The Bitcoin Dilemma – Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides

The Bitcoin Dilemma

The Center Cannot Hold: 11

Game theory is the science of multi-agent decision making. It uses mathematics to study the strategic interaction of rational decision makers. Game theory has social, logical, and computer science applications. It also has Bitcoin applications at the personal, social, business, and nation state levels.

Perfect vs Imperfect Information

Sequential games can be organized into two categories, those with perfect information (e.g., checkers) and those with imperfect information (e.g., bridge). A game of perfect information requires that all players know the strategies and payoffs available to the other players, but also know the actions or moves everyone previously made.

For the purposes of this essay we will consider “players” of the Bitcoin game to be those not only holding some Bitcoin but also running a node. We will here define “moves” to be on-chain transactions, or the lack thereof on the public Bitcoin ledger.

If we consider Bitcoin to be an accumulation game, its information is perfect on a surface level, but imperfect much beyond that. It would appear all the node runners know all the strategies and payoffs available to other players, for example they can audit how much Bitcoin they have, and they can even look into how much Bitcoin other addresses have generally on the public ledger, although matching up all the Bitcoin addresses to specific players is an impossible task. Further, all players can see the massive payoff to the common strategy of hodling.

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