Game Theory in DeFi

Transcript

um okay all right so hey everyone uh i'm so sorry i'm not over there i'm really for mowing and missing out on this event but yeah covert restrictions so i'll start from here uh awesome so uh we are ethereum push notification service so let me just start with some good vibes and the video we created for you guys all right hopefully you like that video

uh so yeah as mentioned in the video we are the ethereum push notification service ebns for short uh what we are doing is building a communication there that will finally allow dabs and smart contracts to send notifications like we all receive on web 2.0 uh but yeah we are not going to talk about that for now uh we are going to talk about game theory and dfi especially because we have used these two elements and uh they are very easy and simple concepts to grasp uh so yeah let's begin uh so yeah game theory and d5 uh these are two things which you'll hear

uh whenever you are uh going to an ed5 project but what do they represent uh so let's start with game theory uh first of all uh a lot of people they give you a really complex or mathematical summary of what a game theory is well that's right uh in general game theory can be summarized by any uh project any ecosystem interaction or a strategic interaction designed by uh any real life scenario or any virtual life scenario where then you at least have one win situation for all the players or all the users involved in the ecosystem that's the best way to explain game

theory uh how to design that uh again are three simple pointers uh you need to make sure whatever game theory you are making for your protocol or your project or even for general uh life situations uh ensure rule number one that you are incentivizing good behavior uh that means uh whenever users are participating in your game theory you are motivating them to do what you want them to do uh you are penalizing bad actors so that kind of helps in pivoting uh users who don't understand your game theory or don't understand your project and it also helps read out bad elements and yeah lastly

the third rule uh ensured at least one finvent scenario for everyone involved in the game theory uh presentation will have a lot of examples so let me begin with uh game theory examples so uh in the real life scenario um i mean we can take the example of an organization and uh when they have employees so again uh it's based on game theory so uh rule number one incentivize good behavior so whenever the organization is hiring employees uh of course uh what they want to incentivize or what want employees to work towards

is the company's vision and uh to ensure that the employee aligns to that organization's vision and hierarchy uh they incentivize that by making uh sure that the employees are paid and you know not only that be incentivized but behavior by promotions uh either by increasing your salary or increasing uh your roles and responsibilities and promoting you out so even here we can see that money violet please uh very good motivating factor uh for incentivization that's not the only factor

uh again rule number two uh that's also uh applicable over here in the organization employee structure penalizing of bad actors so if an employee doesn't adhere to a company policy or is not performing according to a company vision then the employee can be demoted their salaries can be slashed uh so yeah uh again rule number two is checked uh and the last is the one when when scenario at least one win-win scenario over here the win scenario for organization is that if all the employees work hard and work towards achieving the company's goal uh then of course there comes the events and for employees the

uh scenario is that if they are working well uh then of course they are getting paid well they are getting promoted so yeah if uh if the game theory is designed really well between a company and their employees then you will see a really uh nice company culture coming out of it and uh that's one example that's one real life example of game theory uh moving to digital world uh uh we can uh look into twitter because of course if we are into crypto uh one day of work and crypto means one day in twitter so uh or tweeting all day so yeah uh on twitter what's a win-win scenario uh twitter

twitter wants uh users on their platform they want good content from the users the one scenario for the user is of course when they tweet about something they want their voice heard so how does that incentivization work uh twitter incentivizes good behavior by making sure that if you as a user you tweet something of good content then their algorithm will start showing it out to more and more users and you'll get more and more followers uh so there you have uh uh incentivization rule which is tick marked uh penalizing of bad actors again if you are abusing twitter policies if you're writing

uh bad content uh twitter might throttle uh the node uh the tweets which you are sending out to your followers and in the very extreme case can ban you out so again you have the penalization of that actor that is also there and the win-win scenario as i said uh twitter wants good uh the content from the users and users wants their voice heard and twitter helps like this game to dnfe that all of this works in perfect synergy and that's why you know twitter is uh the platform which we use to to eat and go in crypto all right so uh uh that's about uh enough about uh uh digital examples and

real life examples that look at some of the scenarios that has already happened and you know where game theory really really worked so again uh physical scenario let's look at a historical event called known slang uh this happened uh on the christmas tree of world war one uh britain and germany they were fighting each other uh but yeah along king prisoners and uh both of the sides they laid down their weapons the exchange gift and had a very miraculous christmas uh if you look deep into this there's a game theory which was involved uh again incentivization of good behavior so all the parties involved uh

in this uh uh game theory or uh britain and germany all the soldiers involved uh their incentive was that uh if they lay down their weapons and uh they call troops for the day then they don't have to fight uh then they don't have to spend codeless in the bongo which is a penalization as well which uh uh covers it up and of course the win-win scenario was that they all can spend um very night and you know just be fearless or you know just stop worrying about the wall for that just one day uh of course this has happened already so the game to you over here what the next thing let's move to blockchain

uh i know we are editing push notification service and this is hcc the only reason i uh bring in bitcoin into focus is because uh they were the ones that did this first uh ethereum does it better uh ultrasound money uh so yeah uh how does uh bitcoin uh creates the game theory so again for bitcoin if you look at it at a very high level it's a software that requires a lot of users to run you know this software and those users ensure that uh the ledger is distributed and bitcoin is secured or at this uh so yeah the win scenario for bitcoin or the

ethereum or any other blockchain is that more than more users run uh their software uh but yeah for the users there needs to be one incentive right uh because the user when they're running the software they're lending out bandwidth they're lending out space so how did uh bitcoin solve this issue uh well they solved it by making sure that if you're running this software then every once a while you will be rewarded in bitcoin so of course now you have one win scenario where both the players are happy you are incentivizing the users to be truthful because in case you're not you are the

thrown out of the network and that's whatever coins you have they are not bitcoin they are not ethereum and hence worthless and because of that the game theory works uh another penalization factor which is really really cool is uh the difficulty the mining difficulty adjustment uh which actually is a very nice innovation because if you think about it uh the way the network operates is that if the mining diff if more and more users are there on the platform then the mining difficulty rises therefore hackers would have to spend more to uh hack bitcoin but you know if the users are less uh in the network which was of course the case when we started

uh then the uh the mining difficulty cannot be that high because you will not be able to run uh the transaction ledger uh and in that case the mining difficulty is adjusted but at the same time hackers they don't have any incentives to hand that network because the network value is practically worthless at that point of time so yeah uh this is again a really good example of the game theory that worked we can see that because uh ethereum is one of the i mean ethereum is the top smart contract uh currency in the coin market cap and in the blockchain ecosystem and so is bitcoin so yeah uh that's about game theory uh let's look

into decentralized finance or d5 again uh very simple anything which we do uh in finance whether it's borrowing whether it's lending uh whether it's uh fiat money uh anything related to finance which when happens on a blockchain it's called decentralized finance because blockchain is decentralized so uh whenever you're thinking d5 just think finance back on blockchain uh so yeah about d5 and by d5 so uh a lot of people especially from where i'm from uh they uh assume or they see that d5 will kill uh fiat or crypto will kill

fiat and i kind of disagree with that notion i think defy is the next innovation of money rather than uh you know a killer of fiat money because if you think about that fiat money is also not the original fiat money which was designed uh paper money when it was first designed that was backed by gold uh we have i think iteration number three on paper money right now and uh of course that's not backed by gold even if you move further uh before paper money gold coins existed so after gold coins paper money came into existence because they were easier to carry they had more utility than gold coins and they could do

more things than gold coins maybe because of it uh but yeah with paper money what you had was that you have a service and the service provider thus you have to pay the exact amount of paper money to the service provider and the service provider will provide that service to you uh but between paper money and uh d5 there was one more innovation of money that happened or one more iteration of me that happened uh and that was plastic money or credit cards so all of a sudden after the inventions of credit cards you will not even require to take that much uh that exact amount of paper money to the service provider

you could just swipe your credit card and and the service provider will fulfill the service and of course you know you can then settle that thing with your bank uh even moving forward into this innovation uh i mean it opened up a lot of revenues for example online payments were possible uh netflix was possible uh imagine if credit cards didn't exist so we would all be queuing uh around netflix office all around the cities all around the world uh to you know renew our subscriptions and then covet times will practically be without netflix so yeah that's another uh invention over paper money that happened

uh when i say invention uh the thing is that credit card could do things uh which normal paper money couldn't uh just like the online example i gave you uh d5 is obviously the next innovation over this iteration of money that has been happening around uh and we can see that uh already because if you think about d5 most of you guys might be thinking about flash loans or zero collateral loans which is something that is not really possible in tradition banking uh just to give you a hint about flash loans so

they're basically zero collateral loans where a user can borrow thousands of dollars or you know infinite amount of dollars or maybe just say thousands or millions of dollars uh from online uh does do whatever thing they want to do with that money maybe i pick up it maybe trade something out uh and return that back to the window and all of this is a single atomic transaction so the re-transaction the way boxing work is that either a transaction is included into the blockchain and then that is considered valid or the blockchain or the transaction fields and therefore is not included in the

boxing thereby it's invalid flash loan operates on the same principle you have a function uh as long as that function is able to lend money in do whatever you want to do and send the money out to the lender along with a fee then the transaction would be successful and therefore included in the blockchain otherwise it will fail and therefore will be excluded out of the blockchain so voila you have zero collateral loans something which is not possible with the physical or the credit card so yeah that's uh d5 for you uh it also enables a lot of cool applications for example global banks like having compound

where then you have interest rate that is that is offering a much higher interest rate than normal traditional banks especially in the us uh you also have finances which uh are now innovating uh uh the practices of bank or how money should operate and uh the network or the users decide whether this way is better financially or that way is better and all of this happens to refi uh but yeah d5 opens up one more thing especially when we are talking about these uh global banks and innovation it provides you a set of apis or a set of legal

legos uh by which you can build whatever you want and that's uh and that's d5 for you and of course uh i'm sure you might realize now that you know game theory requires incentives and you have d5 which is capable of providing incentives and combining them both we can basically innovate a ton of new things for that 3.0 uh which of course brings us to our product and what we do uh so yeah uh a little bit about us and how we include d5 and the game theory so we are

ethereum push notification service so we are a communication middleware uh which is enabling uh communication or notifications from dabs or smart contracts or even traditional services to ethereum then l2s and then finally to other blockchains as well and open platform agnostic fashion uh the first one to do that the only competitor we have is apple and google hopefully many of you would have gotten notifications uh which led you over here we are doing the same thing for web 3.0 why we are doing it because you know a lot of tabs and a lot of smart contracts are innovating

uh nobody paid attention to the communication there which meant uh it was the right time uh for us to come in and fill the void which is what we did uh the solution uh of course the solution is building the open platform agnostic uh notification uh middleware or notification communication there uh that can uh that can tie you wallet address to notifications uh happy to see that you know we already did it uh we are live on drop scene uh when i uh and of course we are open uh that means uh this is open communication there so uh even crypto wallets like trust and metamask

and integrators and whenever you log in through your wallet address uh yeah in the very near future you might be able to see uh notifications powered by pns protocol uh coming back to the game to the nd5 uh because you know we were the first to create this we realized that you know we can invent something new out of it and uh of course you know uh that led to the idea of incentivized notifications in essence uh this means that uh when you as a user opt in to receive notification not only you are receiving notifications from crucial services but you are also earning a passive

income out of it the way it works is that services who wants to send notifications to you guys uh they basically activate themselves on a protocol by depositing some die we use that i o the protocol takes that die and lends it to ave protocol av is like a global bank so once we lend that die out we start generating interest that interest is coming back to the protocol and now when you as a user come in and subscribe to that specific service uh we basically or the protocol basically calculates in a weighted manner uh the interest or the part of the interest that should go to you and thereby incentivize notification

uh of course happy to share that you know we want to become the pepti communication layer and uh well this is our old slide we are happy to share that rv pool together and ens we are already collaborating with them and hopefully with all the other people in this space as well uh you know we are backed by 35 plus web leaders uh really grateful for their support and of course for their funds uh and yeah we are really really happy that uh uh we have a huge list of pilot collabs including collapse from uni swap rv alpha huma and

a lot of other very cool projects they are essentially helping us building the uh they are essentially helping us to build the communication layer of web 3.0 uh time for alpha drop because of course hcc means alpha drop uh we are launching our push governance in two weeks uh followed by i mean net and q3 2021 and then push nodes and uh the entire network along with staking will come live in q4 of 2021 as a note of thanks so uh of course uh uh thank you to the bitcoin family we are getting cool

uh alumni sentences patch and they helped us shape this entire game theory i would heavily recommend anyone who wants to try more about game theory to go to engage dot me slash trust and play and see how the game theory changes because of different players and because of the different choices you make uh finally uh we are epns dot io uh thank you so much for uh being with us in the center presentation you can follow us at epns project either on twitter or on telegram uh if you want bad ones do join telegram otherwise it might be just fine

uh i'm also open to any questions which you guys might have right now yes

yes so we basically support on-chain and off-chain notifications so we essentially take the web to routes wherein the services decide what notifications they want to give out and therefore yes the answer is we do support wallet uh funds going in and out uh in fact that is already live uh it's called the wallet tracker channel at app.tpns.io so you can check it out uh uh of course other uh very cool use cases that we are working on for example we recently announced uh our partnership with snapshot and what we are going to do is that the notifications which will

come from snapshot very very soon they will even have yes and or multiple options uh because you know our notifications are adjacent payload that can dynamically adapt so you can just tap yes or no from any front end and that vote would be registered you don't even have to go to the portal to check the governance thing out uh so yeah that's one of the advanced use case and of course we support uh notifications about sending tattoo in and out okay

all right thank you so much guys for listening to us and uh do enjoy at cc i wish i could be there but yeah have fun and maybe next time i'll see you next question okay guys bye for now