Problems With Game Theory Mechanics in Distributed Systems


We have already understood game theory and its usage in cryptoeconomics, in this blog we will look at the problems that might come with using game theory in a decentralised, distributed system. Lets quickly look at the problems that it might cause:


Despite the incentive structures and game theory mechanics driving honest behavior in the Bitcoin network, there are some important issues that are widely recognized. Centralization of mining as a result of mining pools has led to concerns that the reinforcing Nash Equilibrium of the system can be compromised through a 51% attack.

This is where malicious miners control enough of the network hashing power to fork the blockchain, overriding the coordination game played out by a decentralized network of miners. Due to this, some view incentive mechanisms as not particularly necessary or only necessary as a last resort of cryptocurrency platforms due to the complications in system logic that they create.

The empirical problem laid out by critics is that the success of game theory models in these platforms cannot be determined academically, only through practice. Some of the assumptions made by game theory models in cryptocurrency platforms revolve around a specific threshold of people acting honestly or dishonestly. Predicating platform security on implied assumptions of human behavior can be risky, especially when there is no precedent for the technology or models being implemented.

Bitcoin as a decentralized network is built on the uncoordinated choice concept where coordination between parties is limited by the size of parties interacting with each other. Centralized mining pools do not follow this concept and therefore create a viable security concern.


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