Hex’s Game Theory
Game Theory is the study of players of various games often make choices where the outcomes depend on what other players make. Games can be zero sum (one winner at the top, like poker), positive sum (growing the pie, such as growing a new industry) or negative sum (fighting for a shrinking pie, such as budget cuts).
I found it hard to find a good resource for learning GT for a long time now, but finally I came across one I can recommend via audio book by The Great Courses called Understanding Economics: Game Theory.
When Hex stakes are made, the staked coins are burned and therefore removing them from supply and once a stake ends, the contract mints the principle coins plus any reward interest accrued. This way there is no custody of the coins and the contract can burn and mint new ones at different stages of the staking process.
The major game theory in Hex revolves around Longer Pays Better. Stakers are incentivized with higher rewards for staking bigger amounts of Hex for longer. You can lock up coins anywhere from a day to 5555 days which is around 15 years. You have complete control over the stake, however, and can end it early with penalty if you wish. Your goal is to accumulate as many t-shares as possible as they factor into your base rewards and the % of end stake penalties you will receive from others. It’s even easier to stake for 10 (rewards max out) or 15 years (collect additional 5 years of end stake penalties from others) with wrapped stakes that Hedron enables as you can trade your t-shares as an NFT and get value from your longer stakes earlier if you choose.
If you think people will make longer stakes (currently average stake length is ~7 years), you’re incentivized to get as many available t-shares as possible. If you see a bunch of stakes are ending on a certain day or month, perhaps you’ll decide to avoid that time period as it may come with sell pressure from people taking profit. Maybe you want to tell your friends and colleagues about Hex as the more it goes viral, the more you stand to benefit from owning and staking it. As with almost all products in finance, most of the rewards go to those who invest early and substantial amounts (but never more than you can afford to lose). Hex has so many different scenarios where the players are taking actions based on what they believe others will do and events that occur in the community, such as launches of new supporting products like Pulse and PulseX which gives holders of Hex on Ethereum their other Hex as well on the PulseChain.
Once coins are locked up to delay gratification and therefore taken off the market, this reduces the opportunities people have to sell their coins early and creates an environment of reduced sell pressure. The more people who learn about Hex, buy it and stake it, the better and better the price performance over time. Instead of “proof of work” it’s “proof of wait” essentially. It’s a beautifully simple system that has proven thus far, just over 2 years from launch, that a system that incentives you to buy and hold for long periods of time, similar to a CD (certificate of deposit) in traditional finance can be wildly successful and appeal to those who want to build wealth without gambling and trading all the time. As the community says, you stake it till you make it!
