Overview
Game theory is the study of how rational individuals make decisions when their outcomes depend on the actions of others. In Web3, game theory is used to predict how miners, validators, and users will behave and to design protocols that remain secure even when participants are selfish.
Key Concepts
- Incentive Compatibility: A system is incentive-compatible if every participant can achieve their best outcome just by acting according to their true preferences (i.e., following the rules).
- Byzantine Generals Problem: A classic game theory problem describing the difficulty of reaching consensus in a distributed system with potentially malicious actors.
- Nash Equilibrium: A state where no player has an incentive to deviate from their current strategy.
Importance
Without sound game theory, a blockchain would be vulnerable to collusion, bribery, and various economic attacks.