Game Theory on the Blockchain: A Model for Games with Smart Contracts

Abstract

We propose a model for games in which the players have shared access to a blockchain that allows them to deploy smart contracts to act on their behalf. This changes fundamental game-theoretic assumptions about rationality since a contract can commit a player to act irrationally in specific subgames, making credible otherwise non-credible threats. This is further complicated by considering the interaction between multiple contracts which can reason about each other. This changes the nature of the game in a nontrivial way as choosing which contract to play can itself be considered a move in the game. Our model generalizes known notions of equilibria, with a single contract being equivalent to a Stackelberg equilibrium, and two contracts being equivalent to a reverse Stackelberg equilibrium. We prove a number of bounds on the complexity of computing SPE in such games with smart contracts. We show that computing an SPE is \(\textsf {PSPACE}\)-hard in the general case. Specifically, in games with k contracts, we show that computing an SPE is \(\varSigma _k^\textsf {P}\)-hard for games of imperfect information. We show that computing an SPE remains \(\textsf {PSPACE}\)-hard in games of perfect information if we allow for an unbounded number of contracts. We give an algorithm for computing an SPE in two-contract games of perfect information that runs in time \(O(m\ell )\) where m is the size of the game tree and \(\ell \) is the number of terminal nodes. Finally, we conjecture the problem to be \(\textsf {NP}\)-complete for three contracts.