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.
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Notes
1 I would like to thank the anonymous reviewers for their very helpful and detailed comments. Koray Caliskan put great effort into directing me through the process of reworking this paper, and in that process has added insightful suggestions himself. Earlier drafts of this paper have been commented on by Christian Bessy, Marieke de Goede, Amina Nolte, Sven Opitz, Ute Tellmann and Carola Westermeier, and I learned very much from these discussions. All errors that may remain in this paper are mine.
2 Lithium has added a whitepaper (to be found at https://docs.lith.finance/, accessed 6 July 2022) to its website, yet the older litepaper (Lithium Finance Citation2021) is more detailed concerning the project's architecture. Available at: https://lith.finance/#About [Accessed 14 September 2021].
3 Available at: https://lith.finance/#Casestudies [Accessed 14 September 2021].
4 Available at: https://lith.finance/#About [Accessed 14 September 2021].
5 Available at: https://lith.finance/#Protocol [Accessed 14 September 2021].
6 It is referenced in Lithium Finance (Citation2021, p. 9), as ‘George 2018’, which should be actually Lesaege and George (Citation2018).
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Andreas Langenohl
Andreas Langenohl is professor of sociology at Justus Liebig University Giessen, Germany, since 2010 and professor extra-ordinary of political studies at North-West University, South Africa, since 2021. Together with Carola Westermeier, he co-directs a research project on “Financial infrastructures and geo-economic security” at the Collaborative Research Centre-Transregio 138 “Dynamics of Security” at the universities of Giessen and Marburg.