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Nash equilibrium through difficulty adjustment

Chess board

“In game theory, the Nash equilibrium, named after the mathematician John Forbes Nash Jr., is a proposed solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy.” Wikipedia

The Nash equilibrium can also be described as existing where players cannot achieve payoff benefit within the rules of a game, by behaving unilaterally. Take chess, for example, where moves are made with an opponent in mind, highlighting how strategy requires adjustment among players and participants.

Game theory provides for a cognitive framework in considering human behaviour, as well as offering a mathematical approach to decision making: John Nash noted on how contracts could implement coalition formation in respect of games.

In both earlier and later works, John Nash also spoke on uniqueness in non-cooperative and pro-cooperative games and how geometric equilibrium points are established:

He also observed on the importance of contracts in commerce and how they index to inflation rates:

It is standard contractual practice for periodic adjustment or escalation to take into account prices or a price level affecting the performance of a contract.

For example, it was common in the earlier part of the twentieth century that business contracts allowed the creditor the option to accept gold or a paper-based gold orientated and equivalent payment, where there existed questions of whether a currency would hold the same longer-term value when payments became due.

Inflation in contract adjustment becomes representative and more descriptive of a data set of contract indexing than a price level average used in macro inflation targeting, given the ubiquity of contracts in commerce.

The possibility, therefore, resides a proof of work mining algorithm could form the basis for contractual indexation in the way a physical gold standard once did, and how such money could affect contract quality:

In the experimental nature of game theory, it also resides Nash equilibrium can be created through the difficulty adjustment in bitcoin, as the basis for the genealogical, non-static, and asymptotically ideal money, indexing a different state of play redolent of more classical times where for all the modern complexity, an honesty benchmark is better understood.

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