Game Theory and Blockchain Key for a Better Banking Network

The banking system that is operating in the current society is very different from what used to be. Consumers are increasing their demand for services some of which these banks are unable to offer. Its services seem to have become highly inefficient and therefore, there is a need to power banks. This means that banks are supposed to widen their array of technology as well as their methods of interaction and transactions with consumers. This could only be done through innovation, where blockchain tech comes in as a savior. All these are being inspired by game theory.

All these mean that there is a great need to digitize the banking services. For instance, the modern banking where one can do transactions on phone without necessarily locating an ATM or the nearest branch has started the way, though it is not enough. There is a need to integrate Banking as a Service commonly referred to as BaaS with Blockchain technology. This model will help solve issues facing the financial world.

All these will be made possible by applying the Game Theory, The Prisoner’s Dilemma, and Blockchain. It will solve the problem of mistrust and lack of transparency in transactions. So integrating traditional banking and blockchain will make it stronger by making all transactions being recorded on a decentralized and highly accessible blockchain.

A fintech company called BANKEX is on a mission to integrate these two banking models. It is set to do it by developing its Proof of Asset Protocol which is a method of making assets possibly be digitized and logged on in the blockchain. It is also working to ensure market liquidity of these digitized assets is increased by making qualities of assets be verified by unbiased programming and recorded on the immutable blockchain.

Reference

https://www.forbes.com/sites/geraldfenech/2018/12/01/how-game-theory-and-blockchain-can-help-support-a-better-banking-network/

 

 

An Outline of Game Theory

When expounded; game theory has diverse applications. When it first got developed, its purpose was to solve economic problems. However, it has to solve a lot of issues in different fields that include politics, war, economics, and biology. The method got developed by a Hungarian-born American mathematician named Jon Von Neumann together with his colleague from Princeton and German-born American economist Oskar Morgenstern.

The two mathematicians saw that economics was like a game in which players anticipated each other’s moves. The two decided to evolve into a new kind of mathematics and named it the game theory. The theory has managed to overpower theories like probability which got previously used. The application does not rely on pure chance but rather focuses on decision making strategic aspects that the players’ control.

On famous and classical example of game theory is the prisoner’s dilemma. It involves two bank robbers that managed to escape the grasp of the authorities. However, the robbers make a mistake of using a stolen getaway vehicle. The police manage to track them down and capture them. The problem, however, is that the cops cannot link the robbers to the bank robbery. They decide to use manipulative tactics to get them to confess.

The two get separated and given the same offers. Should one surrender then confess and links the robbery to his partner, then they will walk free and the other gets a ten-year sentence. The second offer is that if they both confess, they get sentenced for seven years. The last offer is that if they both deny, then they will get a two-year sentence for the stolen car. It creates a dilemma between the wrong-doers.

References

https://www.britannica.com/science/game-theory