Cryptopedia
Zero-sum Game
Definition
A zero-sum game, a term of a non-cooperative game, is a situation where one participant’s gains would cause the other’s losses, not being able to achieve a win-win deal. In this supposed ”game,” the gains or losses of both parties always add up to zero.
Principle
If Q and M have a zero-sum game, the winner will get one point (recorded as +1) and the loser will lose one point (recorded as -1). It is not possible to have two winners in one game, so the winner will either be Q or M.
Supposing Q finally wins X times and loses Y time, Q’s total points will be (X-Y). Since the situation of M and Q is contrary, M’s total points will be (Y-X).
Hence, a mathematical expression of the zero-sum game can be concluded as: (N-M) + (M-N) =0
Background
The zero-sum game stems from the game theory founded by the Hungarian-American mathematician John von Neumann in early 1920. And 22 years later, Von Neumann and the economist Oskar Morgenstern together published Theory of Games and Economic Behavior, which marked the beginning of modern game theory. As the public gradually realized the fortune and resources were limited, the zero-sum game theory became a mainstream thought since then. There is no win-win deal in a zero-sum game that regulates that gains of one participant must lead to the losses of the other one. Still, it is hard to say the profits of the winner equals the losses of the loser and generally, the losses will be larger. Today, with the development of globalization, people should not be confined to the zero-sum game but rather look more into the win-win situation which has been a trend.
The Application in the Cryptocurrencies Industry
The price of the cryptocurrencies is unsteady and the rise and fall of it have an impact on the investors’ assets. For instance, if the trading price is higher than the market price in a trading, the profits of the seller are actually from the spread that the buyer pays, and vice versa. Therefore, trading in the cryptocurrencies industry is also a zero-sum game, in which one party gains and the other one loses. For BTC trading, if the investors believe there is a growth in BTC price, they will buy it, and if the investors consider it decreases, they will sell it. In this process, the rise and fall of BTC price is a key factor that affects the gains or losses of the buyers and the sellers.
The Meaning of Zero-sum Game in the Cryptocurrencies Industry
With a variety of digital currencies on the market, investors should realize that the investment is a zero-sum game. For example, someone holds a certain digital currency. Supposing the holder sells it and then the price of it starts to keep rising, this holder loses in this trade and the buyer gains profits. On the contrary, if the price keeps falling, the seller will reap profits and the buyer will lose money. In conclusion, if the investors choose to hold the currency, there is a possibility of gains or loss; but once the investors begin to trade, they must confront either gains or losses. That’s how the zero-sum game works in the cryptocurrencies industry. Thus, investors should be aware of the good or bad the investment brings and be well prepared for risks before commencing to trade.
A zero-sum game, a term of a non-cooperative game, is a situation where one participant’s gains would cause the other’s losses, not being able to achieve a win-win deal. In this supposed ”game,” the gains or losses of both parties always add up to zero.
Principle
If Q and M have a zero-sum game, the winner will get one point (recorded as +1) and the loser will lose one point (recorded as -1). It is not possible to have two winners in one game, so the winner will either be Q or M.
Supposing Q finally wins X times and loses Y time, Q’s total points will be (X-Y). Since the situation of M and Q is contrary, M’s total points will be (Y-X).
Hence, a mathematical expression of the zero-sum game can be concluded as: (N-M) + (M-N) =0
Background
The zero-sum game stems from the game theory founded by the Hungarian-American mathematician John von Neumann in early 1920. And 22 years later, Von Neumann and the economist Oskar Morgenstern together published Theory of Games and Economic Behavior, which marked the beginning of modern game theory. As the public gradually realized the fortune and resources were limited, the zero-sum game theory became a mainstream thought since then. There is no win-win deal in a zero-sum game that regulates that gains of one participant must lead to the losses of the other one. Still, it is hard to say the profits of the winner equals the losses of the loser and generally, the losses will be larger. Today, with the development of globalization, people should not be confined to the zero-sum game but rather look more into the win-win situation which has been a trend.
The Application in the Cryptocurrencies Industry
The price of the cryptocurrencies is unsteady and the rise and fall of it have an impact on the investors’ assets. For instance, if the trading price is higher than the market price in a trading, the profits of the seller are actually from the spread that the buyer pays, and vice versa. Therefore, trading in the cryptocurrencies industry is also a zero-sum game, in which one party gains and the other one loses. For BTC trading, if the investors believe there is a growth in BTC price, they will buy it, and if the investors consider it decreases, they will sell it. In this process, the rise and fall of BTC price is a key factor that affects the gains or losses of the buyers and the sellers.
The Meaning of Zero-sum Game in the Cryptocurrencies Industry
With a variety of digital currencies on the market, investors should realize that the investment is a zero-sum game. For example, someone holds a certain digital currency. Supposing the holder sells it and then the price of it starts to keep rising, this holder loses in this trade and the buyer gains profits. On the contrary, if the price keeps falling, the seller will reap profits and the buyer will lose money. In conclusion, if the investors choose to hold the currency, there is a possibility of gains or loss; but once the investors begin to trade, they must confront either gains or losses. That’s how the zero-sum game works in the cryptocurrencies industry. Thus, investors should be aware of the good or bad the investment brings and be well prepared for risks before commencing to trade.
