Bitcoin's Competitive Edge

Game theory is a phenomenon that analyzes the strategic behaviors and decision-making processes of individuals or entities in competition with one another. When a competitor acts on a given decision, it can create a strategic advantage over others who have not yet acted. Depending on the situation, both competitors might act, while in others, both may opt out. The resulting dynamics depend on how other competitors react in the face of one competitor’s actions.

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In the game of money, bitcoin is increasingly forcing the hands of businesses to adopt it as a strategic component of their financial strategies, demonstrating the game-theoretic properties that bitcoin introduces to the competitive company landscape.

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To understand what’s going on between companies, however, we first need to understand the fundamentals of bitcoin that are compelling people all around the world to get on board with it, rather than trying to fight against it.

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Bitcoin is a permissionless network, and the only way that it can remain permissionless is thanks to miners pooling enough computational power to outweigh any outside bad actors from overriding it. If some entity wanted to stop the bitcoin network from transmitting data between its participants, it would need to round up enough hashpower to override the entire decentralized, global force of miners. And they would have to continually maintain that sufficient level of output each and every day to retain control. Simply put: it is virtually impossible to override the bitcoin network.

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As a result, everyone, from everyday citizens to national governments, is instead choosing to bend to the rules of the bitcoin network, rather than trying to write the rules themselves. It’s simply a more efficient use of their time and energy. People thus have two choices to make when encountering bitcoin: ignore it and risk missing out, or adopt it in case it proves advantageous.

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In the past week, one of the first movers in corporate bitcoin adoption, MicroStrategy, had their former CEO Michael Saylor give a three-minute pitch to Microsoft about adding bitcoin to the balance sheet in an effort to remain competitive, protect against systemic risks, and stop the bleed of its multi-billion-dollar capital reserve.

Did you know that over 60 publicly traded companies have already adopted bitcoin on their balance sheet?

As inflation eats away at stagnant capital, as financial instruments like Bitcoin ETFs become more accessible, and as the word continues to spread, more and more companies are waking up to the reality of bitcoin’s necessity in any 21st-century financial strategy. Any prospective company now faces the game-theoretic risk of not adopting bitcoin, and what that could mean for the company’s future. Regardless of their own personal beliefs about bitcoin, the pressure is on to take one of two risks: adapt or ignore.