Definition ∞ On chain game theory applies the principles of game theory to analyze and design incentive structures within blockchain protocols, where all actions and their outcomes are recorded on the distributed ledger. It studies how participants, acting rationally in their own self-interest, interact within the transparent and immutable environment of a blockchain. The goal is to design rules that lead to desired collective behaviors, such as network security and consensus, while mitigating malicious actions. This field is crucial for understanding the economic security of decentralized systems.
Context ∞ News frequently discusses the implications of on chain game theory when analyzing the robustness of new blockchain protocols or evaluating the security of existing ones. Debates surrounding various consensus mechanisms, like Proof-of-Stake, often involve detailed examinations of their underlying game theoretic models. Understanding on chain game theory is essential for assessing the long-term stability and resistance to attack of digital asset networks.
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