Game Theory
Interaction between participants in the blockchain ecosystem and their incentives to behave honestly
Last updated
Interaction between participants in the blockchain ecosystem and their incentives to behave honestly
Last updated
Game theory is the study of of strategic interactions among . It has applications in many fields of , used extensively in economics as well as in , and . Traditional game theory addressed two-person , in which a participant's gains or losses are exactly balanced by the losses and gains of the other participant. In the 21st century, game theory applies to a wider range of , and it is now an for the of rational in humans, animals, as well as computers.
Consensus:
Mechanism to ensure that all parties agree that a certain state of the system is correct
The Truth (verifiable)
Consensus mechanisms are based on game theory
Proof of Work is the consensus algorithm intended to provide incentives for responsible behavior for blockchain transactions.
Concept by Cynthia Dwork and Moni Naor in 1992 in the paper "Pricing Via Processing, Or, Combatting Junk Mail, Advances in Cryptology"
Named by Markus Jakobsson and Ari Juels in 1999 in the paper: "Proofs of Work and Bread Pudding Protocols"
PoW ensures that participants in the network agree on the state of the ledger (i.e. the order and validity of the transactions) through a process that involves solving complex cryptographic puzzles
"Miners" do mathematical calculations on their computers to verify that the transactions are valid.
Mining comes from trial and error of finding a Nonce (random number) that satisfies the degree of difficulty of the network
Difficulty ensures that the process of adding new blocks to the blockchain requires a significant amount of computational work. This makes it economically infeasible for malicious actors to manipulate the blockchain
Requires a significant amount of computational effort to solve a puzzle or perform a certain task
Verifying that the work has been done in a relatively simple and quick manner.
Proof of Stake provides an alternative to PoW in the application of consensus algorithms and the security of the blockchain.
Known as proof of participation
To participate in the validation, the amount of coins that the validator has is used, instead of the computational power
The validator must place his deposited coins in a kind of safe to "prove" his participation, without moving the coins
The more coins you have, the greater the chance of validating transactions and earning from them
In terms of energy, it is more economical than PoW
It should bring more security and decentralization, but it makes larger coin holders more likely to get more coins.
Proof of Authority provides another alternative to PoW/PoS systems. It is a consensus algorithm suitable for private and permissioned blockchain which relies on a number of pre-chosen authoritative nodes called the validators. (Singh et al., 2020a)
Used in permissioned Blockchains
Group of AUTHORITIES. These Authorities are the Validators check whether new transactions align with the network’s rules and ensure that the sender has adequate funds to complete the transaction
Specific Nodes are defined and authorized to create new blocks in a chain. It needs approval from most of the nodes for the block to be created
Used in private Ethereum networks and others
A Byzantine fault (also Byzantine generals problem, interactive consistency, source congruency, error avalanche, Byzantine agreement problem, and Byzantine failure) is a condition of a computer system, particularly systems, where components may fail and there is imperfect information on whether a component has failed. The term takes its name from an , the "Byzantine generals problem", developed to describe a situation in which, to avoid catastrophic failure of the system, the system's actors must agree on a concerted strategy, but some of these actors are unreliable.
