In an analysis released On Monday, ASXN, an emerging crypto research firm, describes the dynamics of global Bitcoin adoption through the lens of game theory. The report titled “The Game Theory of Bitcoin Adoption Across Nations” provides an examination of how nations can leverage mathematical game theory to strategically adopt Bitcoin.
The report follows in the footsteps of Donald Trump’s report announcement at the Bitcoin 2024 conference that he will convert all BTC owned by the US government through enforcement actions into a “strategic Bitcoin stash.”
Bitcoin Game Theory Explained
The report begins by framing BTC adoption in the broader context of game theory, a discipline that assesses strategic decisions made by individuals or entities under conditions of uncertainty and conflicting interests. According to ASXN, “game theory provides a structured framework for predicting the outcomes of national-level strategies in the adoption of digital currencies, taking into account not only economic benefits and technological advances, but also potential geopolitical shifts.”
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According to the concept of “first mover advantage,” early adoption of BTC can position nations advantageously on several fronts. The report states: “Nations that act as first movers in the Bitcoin arena can set precedents in legal and regulatory frameworks, attract global crypto companies, and secure a significant share of the blockchain innovation landscape.”
However, it contrasts these advantages with the pitfalls of premature regulatory frameworks and Bitcoin’s market value volatility, which can pose substantial risks to national economies. The report adds: “Once a few influential nations adopt Bitcoin, others will follow suit to avoid being left behind – creating a bandwagon effect. This effect is driven by both the returns to adoption and the risks of non-adoption. This is when the Bitcoin adoption cycle enters the steepest part of the S-curve.”
The ‘Payoff Matrix’ – a fundamental tool in game theory – is applied by ASXN to dissect the decision-making process of countries considering Bitcoin adoption. ASXN explains how this matrix helps countries assess the potential returns and risks associated with various strategic choices. “Each nation faces a unique matrix based on its economic structure, political climate, and market dynamics. The optimal strategy, while generally biased towards adoption due to the projected global ascendancy of cryptocurrencies, must still be tailored to individual national circumstances,” the report elaborates.
Furthermore, the report also introduces the concept of “Best Reaction Function” in the context of Bitcoin adoption, explaining how nations develop strategies by anticipating the decisions of others. “A nation’s strategy is influenced not only by its direct gains from Bitcoin adoption, but also by the expected actions of other nations, which can alter the global economic and technological landscape,” the report states.
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The researchers add how the bandwagon effect might work; “The logic goes something like this – Nation 1 evaluates the cost-benefit tradeoff and decides on adoption. Nation 1 realizes that all other nations will also choose to adopt. Nation 1 concludes that since all nations will choose to adopt, they should increase the speed of adoption so as not to lose competitive advantage. Slowly, then all at once.”
ASXN uses several real-world applications to illustrate the theoretical concepts discussed. The case of El Salvador is examined in depth, showing how its early adoption influenced other nations’ perceptions and strategies towards Bitcoin. The analysis extends to how Investing in Wisconsin Pension Funds in Bitcoin ETFs reflects a broader trend of subnational entities evaluating cryptocurrency as a viable component of their financial strategies, and the substantial commitment of Microstrategy it’s like a corporate parallel to national strategies.
Looking ahead, the report discusses potential future trajectories of Bitcoin adoption, influenced by both technological advances and evolving geopolitical dynamics. It specifically addresses Robert Kennedy Jr.’s proposal at Bitcoin Nashville 2024 to purchase 550 BTC daily until the US accumulates 4 million BTC, which represents 19% of the total available BTC supply. This approach is intended to reflect the proportion of global gold reserves that the US currently holds compared to other countries.
![Research firm predicts Bitcoin game theory among nations 1 Top 15 Gold Reserves](https://thegurumedia.com/wp-content/uploads/2024/07/gold-reserves-top-15.jpg)
And Bitcoin game theory is already in play. “While the ideas Trump presented at Bitcoin Nashville may or may not come to pass, the mere fact that he publicly acknowledged Bitcoin and its properties is a victory, and we are already seeing early signs of the effects of this,” the researchers conclude.
They refer to Johnny Ng, a member of the Legislative Council of Hong Kong, who has defended for the incorporation of Bitcoin into the city’s financial reserves following Trump’s announcement.
At the time of writing, BTC was trading at $66,660.
![Research firm predicts Bitcoin game theory among nations 2 Bitcoin Price](https://thegurumedia.com/wp-content/uploads/2024/07/BTCUSDT_2024-07-30_13-34-27.png)
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