring custody of their assets. This allows smaller holders to participate in network security and earn rewards.

• How it works: The delegator's stake is added to the validator's total, increasing its chances of being selected to propose and validate blocks.
• Key benefit: Enables broad, decentralized participation by lowering the capital requirement to run a validator node.
• Example: In networks like Cosmos or Solana, users delegate their tokens to validators through their wallet interface.

Liquid staking is an advanced form of delegation where staked assets are tokenized into a liquid staking derivative (LSD). This derivative represents the staked position and its future rewards.

• Core innovation: Unlocks liquidity for staked assets, allowing them to be used in DeFi protocols (e.g., as collateral) while still earning staking rewards.
• Process: Users deposit tokens with a staking provider (like Lido or Rocket Pool), which manages validator operations and mints a liquid token (e.g., stETH, rETH) in return.
• Impact: Significantly increases Total Value Locked (TVL) in DeFi by removing the liquidity lock-up traditionally associated with staking.

In Decentralized Autonomous Organizations (DAOs), token holders often delegate their voting power to experts or representatives.

• Purpose: Allows for informed, efficient decision-making without requiring every member to be deeply involved in every proposal.
• Mechanism: Delegation is typically done on-chain via a smart contract or platform like Snapshot. The delegate votes with the combined voting power of all their delegators.
• Example: In Compound or Uniswap governance, users delegate their COMP or UNI tokens to community leaders or investment DAOs to vote on protocol upgrades.

Delegation inherently introduces counterparty risk. The delegate's actions directly impact the delegator's funds.

• Slashing: In PoS systems, if a validator commits a punishable offense (e.g., double-signing, downtime), a portion of the delegated stake can be permanently destroyed (slashed).
• Mitigation: Delegators must perform due diligence on a validator's performance, commission rates, and infrastructure reliability.
• Custodial Risk: In liquid staking, users must trust the smart contract security and centralization risks of the staking provider pool.

Layer 2 scaling solutions, particularly optimistic rollups, use a form of trust delegation for fraud proofs and sequencing.

• Sequencer Delegation: Users often rely on a single, trusted sequencer to order and submit transactions to the base layer (L1).
• Fraud Prover Delegation: In optimistic rollups, the security model assumes at least one honest actor will be watching and submitting fraud proofs if needed. Users effectively delegate this watchtower role to the ecosystem.
• Evolution: New designs like shared sequencers and proof-of-stake sequencing aim to decentralize this delegated trust.

The delegation logic is encoded in smart contracts, which are vulnerable to bugs, exploits, and upgrade mechanisms. A single vulnerability can lead to the loss of all delegated assets. Key considerations include:

• Code Audits: The necessity of rigorous, multi-party security reviews.
• Upgradeability: Risks associated with proxy patterns or admin keys that can change contract behavior.
• Economic Logic Flaws: Errors in slashing conditions, reward distribution, or fee calculations.

A core security mechanism where a delegatee's malicious or negligent actions result in the punitive loss of a portion of the delegator's staked assets. This transfers operational risk.

• Double-Signing: In Proof-of-Stake networks, validating two conflicting blocks.
• Downtime: Failing to perform validation duties.
• Governance Attacks: Voting maliciously in decentralized governance. The slashing penalty is typically enforced automatically by the protocol's consensus rules.

Delegation can lead to the concentration of voting power or validation rights in a few large entities (e.g., centralized exchanges, large staking pools). This creates systemic risks:

• Governance Capture: A small group can control protocol upgrades and treasury funds.
• Transaction Censorship: Major validators could collude to exclude certain transactions.
• Single Points of Failure: Technical or regulatory action against a major delegatee impacts all its delegators.

A fundamental security distinction based on asset custody.

• Non-Custodial (Trustless): Delegator retains custody of assets (e.g., via staking derivatives or smart contract positions). The delegatee only has rights to perform specific actions, not withdraw funds.
• Custodial: Delegator transfers asset custody to the delegatee (e.g., staking with a centralized exchange). This introduces counterparty risk, including exchange insolvency, hacking, or fraudulent withdrawal.

Delegated assets are often locked or subject to an unbonding period, creating illiquidity and price risk.

• Unbonding Period: A mandatory waiting time (e.g., 21 days in Ethereum) to withdraw delegated funds, during which assets are illiquid and may still be subject to slashing.
• Liquid Staking Derivatives: While providing liquidity, these introduce secondary market risk and dependency on the derivative protocol's stability and redeemability.

The user's interface to delegation—wallets and front-ends—is a critical attack surface.

• Approval Exploits: Signing malicious transactions that grant excessive spending allowances to malicious contracts.
• Phishing Sites: Fake staking interfaces that steal private keys or signatures.
• Validator Key Compromise: If a delegatee's validation keys are leaked, it can lead to slashing for all delegators.

A penalty mechanism in Proof of Stake networks where a portion of a validator's (and its delegators') staked funds is burned for malicious or faulty behavior, such as double-signing or extended downtime.

• Risk Transfer: Delegators are subject to slashing based on their validator's actions, making validator selection a risk assessment.
• Security Function: Slashing disincentivizes attacks and poor node operation, protecting the network's economic security.

A smart contract or node operator that aggregates stake from many users to meet the minimum staking threshold for a validator. It is the technical infrastructure that enables trust delegation.

• Function: Manages the distribution of rewards and slashing penalties proportionally among all depositors.
• Types: Can be custodial (centralized exchange) or non-custodial (decentralized protocol). The pool operator is the trusted entity performing validation duties.