Institutional Noise, Strategic Deviation, and Intertemporal Collapse: A Formal Model of Miner Behaviour under Protocol Uncertainty

TL;DR

This paper presents a formal game-theoretic model showing that protocol mutability in blockchain systems causes strategic deviation and collapse of cooperation, emphasizing the importance of rule stability for sustainable decentralized networks.

Contribution

It introduces a formal model analyzing how institutional noise affects miner behavior, highlighting the critical role of protocol stability in maintaining cooperation.

Findings

Minor protocol uncertainty increases time preference and deviation.

Fixed rules promote long-term investment and stability.

Mutable protocols lead to short-termism and potential collapse.

Abstract

This paper develops a formal game-theoretic model to examine how protocol mutability disrupts cooperative mining behaviour in blockchain systems. Using a repeated game framework with stochastic rule shocks, we show that even minor uncertainty in institutional rules increases time preference and induces strategic deviation. Fixed-rule environments support long-term investment and stable equilibrium strategies; in contrast, mutable protocols lead to short-termism, higher discounting, and collapse of coordinated engagement. Simulation results identify instability zones in the parameter space where rational mining gives way to extractive or arbitrage conduct. These findings support an Austrian economic interpretation: calculability requires rule stability. Institutional noise undermines the informational basis for productive action. We conclude that protocol design must be treated as a constitutional economic constraint, not a discretionary variable, if sustainable cooperation is to emerge in decentralised systems.