What is game theory? The art of making decisions (in life and on the blockchain!)

Game theory is the study of how people (or computers) make decisions when the outcome of their action depends on what others do. Think about going to a restaurant with a friend and there is only one slice of tiramisu. Game theory analyzes the different strategies that each one can use to get that longed-for slice of dessert, whether it be: sharing it, competing for it or even giving you the option of not ordering it so that the other person can enjoy it.

Let’s say it’s a kind of manual that serves to understand why people behave in a certain way in circumstances of cooperation or competition. The good thing about this is that it applies to everything: from sports games to the blockchain ecosystem.

Why is it called “game theory”? This is how your strategy works even without a board game

It’s called “game theory” because the metaphor of a game is used to understand complex decision-making situations. It’s not about entertainment with dice or tokens, but about any situation in which the decisions of one player affect the others.

According to Cointelegraph, this theory has its origins in economics and mathematics in the 1940s, and became popular thanks to figures such as John von Neumann and John Nash, who made relevant contributions, such as the concept of “Nash equilibrium.”

Spoiler!: We all play without realizing it in real life

Essentially, the theory shows that in everyday life we constantly make use of strategic games, from negotiating at work to deciding on products to buy at the supermarket.

How does game theory work? Keys and types of scenarios

Game theory works by analyzing the way players make their decisions. Each player chooses their strategy to obtain the best possible result for themselves.

To make this easier to understand, a payoff matrix is used, which is a kind of map that marks the possible rewards or the different punishments that exist in each combination of strategies.

A classic example is the Prisoner’s Dilemma: in this situation, two prisoners act rationally and make the decision to betray each other. This results in a worse punishment for both than if they had been cooperative.
The result, in which neither has an incentive to modify their decision, is known as Nash equilibrium. And this equilibrium shows us that the best individual decision will not always lead to the best joint result.

Types of games: cooperative, non-cooperative, zero-sum and much more

In game theory, according to Cointelegraph, games are classified according to their rules. There are cooperative games, in which players can make bonds and agreements to work together. There are also non-cooperative games, in which, as in a game of poker, each player takes action independently in search of their own benefit.

Likewise, there are zero-sum games, in which the gain of one player is represented by the exact loss of the other player, as in the case of chess. As for non-zero-sum games, everyone can win, due to a successful collaboration; or everyone can lose, due to a price war.

Game theory in the digital economy: the blockchain and crypto revolution

Game theory is the ideal touch that allows blockchain to function without the need for intermediaries or a centralized entity. The network focuses on the idea that all participants (like validators in Ethereum or miners in Bitcoin) are rational players who are seeking to maximize their personal benefits.

The system is created with such ingenious incentives and also punishments that the most attractive strategy for participants is clearly to follow the rules and be cooperative, instead of choosing the path of cheating.

Let’s give an example: a Bitcoin miner gets new coins and commissions for validating transactions honestly. In the event that he tried to sabotage the network, in addition to having to invest a lot of money and energy, he would also devalue his own investment, which would make it a very illogical move.

This is precisely what game theory is about: it shows that, even with players who act selfishly, it is very possible to build a robust, reliable and secure structure.

Why is blockchain kept secure? Incentives, consensus and… honest miners

The security of the blockchain is largely supported by game theory, which moves its consensus mechanisms. These structures are created with the purpose that honesty is the most profitable strategy. In the case of Proof of Work (PoW), miners establish competition for rewards, but if they try to sabotage the network, the cost would be so high that it is economically irrational.

As for Proof of Stake (PoS), validators bet their own coins and are penalized in case of acting dishonestly, which makes them lose part of their guarantee. The combination of rewards for honesty and penalties for dishonesty generates the great Nash equilibrium, which encourages participants to cooperate for the good of the network.

Tokenomics: designing crypto economies with game theory

I invite you to see Tokenomics as the economic design of a crypto project and game theory as its main tool to be able to carry it out.

Developers use its principles to generate incentive systems that lead participants to behave honestly, and this occurs by establishing rules in which the reward for collaboration and contribution to the network is greater than the benefit of cheating. It promotes healthy development and puts a brake on fraud.

In Decentralized Finance (DeFi) protocols or non-fungible token (NFT) markets, users obtain tokens thanks to their participation, and are automatically penalized with smart contracts if they try to deceive the system. In this way, it is ensured that individual interest is aligned with the common good.

Blockchain gaming: when game theory becomes an experience for millions

According to Coinbase, gaming on the blockchain has evolved into a massive trend, proving to be a real “laboratory” of game theory. For example, in the play-to-earn model, each decision of the player has a direct implication in the game’s economy.

These structures, which are based on Web3 technology, use tokenomics to incentivize good behavior and to punish scammers or fraudulent people. In this way, the best decision for the players is cooperation for the collective good.

In 2025, a consolidation of games that allow players to own their assets through NFTs and also participate in decision-making has been seen in the market.

Advantages, challenges and limits of game theory in crypto

Game theory in crypto is a kind of digital kingdom in which transparency is the rule and communities govern themselves. It’s almost a fairy tale! But of course, in all fairy tales there is always a dragon or a terrifying witch.

If the game’s design is not very well thought out, the initial incentives can, in fact, become an invitation for malicious people. Just one error can cause chaos throughout the kingdom, cause attacks and leave power in the hands of a few. Therefore, the game continues.

The real challenge is not only to create rules, but to make them cheat-proof. The future in this digital ecosystem is in frequent innovation. It is about finding that ideal design that resists both the cunning of hackers and the surprises of regulators.

Quick Glossary: Words you need to talk about game theory like a crypto expert

• Player: a participant who decides in a scenario (can be a user, a miner or a company).
• Strategy: is the plan or set of actions that a player selects to obtain the best possible result for himself.
• Incentive: is the reward that encourages a player to advance in a specific strategy.
• Nash Equilibrium: it is the moment of a game in which no player has any incentive to modify their strategy, assuming that others will not either.
• Consensus: is the agreement between the participants of a decentralized network regarding the state of the blockchain.
• PoW (Proof of Work): is the consensus mechanism where miners compete with computational power to validate transactions.
• PoS (Proof of Stake): is the consensus mechanism where validators bet their own coins as collateral to validate their transactions.
• Tokenomics: it is the economic design of a cryptocurrency project, which includes its rules and also its incentives.

Bitnovo and the new crypto economy: your ally to make better decisions

Understanding game theory, cryptocurrencies and tokens does not have to be a titanic task. At Bitnovo, we want to be your allies on this journey and empower you with very clear and simple information. We provide you with the tools and knowledge you need to make intelligent decisions and invest with confidence, managing to be part of the digital economy without confusion and without fear. We are here to make the complex simple. We want you to become an active participant in the crypto revolution!

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