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‘Nash eXchange’ tag · Gwern.net

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An incentive-compatible⁠ ‘deposit-refund’ mechanism for enabling trade without trusted third parties is the exploding Nash equilibrium where both parties put up 100% of the value in an ‘exploding box’, and if either is unhappy, the value is destroyed. Thus, neither party gains from scamming the other, and so will cooperate honestly. This can be implemented as ‘2-of-2’ multisig escrow in Bitcoin⁠ & was popularized by the NashX website, and proposed for darknet market⁠ use. Parent⁠ mechanism design⁠ ⁠“Payment Schemes from Limited Information With Applications in Distributed Computing”⁠, Nikolaj Ignatieff Schwartzbach2022 (Nash eXchange; ⁠similar, ⁠bibliography): We propose a generic mechanism for incentivizing behavior in an arbitrary finite game using payments. Doing so is trivial if the mechanism is allowed to observe all actions taken in the game, as this allows it to simply punish those agents who deviate from the intended strategy. Instead, we consider an abstraction where the mecha

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