The Architecture of Coordination in Decentralized Finance: A Structural Approach

Abstract

This study examines how decentralized finance (DeFi) platforms coordinate capital and liquidity through algorithmic mechanisms. Using reproducible on-chain data from the DeFiLlama API, the analysis constructs a structural econometric framework linking micro-level choice, production efficiency, and network spillovers. A sequence of models-conditional logit, nested logit, nested CES, and spatial error-captures how algorithmic inputs, digital capital, and inter-protocol dependencies shape efficiency and systemic behavior. Results show that DeFi protocols exhibit strong internal substitution between algorithmic and traditional inputs, while cross-protocol linkages produce measurable spatial effects in efficiency and growth. The findings highlight how decentralized systems can self-organize productive coordination without central intermediaries, contributing to ongoing debates on financial autonomy, digital liquidity, and algorithmic governance.