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Multi Agent Influence Diagrams for DeFi Governance

Abhimanyu Nag, Samrat Gupta, Sudipan Sinha, Arka Datta

TL;DR

A simple governance game that approximates real governance protocols and compute the Nash equilibria using MAIDs is studied and the structure of a MAID in MakerDAO is outlined.

Abstract

Decentralized Finance (DeFi) governance models have become increasingly complex due to the involvement of numerous independent agents, each with their own incentives and strategies. To effectively analyze these systems, we propose using Multi Agent Influence Diagrams (MAIDs) as a powerful tool for modeling and studying the strategic interactions within DeFi governance. MAIDs allow for a comprehensive representation of the decision-making processes of various agents, capturing the influence of their actions on one another and on the overall governance outcomes. In this paper, we study a simple governance game that approximates real governance protocols and compute the Nash equilibria using MAIDs. We further outline the structure of a MAID in MakerDAO.

Multi Agent Influence Diagrams for DeFi Governance

TL;DR

A simple governance game that approximates real governance protocols and compute the Nash equilibria using MAIDs is studied and the structure of a MAID in MakerDAO is outlined.

Abstract

Decentralized Finance (DeFi) governance models have become increasingly complex due to the involvement of numerous independent agents, each with their own incentives and strategies. To effectively analyze these systems, we propose using Multi Agent Influence Diagrams (MAIDs) as a powerful tool for modeling and studying the strategic interactions within DeFi governance. MAIDs allow for a comprehensive representation of the decision-making processes of various agents, capturing the influence of their actions on one another and on the overall governance outcomes. In this paper, we study a simple governance game that approximates real governance protocols and compute the Nash equilibria using MAIDs. We further outline the structure of a MAID in MakerDAO.
Paper Structure (15 sections, 2 theorems, 8 equations, 6 figures, 1 algorithm)

This paper contains 15 sections, 2 theorems, 8 equations, 6 figures, 1 algorithm.

Table of Contents

  1. Introduction
  2. Multi Agent Influence Diagrams (MAIDs)
  3. Algorithm for Computing the Nash Equilibrium
  4. Model
  5. Explanation of the Utilities
  6. Analysis
  7. Single Agent Optimal Strategy
  8. Multi Agent Equilibrium
  9. A Simple Attack Model
  10. Application to MakerDAO Governance Protocol
  11. MAID for MakerDAO
  12. Chance Variables
  13. Decision Variables
  14. Utility Variables
  15. Conclusion and Future Work

Key Result

proposition 1

Let $\mathcal{M}$ be a MAID. Then, there is a corresponding extensive-form game tree $\mathcal{T}$. For any strategy profile $\sigma$, the payoff vector for $\sigma$ in $\mathcal{M}$ is the same as for $\sigma$ in $\mathcal{T}$.

Figures (6)

  • Figure 1: Causal Influence Diagram for Model
  • Figure 2: Optimal Policy for an Agent in the Game
  • Figure 3: Multi Agent Causal Influence Diagram
  • Figure 4: Pure Nash Equilibrium for Two Agents
  • Figure 5: Nash Equilibrium for Honest Agent vs Attacker
  • ...and 1 more figures

Theorems & Definitions (23)

  • definition 1: Chance, Decision, and Utility Variables
  • definition 2: MAID
  • definition 3: Causal Influence Diagram
  • definition 4: Parent Set
  • definition 5: Conditional Probability Distribution (CPD)
  • definition 6: Decision Rule, Strategy
  • definition 7: (Partial) Strategy Profile
  • Remark 1
  • definition 8: Joint Distribution
  • definition 9: Expected Utility
  • ...and 13 more