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Strategic Game Theory analyzes interactions among rational decision-makers, focusing on competitive strategies. Blockchain, a decentralized digital ledger, enhances trust and transparency in transactions. Decentralized Finance (DeFi) leverages blockchain to provide financial services without intermediaries, enabling users to lend, borrow, and trade through smart contracts. Together, these concepts have the capability of fostering innovation and efficiency in the evolving financial landscape. This study investigates the application of game theory to optimize lending and borrowing dynamics within Blockchain-based Decentralized Finance (DeFi) on the Ethereum network. Strategic game theories are an integral part of traditional finance systems. The aim of this work is to explore how user-centric game-theoretic models can enhance efficiency and user engagement in DeFi. The goal is to identify optimal reward structures and interaction strategies using utility functions to model the preferences of lenders and borrowers. The current paper analyzes the relevance of earlier strategies in theories of games like Nash Equilibrium (for understanding stable states in lending markets), the Prisoner’s Dilemma (for addressing potential conflicts and strategic behavior), and Iterated Games (for incentivizing repeat participation and fostering long-term platform stability) in modern-day DeFi financial systems. In this work these concepts are strategically implemented by offering preferential rates of interest to recurring borrowers with a good history of repayment of loans and offering non-preferential rates of interest to default borrowers. The paper demonstrates the way game theory can contribute to building more efficient and user-centric DeFi lending protocols. This study provides valuable insights into the intersection of game theory and decentralized finance, offering a framework for designing incentive mechanisms that promote sustainable growth and participation of more people in the evolving DeFi landscape, ultimately advancing DeFi on a mass scale globally.

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Game-Theory Approach Using Blockchain to Enhance Trust in Decentralized Finance Systems

  • 会议论文

  • 发表日期：

    2026年

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  • Krrish Dubey,
  • Priyanka Mukherjee,
  • Sayan Chakraborty,
  • Sitanath Biswas,
  • Shubhashree Sahoo,
  • Nabanita Das

摘要

Strategic Game Theory analyzes interactions among rational decision-makers, focusing on competitive strategies. Blockchain, a decentralized digital ledger, enhances trust and transparency in transactions. Decentralized Finance (DeFi) leverages blockchain to provide financial services without intermediaries, enabling users to lend, borrow, and trade through smart contracts. Together, these concepts have the capability of fostering innovation and efficiency in the evolving financial landscape. This study investigates the application of game theory to optimize lending and borrowing dynamics within Blockchain-based Decentralized Finance (DeFi) on the Ethereum network. Strategic game theories are an integral part of traditional finance systems. The aim of this work is to explore how user-centric game-theoretic models can enhance efficiency and user engagement in DeFi. The goal is to identify optimal reward structures and interaction strategies using utility functions to model the preferences of lenders and borrowers. The current paper analyzes the relevance of earlier strategies in theories of games like Nash Equilibrium (for understanding stable states in lending markets), the Prisoner’s Dilemma (for addressing potential conflicts and strategic behavior), and Iterated Games (for incentivizing repeat participation and fostering long-term platform stability) in modern-day DeFi financial systems. In this work these concepts are strategically implemented by offering preferential rates of interest to recurring borrowers with a good history of repayment of loans and offering non-preferential rates of interest to default borrowers. The paper demonstrates the way game theory can contribute to building more efficient and user-centric DeFi lending protocols. This study provides valuable insights into the intersection of game theory and decentralized finance, offering a framework for designing incentive mechanisms that promote sustainable growth and participation of more people in the evolving DeFi landscape, ultimately advancing DeFi on a mass scale globally.