Game theorists predict problems for Bitcoin

MIT Technology Review : Five years ago a mysterious figure named Satoshi Nakamoto created a digital currency for making online purchases. Called bitcoins , they can be obtained through exchange of currency, products, or services or through a process called “mining,” in which computer users are paid for running software that records bitcoin transactions into a global public ledger. To better understand the novel monetary system, Joshua Kroll of Princeton University and colleagues have been using game theory to mathematically model the complex interactions, involving competition and cooperation, among bitcoin users. Although the system as created has worked relatively well so far, they say, the researchers predict problems as the total number of bitcoins in circulation reaches the cap of 21 million set by Nakamoto. When that happens, interest in mining could drop off and, with it, the maintaining of the global transaction ledger. However, the very notion of introducing new rules and regulations to solve the problem may run counter to the bitcoin principle of avoiding any kind of centralized control, like that of banks and regulatory agencies.