Securing Decentralization Through Nash Equilibria

(Some found this relevant in relation to this debate:
Our view is that if it is viewed scientifically and rationally (which is psychologically difficult!) that money should have the function of a standard of measurement and thus that it should become comparable to the watt or the hour or a degree of temperature. And money, as an efficient practical means of transferring utility, naturally links directly with the game theoretic idea of “TU games” (games with transferable utility)~Ideal Money

Secure decentralization necessitates a Nash equilibrium otherwise it cannot be said that no party can unilaterally change their strategy in order to gain. If a party can unilaterally change their strategy to gain then it is possible that they might centralize or exploit the system (this should at least affect one’s psychological security!). If such a unilateral change creates an oscillating pattern of strategy adjustments between parties then this becomes a mixed strategy Nash equilibrium.

Once a LIMITING foundation for stability through securing decentralization is achieved through a Nash equilibrium security leaks in connected systems begin to show their faults. In order to continually keep the “core” safe, equilibrium must be continually sought in more and more layers of the system (inner or outer is seemingly only a matter of perspective only).

Much like a zipper it must happen and does naturally happen in its own sequential order and so once the process begins, is somewhat harnessed, and somewhat understood, we can begin to look at the “speed” at which we acquire such secure decentralization and begin to create a sort of “standardized unit” and “qualities” for it.

We can observe this phenomenon in bitcoin by understating it’s relation to John Nash’s concept of “Ideal Money“:

Starting with the idea of value stabilization in relation to a domestic price index associated with the territory of one state, beyond that there is the natural and logical concept of internationally based comparisons. The currencies being compared, like now the euro, the dollar, the yen, the pound, the swiss franc, the swedish kronor, etc., can be viewed with critical eyes by their users and by those who may have the option of whether or not or how to use one of them. This can lead to pressure for good quality and consequently for a lessened inflationary depreciation in value.”

“It seems possible and not unlikely, however, that if two states evolve towards having currencies or more stable value as measured locally by national CPI indices that then also these distinct currencies would tend to evolve towards more stable comparative relations of value.

Then the limiting or “asymptotic” result of such an evolutionary trend would be in effect “ideal money” but this as a result achieved without the adoption of anything like an ICPI index as a basis for the standard of value.”

When bitcoin started out there was fear of a 51% attack.  This attack can be neutralized by a Nash equilibrium amongst the mining pools. Until the then price of bitcoin is necessarily unstable as we should expect it to be affected at least in part by the psychology of the general citizenry.

As the mining pool parties limit towards a Nash equilibrium, which they will tend to based on the invisible hand, large fluctuations in price start to shows symptoms of the flawed exchange systems. The next stage then would be a Nash equilibrium between enough exchanges to create a stable decentralization.

After this one would expect the next important stage is to raise the price of bitcoin to a level that no other entity or wealth in the world could manipulate thus bringing a Nash equilibrium to this aspect of the “game”.

It might be difficult to project beyond this but one can expect a certain form of standardized unit of currency in the near future as well as a new formula for a type of “economic velocity”.


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