The Game Outside the Game
In game theory, we need to reduce complexity to analyze and understand situations. Furthermore, we make assumptions about unknown or complex facts. This is necessary because if we would consider the whole complexity, we could not process the information load and find a result.
But this also creates a space we do not see in our analysis. And sometimes, this unseen space disappears totally from our rationale as we take some assumptions for granted. This invisible space is also called game outside the game. The problem with the “game outside the game” is that it can lead to different outcomes in reality than in our analysis.
In blockchain, this game outside the game appears in two fields:
- consensus and
- governance.
Consensus protocol
In a Proof of Work (PoW) blockchain context, following the protocol is beneficial for the miners. They receive a reward for contributing honestly and waste their electricity if they are fraudulent. Inherently, we assume that every participant prefers higher rewards to lower rewards. Hence, one could think that a blockchain with a high hashing power is safe against any attack. But that’s only half the truth. We would be blind to some other participants who have different incentives.
If a government, for example, wants to shut a blockchain down, it could try this in many ways:
- Disturb the consensus process by obtaining 51% of the hashing power (or staking amount in Proof of Stake (PoS)
- Launch a malware/Denial of Service (DoS) attack on miners/ block producers
- Ban mining/staking operations legally
- Censor network traffic
- Infiltrate the developer’s community
This means that focusing only on incentives is important but not enough to protect a blockchain.
Governance
Another important process in blockchains is coordination among developers, users, node operators, miners/block producers. This process is called governance. In Ethereum and Bitcoin, established coordination mechanisms utilize certain communication channels, improvement proposal schemes, etc. They appear legitimate and working schemes have been established (like rough consensus). But it is possible that other channels or groups will emerge that develop solutions for that particular blockchain that contradict the first group.
These games are played outside of the security or incentive considerations from above. Hence, it is important to keep unconsidered things in mind when evaluating the mechanism.
