Making uncertainty operable: social coordination through game theory in decentralized finance

Abstract

As blockchain technologies are discussed in their political dimensions, this paper questions the political implications of developments in decentralized finance (DeFi). It looks at the ways that DeFi projects refer to game theory as a template for designing the integration of off-chain financial processes into on-chain processes. DeFi’s reference to game theory carries normative understandings of social coordination that oscillate between (liberal) cooperation and (neo-liberal) non-cooperation and defection. This is evidenced in the ways that DeFi installs fundamental uncertainty as well as the reliability of participants’ information, as the key resource for modeling social coordination. While referring to a libertarian notion of ‘collective intelligence, ’ the models tend to involve participants in high-stake transactions under conditions of uncertainty. These results have consequences for the social studies of finance more generally: The prominence of game theory in DeFi indicates that the performativity of economic theory, often depicted in the ways that theory-derived models enable pricing calculation and the transformation of uncertainty into risk, may also result in the celebration of radical uncertainty as a resource of strategic action.