The U.S. election system only passed its stress-test with an assist from the judiciary. A decentralized voting system doesn't safeguard against potential abuse of power – but blockchain could, Marcel Hostettler writes in an essay for finews.first.


This article is published on finews.first, a forum for authors specialized in economic and financial topics.


All votes are counted, but the controversy about the presidency is ongoing. More than two hundred years ago, when the U.S. founding fathers created a decentralized election system for the presidency, they wanted to prevent the concentration of power typical for a monarchy in a democratic government.

This is why they did not foresee a centralized oversight or did not provide for federal election legislation. An election which is carried out independently by 13,000 local administrative units. The U.S. president is not elected by popular vote, but by an electoral college whose delegates are appointed by state legislatures, not the Congress, who then vote for the president in an electoral college.

«Donald Trump is now using the division, which he himself generated»

The incumbent president Donald Trump followed by «his» Republican Party sees himself entitled to have the last word about the election results. This splits the electorate along party lines into two camps. Trump is now using the division, which he himself generated, to retain power.

He refers to overall «uncertainty» created by this split to justify his disregard of the decentralized distribution of power and interferes in the nomination of electors and their vote. This makes finding consensus about the election result as unlikely as bending together fork prongs.

This image originates from Distributed Ledger Technology (DLT): What happens when a ledger is continued, despite disagreement about the way changes are made on this ledger (e.g. of a blockchain) which is distributed over, and saved in its entirety, on multiple computers (nodes)?

«Is decentralization the key in the blockchain world as much as in a democracy?»

Without consensus among its main actors, the principal ledger splits into multiple sub-ledgers like the arms of a fork which then follow their own truth. The growing influence of single actors on a public blockchain increases the risk of dissent (soft or hard fork). Some actors may try to use the spin-off of a blockchain to their advantage, meaning to gain control. Is decentralization the key in the blockchain world as much as in a democracy to avoid concentration of power?

The question is whether consensus mechanisms, on which the open blockchains run, preserve or suspend the decentralized distribution of power.

In a proof of stake (PoS) model, the number of project-specific tokens (stakes) determines who is selected to produce and validate blocks (validators), for which validators again are rewarded with more tokens.

«The delegated PoS becomes a more and more popular model»

Blockchain governance will determine the likelihood of a hard fork, generated by aggregation of stakes which results in even more accumulated power to force a spin-off of one chain to exercise even more control: In off-chain models a large number of stakes are already concentrated off-chain, meaning outside of the blockchain (e.g. in foundations held by project developers and early investors owning a large number of tokens), whereas in the «on chain» solution it is already coded into the blockchain that stakes are randomly assigned, such as is the case with decentralized autonomous organizations (DAO).

In the first case, it is most likely the deterrence of uncontrollable effects of the fork that disciplines actors, whereas in the latter case it is DAO autonomy that prevents validators’ bad behavior.

The «delegated PoS» becomes a more and more popular model in which custodians, as users of nodes, delegate the stakes they are entrusted with to validators, so as to earn rewards with these tokens. For validators, it increases the chance to validate. The actual owners neither have control over their tokens nor partake in decision making.

«The U.S. election-system has only passed its stress-test with the support of the judiciary»

The custodian-validator relationship is similar to the relationship between voters and electors in the Electoral College, where electors are supposed to act in the interest of the voter.

It is a given fact that the delegated PoS leads to concentration of validating power. In the end, power concentration and with it the abuse of such power are inevitable.

The U.S. election-system has only passed its stress-test with the support of the judiciary. Does blockchain governance also need support by local law, meaning off-chain mechanisms, to withstand the abuse of power?


Marcel Hostettler is a partner at the Zurich office of German law firm Heuking Kuehn Lueer Wojtek and advises on matters relating to capital markets and corporate law with a special focus on digital assets/DLT/blockchain. He has previously held senior positions with a major Swiss law firm as well as UBS, the Swiss Financial Market Supervisory Authority (Finma) and big-four firms. He studied law at the University of Berne and is admitted to all Swiss courts (2004). He holds an MBA from the IE Business School (Madrid) and a MA in Finance from the University of Zurich.

Anja von Rosenstiel, the co-author of this article, is an attorney licensed in Massachusetts and Germany, and U.S. certified mediator. She lives in Boston and offers her expertise in U.S.-German cross border cases with special emphasis on estate planning. Clerking for a federal judge and acting as party challenger for the Democratic Party in several presidential elections helped her gain expertise in Constitutional and Election law.


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