Delegation

The delegation process bonds stake to a validator, converting stake PEN to delegation tokens dPEN. Delegations may be performed in any block, but only take effect in the next epoch.

Delegations are accomplished by creating a transaction with a Delegate description. This specifies a validator $v$, consumes $x$ PEN from the transaction’s balance, produces a new shielded note with $$y=x/{\psi }_v(e)$$ dPEN associated to that validator, and includes an encryption ${\mathrm{Enc}}_D(y)$ of the delegation amount to the validators’ shared decryption key $D$. Here $e$ is the index of the next epoch, when the delegation will take effect.

In the last block of epoch $e-1$, the validators sum the encrypted bonding amounts ${\mathrm{Enc}}_D(y_v^i)$ from all delegate descriptions for validator $v$ in the entire epoch to obtain an encryption of the total delegation amount ${\mathrm{Enc}}_D({\sum }_i{y}_v^{(i)})$ and decrypt to obtain the total delegation amount $y_v={\sum }_i{y}_v^{(i)}$ without revealing any individual transaction’s delegation amount $y_v^i$. These total amounts are used to update the size of each validator’s delegation pool for the next epoch.

Revealing only the total inflows to the delegation pool in each epoch helps avoid linkability. For instance, if the size of each individual transaction’s delegation were revealed, a delegation of size $a$ followed by an undelegation of size $b$ could be correlated if an observer notices that there are some epochs $e_1,e_2$ so that $$a\frac{{\psi }_v(e_2)}{{\psi }_v(e_1)}=b.$$

This risk is still present when only the total amount – the minimum disclosure required for consensus – is revealed, because there may be few (or no) other delegations to the same validator in the same epoch. Some care should be taken in client implementations and user behavior to mitigate the effects of this information disclosure, e.g., by splitting delegations into multiple transactions in different epochs involving randomized sub-portions of the stake. However, the best mitigation would simply be to have many users.