Every decision make is influenced by what want and what others might do in ansr. The fact of game theory is this active. Game theory explains how objective people anticipate other people’s activities to increase their success.

But what exactly is activity idea, and why does it matter to Bitcoin?

What is sport idea?

Game theory helps to explain why people ( or businesses or nations ) might not always act in ways that seem logical or fair. It shows how anxiety, confidence, and plan all play a role in decision-making. It also provides tools to design better techniques, like transactions, voting laws, or online markets, where everyone can profit more from making wise, tactical choices.

In the 1920s, mnematician John von Neumann came up with the idea of sport idea. His second major discovery was a 1928 sheet on proper decision-making, where he introduced the combinatorial theorem. In zero-sum games, such as games, moral players generally aim for the worst-case scenario. This is demonstrated by this study. For instance, in a sport like rock-paper-scissors, the ideal strategy isn’t to follow a design but to create choices haphazardly, preventing an opposition from predicting and exploiting your movements.

” Game principle is the study of how decision-makers interact”, Dr. Matthew Stephenson, Head of Research at venture capital firm Pantera Capital, told in an interview. ” It’s a set of tools to understand their behavior”, which he said was usually based on” two key ideas”: decision-makers have objectives, and they respond to the actions of others.

For example, in a sport such as games the usual objective is winning, when playing the marketplaces, the goal is making money.

” In games, success requires anticipating an opponent’s moves, in businesses, success depends on value changes and buying behavior”, Stephenson said. These two tenets, which include having objectives and responding to others, are essential to game theory and serve as versatile models for analyzing and predicting behavior in various corporate contexts.

The Prisoner’s Dilemma

The Nash Equilibrium, a condition in which no player can increase their output by changing their plan only, is a crucial concept in game theory. A typical example of the Nash Equilibrium is the Prisoner’s Dilemma.

In the Prisoner’s Dilemma, two defendants are interrogated differently and may determine whether to disclose or remain silent. If both remain motionless, they receive light words. The priest is released while the passive one is given a harsh sentence. If both confess, they both receive a reasonable word. Since neither slave can unilaterally alter their position, confessing ought to be the outcome of the Nash Equilibrium.

Game theory also distinguishes between zero-sum games, in which one player’s gain is another’s loss ( most games are zero-sum—there are winners and losers ), and positive-sum games, in which cooperation allows all players to benefit ( two countries trading resources, resulting in a win-win, say ).

In economics and finance, activity concept helps assess pricing strategies, business opposition, negotiations, and investor behavior. By modeling proper relationships, game theory provides insights into decision-making in dynamic and collaborative environments.

Did you know?

Game idea underpins some real-world activities, including:

    ♟ ️ Chess: Players strategize moves based on potential responses.

  • ♠ ️ Poker: Involves bluffing and reading opponents ‘ choices.
  • ✂️&nbsp, Rock-Paper-Scissors: Shows mingled strategies and possibility.
  • ⛓ ️ Prisoner’s Dilemma: Highlights cooperation vs. self-interest.

How game principle aspects into Bitcoin

Stephenson explained that Bitcoin’s implementation, when viewed through the lens of sport principle, is largely driven by its part in preventing fiat devaluation. Governments may print money, creating a “money idea” where wasting occurs before depreciation is realized. Bitcoin registers this with a preset source, removing inflationary manipulation.

” Cryptocurrency is like a blowtorch”, Stephenson said, meaning it acts as a force system. ” Only the possibility of Bitcoin being commonly adopted forces people to act, whether or not it happens, if you assume everyone is completely rational, next.” The mere danger of a decentralized, non-state-controlled money does affect financial institutions, central banks, and businesses to alter their techniques in answer”.

Bitcoin’s 21 million cap rewards early adopters, who benefit most as demand grows, while late adopters pay more—creating a strong incentive for early investment, as seen in Bitcoin’s rise from a niche asset in the 2010s to mainstream recognition by 2025.

Bitcoin game theory in action: the MicroStrategy playbook

The first major non-crypto related company to develop was Virginia-based technology company MicroStrategy, led by its Co-Founder and Chairman Michael Saylor, despite it being common to hear about companies doing so.

MicroStrategy made its first investment in August 2020, purchasing$ 425 million worth of Bitcoin. By February 2025, MicroStrategy’s Bitcoin treasury had reached 471, 107 BTC, around$ 49.32 billion.

That was the strategy.

MicroStrategy’s continuing purchase of Bitcoin , and soon companies including Tesla, Japanese firm Metaplanet, health technology company Semler Scientific, and KULR Technology Group bought in.

That was the response.

As businesses weigh the risk of balance sheet devaluation against the benefit of adopting Bitcoin before competitors, these two things serve as examples of game theory in action.

” My best guess is that, for most companies getting into Bitcoin, it’s hard to see these moves as more than a brand play” ,&nbsp, Stephenson said. ” The most strategic move, beyond just wanting Bitcoin people to think they’re cool, is addressing investors who keep asking,’ What are you doing with new tech? What are you doing with crypto?’ They are satisfied by holding Bitcoin.

Some firms, Stephenson continued, may also use such buys to influence the market.

” Maybe not with Bitcoin, but with other assets—making a splash, driving up prices, and suddenly holding something more valuable”, he said. ” Whether they sell or not, the opportunity is there”.

From an economic perspective, however, Stephenson remained skeptical of the reasons why companies that make a product would announce holding Bitcoin.

” Companies that produce real goods and services shouldn’t be playing at crypto or finance investing”, he said. That money should be returned to investors or their businesses.

Nation-state game theory: first-mover advantage in Bitcoin reserves

It’s not just corporations leveraging game theory with Bitcoin—nation-states are also engaging, albeit differently from individuals and businesses.

Nation-states may have to deal with restrictions on their ability to outmaneuver their opponents and act covertly due to factors like representative government and the need for transparency, which could make it difficult for them to accumulate Bitcoin without anyone knowing.

El Salvador formally became the first nation to legalize Bitcoin in 2021. From a perspective, El Salvador took a first-mover advantage by embracing Bitcoin. El Salvador sought to attract investments, and reduce reliance on the U. S. dollar. First-mover advantage refers to the advantage gained from being the first to adopt a new technology or enter a market.

First-mover advantage also boosted the perception that moving to El Salvador would be advantageous while nations like the US continued to deal with regulatory uncertainty.

Three years later, in the lead-up to the 2024 U. S. presidential election, Bitcoin became a political issue. The Bitcoin community was approached by both Donald Trump and Kamala Harris. One of Trump’s promises was the creation of a Bitcoin strategic reserve, a move championed by prominent Bitcoiner, Wyoming Senator Cynthia Lummis.

John Haar, the managing director of Swan Bitcoin Private Client Services, stated to that how the United States manages the Bitcoin it already holds will determine how to form a strategic reserve.

” The U. S. holds about 200, 000 Bitcoin, making it one of the top government holders”, Haar said. ” They might argue”, We already have the largest publicly known holdings, so our position is solid.”

Countries compete by diversifying their reserves, Haar explained, adding while the U. S. financial system remains stable, Bitcoin is growing as a neutral monetary asset.

” Even if the U. S. doesn’t need it, holding a significant reserve could be a strategic advantage, “he said.

According to Haar, Bitcoin’s game theory-based design produces a self-reinforcing system that is extremely resistant to attacks or attempts at centralized control because of the enormous resources required to effectively attack the network.

The honest actors can increase their hash rate to raise the bar even higher for the attackers, Haar said.” If the network detects malicious actors trying to gain hash power, the honest actors can raise the bar even higher.

Winners and losers: what happens to late adopters?

While game theory has both winners and losers, Haar urged people to avoid making a zero-sum game out of investing in Bitcoin. Unlike a fixed pie, where one person’s gain comes at another’s expense, Bitcoin’s value can grow over time and, with broader adoption and market expansion, can benefit multiple participants instead of a single” winner.”

Haar refuted the notion that early adopters of Bitcoin were somehow disadvantaged.

” I don’t believe that’s the framework we should be using, “he said”. If you apply it to other, even more popular assets than Bitcoin—real estate, Google stock, the S&amp, P 500, or any tech stock—people don’t usually think that way.”

Instead, he argues that investing in any valuable asset—whether Bitcoin, real estate, or stocks —should be seen as a forward-looking decision rather than a missed opportunity.

The meme version of the phrase” As long as Bitcoin remains an asset for storing wealth, as long as it remains so,” applies:” The best time to buy Bitcoin was in 2011 when it first hit$ 1. The second-best time is today, “he said”. Once you figure it out, you get on board—that’s all you can do.”

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