We’re excited to see the massive interest in the time deposit market of late. To aid in comparison and understanding, we’ve drawn up a simplified game theory description of how the game of TAO can be played :)
This is particularly realistic, as 133K Quickswap users were airdropped TAO tokens. From the position of Airdrop, they faced two options, sell or stake, with the following incentives:
- If both choose to stake, supply deflates maximally and price appreciates maximally for that unit time.
- If one sells, a small amount of value is realised by the seller.
- If both sell, no value is realised.
Clearly, staking is the best cooperative option, and many (especially large holders) did just that. However the game does not stop after one choice — it is a continuous/repeated game, where every moment a user decides whether to unstake and sell or stay STAKED. This is where the game theory of tokens like OHM fails — the reward for choosing to “STAKE” again stays the same, regardless of how long you have staked.
In contrast, TAO offers increasing rewards the longer you stake — which are NOT the same as if you staked, unstaked, and then staked again.For eg.
TAO staked 1yr x 2 = 25% interest |. TAO staked 2yr = 37% interest
Whereas interest earnt in OHM is same in both these scenarios. In effect, TAO offers a third meta choice for those that pick “STAKE” and continue to correctly play the game — they now have a choice to STAY STAKED, which is even more rewarding than starting STAKE!
This meta game allows people to make the correct choice in a continuously evolving real time game theory scenario, rather than an oversimplified single -turn game theory analysis.
We welcome your thoughts and comments!
