Game Theory in DeFi - Harsh Rajat

our next speaker is harsh uh rajat from epns project um he's gonna be talking about game theory in d5 and oh there he is uh hello harish my friend how are you hey awesome mariano i'm doing good uh how are you i'm really excited to be uh excited and stressed i don't know why but yeah no no don't be stressed please uh you're among friends and uh please take it away thanks awesome mariano and uh all right so i think maybe we can start uh with some uh good vibe video of uh exactly what we are that's a 30 second video and uh jonathan if you're [Music] awesome all right so uh hey guys so hope you liked the video via ethereum push motif uh but yeah i'm not here to uh show uh our project uh i'm here to talk about game tv and d5 of course so shilling will probably come a bit later but uh yeah without any let's get started uh so yeah just to give you some brief uh uh idea why game theory and uh buy game theory and d5 in particular well because these are the two aspects which we relied on heavily when we were building ethereum push notification service which in essence uh is a decentralized middleware uh communication protocol that will allow smart contracts adapts or even traditional services to send notifications to your wallet addresses but yeah as i said let's get started let's dive into game theory and t5 so yeah what's game theory i'm going to keep it very very simple uh you might have heard of a different mathematical interpretation of game theory but yeah in essence game theory is really easy and it's almost everywhere uh simply but uh it's uh inter interaction which you design for your project or your ecosystem uh between all the players that ensures that you know you have at least one win-win for everyone involved in the ecosystem and you know not just uh for a traditional uh uh person but you know everyone involved uh uh yeah so uh what goes into designing game theory well again uh very simple there are three things which you have to keep in mind the other or three rules uh rule number one is you have to incentivize good behavior rule two is you have to be analyzed bad actors and rule three is that you know again there needs to be at least one win-win uh i rely very heavily on examples and uh you know uh historic uh observations so i'm going to go into a few examples uh let's just take a example of organization and the relationship employee has for the employer so for an organization uh they will win if the employee performs well so how do they incentivize it well they incentivize it uh by making sure that if you as an employee you perform well uh you are promoted or you know your salary is increased uh again uh when you are talking about the penalization of uh the same uh organization so yeah if you do a crappy job uh the employer uh might remote you uh might cut your raise or you know might fire you uh and yeah uh even in this scenario there's a one win-win scenario where then from the uh from the view of the organization uh what they want is they want to utilize you to achieve their vision uh so that's a win for them uh open for you is that you know if you are able to help this organization achieve their vision then of course they will make sure that they are rewarding you handsomely and even promoting you so yeah uh now if the game theory is designed well in terms of a company then you can see that organization and employee they will both come out to be uh very happy and you know the game theory will just work uh even in this example you know while money is a very good uh uh motivator and you know works very well for incentives we can see that uh it's not the only way to incent device uh yeah the employee can also be incentivized by making sure that you are promoting them right so uh and that's something to keep in mind uh another good example is twitter uh so this is a digital platform or twitter requires users to provide them with good content which will make sure that the twitter will grow for users the users just want their voice to be heard by many many people so yeah no yeah if you look at the game theory over there so again incentivizing good behavior you as a user if you're tweeting well if you're tweeting good content twitter also will make sure that you know it's shown across to more and more people analyzing bad actors again if you're uh doing crappy tweets or if you're the uh uh abusing uh uh twitter platform then twitter might ban you or you know it might not show your tweet out to a lot more users or you know it might uh totally kick you out of the system so there's a penalizing part as well and then the win-win scenario so of course uh twitter events in case the user provides them with good content and you as a user when in case you know you follow all the rules of twitter so again a game theory that really really works well uh so yeah again uh lots of example so this time around let's look at a real world example this is world war one uh and uh uh you know uh there are two sides uh in world war one uh there was uh the site called some uh there was germany and britain and they were both uh fighting from the opposite side uh during world war one but uh you know uh then came the christmas eve and uh some sort of uh miracle happened uh both of these sites despite having orders uh from above they laid down their weapons the exchange gift and kinda had a very merry merry night uh if you look closely at it there's game theory over here as well uh the incentivization part uh of course both the sites understood that you know if uh all of them play by the rules then they can have a night without fear the penalization part uh not following the rules meant uh having a sleepless uh night in cold bunkers and yeah there was a win-win scenario so uh again the game to revolve then this is uh actually a real event in history so yeah while this is at denver and we are at hitting push notification service we thought about a lot for this slide and we decided to go with bitcoin because that was dead genesis or blocked but if you really think about it the game theory is also embedded in blockchain and bitcoin so bitcoin and satoshi nakamoto what do they want or what did they want they wanted more and more users to run their software so that bitcoin can become a immutable ledger uh that was uh the thing they wanted but in turn they didn't had anything to give to the users and you know that's why we came up with the concept that you know if you run uh the software uh then you know every once in a while you might be rewarded with bitcoin so again there's an incentivization that's occurring uh there are two penalties which occurs uh in blockchain i mean you know if you're a bad player then you get kicked out of the blockchain uh now you lose all your rewards because the blockchain will simply reorganize uh and then there's one very tricky penalty as well which is you know what this one this uh tricky way by which the blockchain system or the software was designed and that was that you know in the start you didn't need a lot of computing power to you know just to start using bitcoin or just uh start but this was it's uh so nicely done that as more than more people are joined the value of bitcoin will probably go higher than higher and with that uh it was essential that you know the software becomes uh harder and harder to crack and that's what uh mining difficulty is so again uh this is a game theory that has really really worked well we are all here uh but yeah now following the three rules that's all you need to make sure that you know uh your game theory of whatever project you're doing it will work really well uh awesome so let's talk about uh decentralized financing p5 or what did what it does uh i mean it feels all that you know maddiano is here and i'm talking about d5 but yeah i'll give it a try so yeah uh d5 is essentially anything uh or any finance instrument that's built on boxing uh whether that's a smart contract whether the other digital assets or you know any uh sort of functioning which you can do in traditional uh finance sector if you do it on blockchain that's mostly uh d5 so uh loans borrowing lending everything forms d5 so exactly what is d5 uh over here again i dive into history so a lot of people say that you know uh defy is uh the fiat killer or blockchain is a fiat girl and i don't really see it like that i kind of see defy as the next innovation of money uh and the reason i say it is because even right now the paper money we have the current equation of paper money is not the iteration which we started from and even that paper money only existed for few hundreds of years before that it was gold coin but uh maybe gold coin was very clunky to carry and because of that you know people shifted to paper money because it was easier to carry it opened up new use cases uh but again those things they kept on changing and changing and even uh before d5 and you know even in between uh the uh paper money and d5 they came and then innovation and that was plastic money uh specifically credit cards uh and again it opened up a whole new revenue uh which was not possible uh through paper money so if you think about it you know if you have paper money and you go to a service provider you usually hand them the exact amount which the service provider needs to provide a service and only then the service is given to you but with the uh the innovation of plastic money or credit card uh you then need that exact sort of money to carry you and to get to service providers you can just swipe your card and bank will probably be that good for you and you have to later pay the bank and it opened up new avenues and new innovations uh i mean now for this they can just try to imagine if uh netflix uh had an office in every city and we all had to line up and you know make sure that you know everything gets renewed monthly by handling the paper money uh the concept wouldn't have worked uh but yeah with the credit card you could have transacted uh on the internet and all of a sudden you know that opened up whole new f news and that's why i say that defy is the next innovation over uh uh the form of money uh because you know the things that plastic money can do paper money was not able to do uh and same thing with v5 you know the things that b5 can do of course you know paper money and credit card cannot do one of the examples is flash loans uh which uh really is zero collateral loans and i really don't have an example for this in the uh real world scenario uh but yeah uh to explain a bit flash loans uh they're like atomic transactions or uh there's something like uh that you can lend any amount of money from a landlord uh you can do whatever you want to do with that when you can arbitrage it out or do whatever you want then you put that money back to the lender along with some interest and because of the nature of the blockchain and because this is going to be atomic function i all of the steps will execute and the transaction will be successful and therefore it will be included in the blockchain and you know the sloan will be taken and returned all in one go or you know the transaction will fail and because of the nature of the blockchain uh it will be like that the lender never lent you any money to begin with so again uh that's an innovation which we find makes possible uh so yeah if you think about d5 uh imagine a set of apis or legos and uh these legos are something now which you can play with that you can plug into your project and essentially do anything right in the beginning i said that king theory uh the biggest motivator uh in game theory or the biggest incentive is money and all of a sudden you actually have p5 and you know now you can combine those two uh concepts and you can come out with powerful uh and really really flexible and strong protocol which is what is happening around the world and yeah that makes me come to my project yeah not to explain to you guys about what the project does but how we implement the game through the m35 part so as i said uh in communication and factory they are still in stony so any damp any smart contact the user has to come to them and you know they have to check everything again and again and when you contrast experience with the traditional web to services uh you can see a very uh massive difference if you think about it all your virtual life i mean all the things which you do online uh traditionally everything is guided by notifications uh even the emails you receive the payments you do uh any games you play your social interaction even your whatsapp calls and videos everything is uh triggered by a service coming to you in terms of notification and saying hey this is something that's going to be important for you guys and would you like to respond to it and when you come to webt this is lacking and uh we wanted to fix that so yeah we went ahead and created a decentralized communication protocol uh and what it does is it allows system contractor additional services to send notification to wallet addresses uh we also did two innovations down the way uh first we made them platform agnostic because this is a web tree protocol uh the entry point of uh web3 platform is never decided it can be a meta mask it can be trust it can be your ios android app it can be that and we made sure that you know whatever that entry point for the user is they will be able to receive notification over there the second thing we did first we made it incent device which is where the game theory and defy aspect amen so yeah uh what what we did exactly basically what we did was we created a protocol and we uh we added a rule in this protocol that whatever service wants to send notification out they have to stake a amount of time into the protocol and once they do that we basically lend it out to a d5 protocol called ave which means that now we are generating interest and this interest which is coming uh back to the protocol whenever user comes in an uh option to receive notification by this particular service we essentially make sure that we distribute this interest out uh therefore uh ensuring that notifications are incentivized user have a passive earning as well as them getting notifications so yeah that's not all i mean we had four players in the ecosystem as i said end goal is metamask or trustworthers so we made sure that you know the protocol also rewards them uh we do that by uh we do that by ensuring that uh uh whatever the free pool or whatever uh reward pool is formed in the protocol a part of a true governance uh token of ours and once the situation passes it can go to all these crypto wallets and of course you know on this only covers three uh place of the ecosystem which has services users and introverted uh wallets or notes that are forming the epns protocol we wanted to make sure that the governance holders are also uh uh rewarded for their efforts and therefore you know the street pool or this revolt pool a part of the portion also flows uh to the uh to all the governance holders so yeah in a sense uh that's game tv nd5 uh i would uh like thank everyone in get coin who helped me made this presentation i think i have been doing this presentation for a long while now but yeah still gets stressful when denver calls you uh so yeah just uh sorry if i have uh misspoken about anything uh but yeah i would heavily encourage anyone and everyone to uh play and learn game theory on your own uh and yeah uh thank you so much if you uh like us just uh also pbs project and thanks for the time stay awesome guys hey rajat thank you so much for that presentation that was really good um so to learn more about apms epns.io and uh i don't know to follow you on twitter for example sure so uh it's harsh it has a other search rej but yeah to follow our project just go to epns project uh either on twitter or on telegram we are very chatty on telegram so in case you don't like that sense of humor twitter might be the best call excellent perfect well uh thank you so much for that presentation and have a great day thanks so much have a great day