Game Theory in DeFi Protocols Part I: Types of Games

Symmetry, information completeness, cooperative models are some of the game theory omnipresent in DeFi protocols.

Game theory is an intrinsic component of the crypto ecosystem and has been particularly relevant in DeFi. From incentives models to governance voting dynamics, game theory is at the center of many of the protocol design aspects of DeFi. However, within the DeFi community, there is very little coverage about the foundations of game theory. So we thought we dedicate a small post to cover some of the fundamental ideas behind game theory.

The history of game theory is attached to the history of computer science. Much of the current research in game theory dates back to the work of computer science pioneers like Alan Turing or John Von Neumann. The famous Nash equilibrium popularized by the movie “A Beautiful Mind” is the cornerstone of many gamified interactions in modern systems. However, modeling a DeFi protocol using the principles of game theory many times goes beyond the Nash equilibrium. A good place to start understanding the implications architecting DeFi protocols using principles of game theory is to understand the different types of games that we typically encountered in our social or economic interactions.