Read on Twitter
A short thread on #Bitcoin 
's game theory and why the nodes control the network, for @mcuban.
https://twitter.com/mcuban/status/1340009812457910273
's game theory and why the nodes control the network, for @mcuban. https://twitter.com/mcuban/status/1340009812457910273
2/ A miner's role is to create value for the network by performing the proof of work function.
To deliver this value, miners expend time, energy & capital in the form of mining hardware, infrastructure and energy to run the mine. It takes value to produce value
To deliver this value, miners expend time, energy & capital in the form of mining hardware, infrastructure and energy to run the mine. It takes value to produce value
3/ Additionally, Moore's Law is built into the mining incentive structure (h/t @PrestonPysh). Miner's have to constantly invest in new mining hardware to remain competitive with new entrants to the market w/ exponentially more mining power every ~18 months (h/t @JeffBooth)
4/ Then, throw in the halving cycle every 4 years that programmatically (and predictably!) cuts the miners revenue in half. Only miners with margins greater than 100% pre-halving will remain profitable after the halving, a dynamic miners understand well. (h/t @mjdsouza2 , RIP)
5/ All of this to emphasize that mining is extremely competitive and requires a lot of time, effort, energy & capital to be successful and have the privilege to retain some of their earnings on their balance sheet. Remember, their revenue is #BTC
6/ The miners are STRONGLY incentivized to protect the value of #BTC . It is the only asset they receive in exchange for their mining services and the asset they hold on their balance sheet. If the value of #BTC were in jeopardy, miners would be the biggest losers.
. It is the only asset they receive in exchange for their mining services and the asset they hold on their balance sheet. If the value of #BTC were in jeopardy, miners would be the biggest losers.
7/ For this reason, the miners are constantly seeking the approval of the nodes, who validate the blocks found by miners, unlocking the block reward for the miner. The game theory behind this relationship helps explain why we know miners will be honest actors.
8/ For fun, let's play out the potential outcomes of a miner attempting to break the 21M supply cap in favor of themselves. Their are 2 possible outcomes; (1) he fails or (2) he succeeds.
9/ Scenario 1 - The Miner Fails. If a miner proposes an invalid block, the nodes will not validate it and the miner will not receive the reward. The nodes will then validate the next proposed block that is valid. The miner wastes his energy and receives no reward. REKT
10/ Scenario 2 - Let's say a miner was able to get an invalid block validated. If that happened, Bitcoin goes to zero because with a broken supply cap, Bitcoin would be worthless. The stolen #BTC is now worthless with the cheater having lost money. REKT
is now worthless with the cheater having lost money. REKT
11/ No rational actor would take either course of action. It is far more in the interest of the miner to act honestly than dishonestly. Cheating is not rewarded in the #Bitcoin ecosystem.
ecosystem.
In the 2017 block war, we also saw what happens when the miners wanted to change the network in their favor (~95% wanted bigger block). The nodes select the valid chain, the nodes have the power. Ask anyone with BCH or BSV how its going.
12/ Its evident that Satoshi thought deeply about the protocol's game theory. He knew that a decentralized system would only be successful in the long run with the right incentive structure. It's brilliantly simple, and for that, we are forever thankful 
