The Prisoner’s Dilemma is a fundamental concept in game theory illustrating why two rational individuals might not cooperate, even when it appears to be in their best collective interest. It describes a situation where individual incentives lead to a suboptimal outcome for both parties when they act independently. This scenario highlights the tension between self-interest and mutual benefit. The dilemma demonstrates the challenges of achieving cooperation in the absence of trust or enforceable agreements.
Context
In blockchain and cryptocurrency discussions, the Prisoner’s Dilemma is often referenced to explain the design of consensus mechanisms and incentive structures. News articles might use it to illustrate why participants in a decentralized network are incentivized to act honestly, even if they could potentially cheat. Debates often concern how protocol rules and economic models are constructed to align individual self-interest with the collective security of the network. Understanding this concept aids in analyzing the stability and robustness of decentralized systems.
Game theory formalizes the MEV supply chain, proving unconstrained transaction ordering creates a systemic welfare loss, unlocking quantified mitigation via mechanism design.
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