Related papers: Rational Ponzi Games in Algorithmic Stablecoin
Fairness is a desirable and crucial property of many protocols that handle, for instance, exchanges of message. It states that if at least one agent engaging in the protocol is honest, then either the protocol will unfold correctly and…
Artificial intelligence (AI) has achieved superhuman performance in a growing number of tasks, but understanding and explaining AI remain challenging. This paper clarifies the connections between machine-learning algorithms to develop AIs…
Cooperative systems often remain in persistently suboptimal yet stable states. This paper explains such "rational stagnation" as an equilibrium sustained by a rational adversary whose utility follows the principle of potential loss, $u_{D}…
We are concerned with the stability of a coalitional game, i.e., a transferable-utility (TU) cooperative game. First, the concept of core can be weakened so that the blocking of changes is limited to only those with multilateral backings.…
This paper investigates a type of instability that is linked to the greedy policy improvement in approximated reinforcement learning. We show empirically that non-deterministic policy improvement can stabilize methods like LSPI by…
Algorithmic resignation is a strategic approach for managing the use of artificial intelligence (AI) by embedding governance directly into AI systems. It involves deliberate and informed disengagement from AI, such as restricting access AI…
We introduce a new non-zero-sum game of optimal stopping with asymmetric exercise opportunities. Given a stochastic process modelling the value of an asset, one player observes and can act on the process continuously, while the other player…
The StableSims project set out to determine optimal parameters for the new auction mechanism, Liquidations 2.0, used by MakerDAO, a protocol built on Ethereum offering a decentralized, collateralized stablecoin called Dai. We developed an…
Two issues of algorithmic collusion are addressed in this paper. First, we show that in a general class of symmetric games, including Prisoner's Dilemma, Bertrand competition, and any (nonlinear) mixture of first and second price auction,…
This paper introduces a heterogeneous macroeconomic model of a Proof-of-Stake (PoS) network to analyze the long-term centralizing effects of external traditional finance (TradFi) yields. We model a continuum of rational actors divided into…
We study general-sum, multi-player stochastic games with transferable utility, motivated by settings where agents can use side payments to make cooperation individually rational. Building on the Harsanyi--Shapley (HS) value for normal-form…
State space subspace algorithms for input-output systems have been widely applied but also have a reasonably well-developedasymptotic theory dealing with consistency. However, guaranteeing the stability of the estimated system matrix is a…
Coalition formation studies how to partition a set of agents into disjoint coalitions under consideration of their preferences. We study the classical objective of stability in a variant of additively separable hedonic games where agents…
One of the main criticisms to game theory concerns the assumption of full rationality. Logit dynamics is a decentralized algorithm in which a level of irrationality (a.k.a. "noise") is introduced in players' behavior. In this context, the…
In the context of strategic games, we provide an axiomatic proof of the statement Common knowledge of rationality implies that the players will choose only strategies that survive the iterated elimination of strictly dominated strategies.…
In decentralized finance (DeFi), stablecoins like DAI are designed to offer a stable value amidst the fluctuating nature of cryptocurrencies. We examine the class of crypto-backed stable derivatives, with a focus on mechanisms for price…
As of July 15, 2023, Ethererum, which is a Proof-of-Stake (PoS) blockchain [1] has around 410 Billion USD in total assets on chain (popularly referred to as total-value-locked, TVL) but has only 33 Billion USD worth of ETH staked in…
We consider a prediction market in which all aspects are controlled by market forces, in particular the correct outcomes of events are decided by the market itself rather than by trusted arbiters. This kind of a decentralized prediction…
The `Black Thursday' crisis in cryptocurrency markets demonstrated deleveraging risks in over-collateralized non-custodial stablecoins. We develop a stochastic model that helps explain deleveraging crises in these over-collateralized…
Smart contracts are cryptographic protocols that are enforced without a judiciary. Smart contracts are used occasionally in Bitcoin and are prevalent in Ethereum. Public quantum money improves upon cash we use today, yet the current…