Xcel Token

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 proble...

To understand how game theory works within the sphere of Cryptocurrency we need to get through the basics first. To know more about game theory and how it’s used in cryptoeconomics keep reading on. Let’s first get a feel for Game theory . It is essentially the study of logical decision making made by players within the clear parameters of a classification (game, scenario, etc). It uses mathematical models and can be applied to economics, psychology, logic, computer science, distributed systems, and more. Game theory can be seen as a microcosm of human behaviour under set conditions wherein certain inducement structures and mechanisms can lead to predictable and honest behaviour by players. In a archetypal game theory scenario, there are 3 primary components: Players, Strategies, Outcomes. Players are the users that make decisions. Strategies are the manoeuvres that players make while simultaneously taking into account possible strategies of other players. The conclusi...