Game Theory: How does Bitcoin Adopt Game Theory?
The way bitcoin works is a real-life example of Game Theory: it believes that all owners of bitcoins share the same interest, and so all miners, the way they call the owners of bitcoins, will perform similar behavior in the encrypted coin market. In this way, the market will be comparatively stable and safe as people’s behavior and actions are strictly regulated through their interactions with one another in the market. Like what’s stated by game theory, when one makes a decision, he or she must consider others’ actions and the payoffs to make sure he or she can benefit the most.
The bitcoin market gives the customers a scenario where all people in the market have no trust in each other and the decisions they make could affect each other – whether to buy or not buy. In the case of bitcoin, the only way to “win the game” and earn money is to buy bitcoin as the buyer is not sure whether the other competitor is buying or not. In the competition, there are three scenarios:
- When one side decides to not buy bitcoin, it suddenly loses a competitive advantage in the market while the early adopters lead the game
- When both sides choose to not buy the coins, the central banking is likely to not be affected but the competitors will not have a competitive advantage as they do not adopt encrypted coins
- When both sides choose to buy the coins, they will both become leads in the market as they adopt the coins earlier
The bitcoin market performs a very similar structure to the game theory, as both gamers are striving for a higher benefit and each other has no clue what others are doing. On the other hand, they will win or lose based on their decisions and they will always find a dominant solution in which they buy or not buy bitcoin. For the current stage, the dominant strategy is gamers should always buy in to increase their competitive advantage. Such phenomena are very interesting in terms of the game theory and especially when we take international situations about each country’s perspectives on encrypted coins into consideration.
https://bitcoinmagazine.com/culture/the-bitcoin-dilemma