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**Securing Digital Rights for Communities (Game Theory and Governance of Scalable Blockchains for Use in Digital Network States)**  
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# Chapter 12. Coin Voting Parameters
*How Time Locks, Stable-coins, and Infrastructure Incentives Strengthen Governance on DPoS Chains*

![12c.png](https://files.peakd.com/file/peakd-hive/networkstate/23u5tiZjpBJ9Ss2zkRkp2kSaqdtuSuGrD2BHxDENgVTBBb6TWTivBMwJC6BC4ffAUQqQ6.png)

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## **Introduction**
Once a blockchain community agrees on “Parameterised Coin Voting” (often called Delegated Proof-of-Stake, or DPoS), it must also define *how* the eco-system's voting power is distributed and exercised. These “coin voting parameters” determine everything from how long stake must remain locked when Powered up, protective time delays for stable coin token swaps on the base layer, to how new tokens are issued or taxed as well as many other variables. Each parameter serves as a safeguard against centralisaed takeovers and short-term manipulation, while also Incentivizing community members to hold, build, and coordinate in the long term.

This chapter details key parameters such as lock-up durations for governance, stablecoin security rules, token minting and inflationary controls, and more.  It explains why collectively they form the backbone of secure, censorship-resistant on-chain economies.

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## 12.1. Importance of Long Lock-Ups for Governance Participation
**Why Locking Matters**  
When stakeholders lock (or “power up”) tokens for an extended period, they reveal genuine “skin in the game.” Someone who can instantly withdraw has far less risk and can more easily perform a short-term attack or manipulate votes. By contrast, a locked-in stakeholder must carefully choose who or what they vote for, because they can’t exit quickly if they cause harm or fail to benefit the community.

**Preventing Custodial Attacks**  
Long lock-ups also prevent custodial wallets (like centralised exchanges) from freely using *other people’s* tokens to hijack governance. If tokens must remain staked for months, it’s much harder for an exchange to suddenly vote without telegraphing its move. The community gains time to see large power-ups and respond if malicious behaviour appears.

**Time as a Security Factor**  
Time itself becomes an integral part of security. With a multi-month lock-up requirement, any new whale is effectively “on probation” for that period before it can fully influence governance. This discourages opportunistic short-term attackers who want to “buy in, vote, then sell.”  

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## 12.2. One-Month Voting Delay
**Seeing Attackers Coming**  
A “voting delay” is a specific parameter stating that *even after* you lock your tokens for, say, three months, so that you can vote in governance decisions, you must still wait an additional period (e.g., one month) *before* you can cast those governance votes. This delay means:
- The community can observe and reach out to new, large stakeholders and see if they’re legitimate or a threat.  
- Any suspicious movement of funds from, for example, a major exchange’s wallet, becomes immediately visible and can be monitored in case it is going to be used in an attack on the community.  

**Critical Defence**  
Had such a voting delay existed on certain DPoS chains in the past, major hostile takeovers by custodial exchanges would have been thwarted or significantly hampered (See STEEM blockchain takeover). The extra time window lets defenders rally: they can withdraw support from compromised witnesses or even prepare a hard fork to nullify an attacker’s stake if it’s obviously stolen or the intention is to use stake against the super majority's will which represents the community's consensus.

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## 12.3. Why a Three-Month Lock-Up
**Why Three Months?**  
Three months is a good lock duration for governance participation, but similiar lengths are good as well. It strikes a balance: long enough to deter “drive-by” attackers, but not so long as to alienate ordinary users. During this period:
- Stakers cannot instantly sell their tokens, so they share in the chain’s volatility and remain committed.  
- Potential attackers must accept that if they sabotage the system, their funds remain at risk to volatile price movements and community, consensus driven mitigations for months.  

**Future Variations**  
Some ecosystems might experiment with different lengths or even *tiered* lock-ups with longer commitments giving even greater voting power. The core idea is consistent: time-bound staking cements accountability and weeds out short-term exploiters.

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## 12.4. Stablecoin Security
**Why a Decentralised Stablecoin Is Crucial**  
For an on-chain economy to function, especially one prioritizing censorship resistance, users need a stable unit of account that *doesn’t* rely on centralised issuers or banks. A purely “speculative” chain with a volatile native token won’t serve everyday commerce or wages. Algorithmic stablecoins fill this gap by:
- Maintaining a peg (usually $1, but could be pegged to some other stable asset, commodity or basket of the same, should the community consensus wish it so)  
- Relying on on-chain mechanics, free of direct fiat banking  
- Allowing users to buy goods, save money, or transact in a familiar unit instead of an unfamiliar, volatile priced asset.

**Collateralised by the Base Token**  
The main token is often 20-30 times larger than the stable coin which it collateralises.  There should be multiple controls built into the base layer protocol which ensure the stable asset is always vastly over collateralised by the main token. 

A robust *algo-stablecoin* typically uses the chain’s main token as collateral. For example, if you hold 1 “Hive Backed Dollar” (HBD), you can always convert it into $1 worth of Hive (the main token), provided certain parameters remain healthy. To prevent runaway issuance, the chain includes “haircut rules” and time delays on large token swaps, ensuring the stablecoin supply can’t surpass the market capitalisation of the underlying collateral in a way that threatens the peg. An example of where these rules were not followed, ending in inevitable disaster was Terra Luna which incorporated none of the above mitigations into its protocol, resulting in a hyper inflationary collapse.

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## 12.5. Haircut Rules
**Preventing Over-Issuance**  
A “haircut rule” puts a hard cap on how large the stablecoin’s total market cap can be relative to the base token’s market cap (e.g., 30%). If the stablecoin ever approaches or exceeds this threshold:
1. The chain can **stop** creating additional stablecoins (e.g., halting certain reward distributions in stable form).  
2. It may **devalue** the internal stablecoin peg (to 90¢, 80¢, etc.) to ensure overall system solvency, by prioritising the limitation of the creation of new main governance / collateral
 tokens during conversions back from stable coins at the cost of the stable coin peg value. This prevents a hyper inflationary event of the main collateral token, protecting the ecosystem, all be it at the cost of a temporary de-pegging of the stable coin asset's price  

**Adaptive Mechanism**  
This dynamic protects both the stablecoin and the chain from a “bank run,” where too many stablecoins chase too little collateral. Over time, once conditions improve and the chain’s base token regains value, the stablecoin’s internal peg and issuance can return to normal. This cyclical approach allows algorithmic stablecoins to recover from market dips without collapsing irreversibly.

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## 12.6. Time Delay on Bulk Token Swaps
**Slow Conversions, More Safety**  
If large holders could instantly swap massive amounts of tokens into stablecoins (or vice versa), they could destabilize the market or execute rapid attacks by building short positions in the main token and then instantly converting large amounts of stable coins to the main token.  this causes massive inflation of the main token and devalues it, resulting in large payouts for the attacker's short positions. Imposing a three-day (or similar) delay on major conversions:
- Gives the community consensus driven protocol time to adjust supply and internal pricing.  
- Alerts the community to suspicious behaviours well before the conversion finalizes.  
- Creates a highly risky situation for the attacker, who now has to wait for 3 days with a large short position that can be liquidated by a move higher in the base layer asset, causing a huge short squeeze against their position.  This makes the potential losses to the attacker infinite and the inherent risk of such an attack far greater than carrying out such an attack without the time delay on internal stable coin conversions mitigation in place.

**Avoiding System Shocks**  
A delayed swap mechanism prevents sudden surges in the stablecoin or base token supply, reducing manipulative volatility. This resembles “capital controls,” ensuring a healthy conversion pace rather than abrupt floods that can crash markets.

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## 12.7. Inflation Control
**Steady, Transparent Token Issuance**  
Blockchains commonly issue or mint new tokens as “inflation,” distributing them to infrastructure operators (validators) or to individuals providing value (content creators, developers, liquidity providers). However, the inflation rate must remain carefully managed:
- **Too high** and the token’s value dilutes, undermining long-term growth, inflating it away to zero.  
- **Too low** and the chain can’t adequately fund community projects or incentivize widespread distribution of the token.

**Community-Defined Parameters**  
Many DPoS-like systems use scheduled token minting curves (e.g., starts at 12% then drops 0.5% per year until 0.5%) or allow consensus decision by governance voting to adjust annual rates. The key is that *no central party* arbitrarily mints unlimited tokens. When stakeholders collectively control inflation, they align it with network health.

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## 12.8. Importance of Transaction Taxes
(*Note: Some chains opt for “resource credits” instead of explicit transaction fees, but the concept is similar.*)

**Prevents Spam**  
Tiny taxes or “resource credit” costs in zero transaction fee systems on each transaction deter malicious actors from flooding the network with meaningless transactions.  
**Funds Public Goods**  
If designed properly, transaction fees can be channelled into a decentralised community fund (a DAO), financing infrastructure upgrades, marketing, or development without relying on external VC's.  

**Trade-Off**  
High fees can stifle usage, pushing users to centralised layers or competitor chains. Low or zero-fee designs risk spam unless you stake tokens to earn “resource credits.” The right solution typically involves parameterised resource models that scale usage based on staked token amounts.

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## 12.9. Backing the Token with Community Interactions
**Real Economic Activity**  
A chain’s main token gains lasting value not through speculation alone, but from genuine utility. If people need to stake tokens long term in order to:
- Post or comment,  
- Run apps,  
- Vote on governance proposals,  
- Earn stablecoins or other rewards,  
then they *compete* for access to on chain resources in exchange for holding and staking those tokens. As network effect takes hold and the community grows, the demand for transactions grows and thus competition for access on chain resources also grows with it.  This usage is what “backs” the token’s worth *far* more stable than mere hype, speculation and venture capital backed market makers.

**Circular Incentives**  
Users earn tokens for creating valuable content or running infrastructure. They then stake (lock) those tokens to gain influence or resource credits, enabling them access to more on-chain activity, which further enriches the ecosystem. This positive feedback loop cements real demand for tokens that pure speculation cannot match.

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## 12.10. Rewards for Holding and Locking In
**Staking Benefits**  
Long-term stakers may earn extra yield or command stronger voting power. This can:
- Counterbalance short-term traders,  
- Incentivize early believers and builders,  
- Foster and favour a middle class of stakeholders who have earned their tokens from the protocol over time, over whales that merely buy big positions on day one.

**Proof of Commitment**  
These “hold-and-earn” or “stake-and-earn” models on social blockchains where community stake weighted voting of valuable content show that one can support the chain’s vision long enough to shape its governance responsibly. In many systems, staked accounts also receive a portion of newly minted tokens or content curation rewards over time. This incentivises long term, staked holders with skin in the game to continue to contribute to the community while earning additional stake as a result of their value added contributions.

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## 12.11. DApps and Services as Holders of Last Resort
**Why They Don’t Sell**  
Applications built atop a chain (social media platforms, games, DeFi protocols) need guaranteed access to transactions, bandwidth, and resource credits for their users. They must lock large amounts of the base token:
- If they become distressed sellers and sold under times of price pressure, *their entire app* would cease to be able to post to chain and thus lose much of its functionality.  
- This creates a class of “holder-of-last-resort” entities, who keep tokens *no matter* how low the price dips, in order that they can continue to operate their applications on chain.

**Intrinsic Value Floor**  
When multiple serious DApps stake substantial amounts of tokens, you get a “demand floor". An intrinsic value to the token. Even in market crashes, these services can’t afford to offload their stake. This underpinning helps prevent token value from hitting zero purely from panic sells.

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## 12.12. Anonymous Accounts vs. Known Accounts
**Freedom vs. Trust**  
A truly censorship-resistant chain lets users create accounts without government-issued IDs or personal details. However, if people want to build public reputations or operate recognized infrastructure, they may choose to “dox” themselves revealing their identity. Both approaches matter:
- **Anonymous** (or pseudonymous) users enjoy privacy, crucial for free speech in hostile regimes.  
- **Known** users gain trust more quickly and may have “official” track records.

**Hybrid Ecosystem**  
Chains typically end up with a mix: some top validators or developers might be pseudonymous, while others are open about who they are. Reputations can form around handle names, proven over time by consistent participation.

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## 12.13. Importance of Locally Run Desktop Apps for Censorship Resistance
**Web Apps Are Vulnerable**  
If an application only exists as a website (e.g., *something*.com), governments or ISPs can block the URL. Domain registrars can seize or censor it, pressuring the app to follow local regulations.  

**Desktop Clients**  
By contrast, user-installed desktop or mobile clients directly query the blockchain’s node infrastructure. No single domain or centralised server can be shut down. Even if a front-end website disappears, the *community-run blockchain* remains accessible through these locally operated apps.  

**True Decentralised Access**  
Desktop clients shift control back to users. They choose which API nodes to connect to, or even run a node themselves. This fosters unstoppable digital communities no domain take down or corporate compliance order can erase the chain’s content or access to it.

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## Conclusion
Coin voting parameters might seem like small technical rules, but collectively they fortify an ecosystem against takeover, ensure broad participation, and maintain the stablecoin foundation crucial for everyday transactions. **Long lock-ups** and **voting delays** deter short-term money attacks, while stablecoin **“haircut rules”** and **time-delayed swaps** prevent systemic collapse. **Transaction fees or resource credits** control spam and fund public goods, and **Dapps** become “holders of last resort,” sustaining demand for the base governance / collateral token. 

Whether your account is anonymous or publicly known, these governance parameters allow a robust, censorship-resistant environment where individuals can operate desktop apps, earn tokens from the rewards pool, and shape policy over time. By weaving all these elements together economic, technical, and social blockchain communities can grow into truly self-sovereign digital Network States, immune to the centralising forces and quick-profit motives that undermine so many freedom / self-sovereignty based projects.