Introduction to Portfolio Diplomacy in Mithraeum

An alliance with the powerful is never to be trusted — Phaedrus

In 448 AD Attila the Hun forced the Byzantine Empire to pay a regular tribute of 2,000 liters of gold annually.

Background

The fundamental component of the non-trivial gameplay of the Mithraeum is a social mystery. The blockchain is deterministic; its actions are public, but each of its participants is a mystery. Since Mithraeum is a social-competitive game, the issue of trust between players or entire guilds becomes the most critical factor in their political stability, scalability, and survival in the game.

In addition, players seek to maximize profits while minimizing risks and costs. It is always more profitable for strong players to intimidate the weak by forcing them to pay regular tribute rather than to carry out sieges and robberies, spending resources and time on this.
At the same time, weak players want to ensure their safety and do not want to resolve all conflicts with brute force.
This situation is well described in Mancur Olson’s Stationary Bandit Model (political science). I recommend reading, as we will start with the theory.

Bellum omnium contra omnes

Bellum omnium contra omnes (free-for-all) — it is the natural state of society without laws and obligations. The state that Mithraeum players start with. The laws of game physics allow them to accumulate resources and take resources from others through gamified brute force, which in turn has its own costs.

Mancur Olson’s roving bandit robs a settlement. Part of the loot is burnt as a military loss.

Players fight each other and rob each other in order to maximize their personal gain. Imposing costs for both winners and losers.

Proto-states

The actual ability to harm another actor through brute force is the most basic driver of diplomacy. If it is obvious which side will win the military conflict for resources, it will be more profitable for the parties to agree for tribute.

The most effective way to maximize the benefits of an aggressive game is to use brute force (military power) as a diplomatic argument rather than using it directly. A dominant military force can achieve great success if it can convince others of its power without necessarily resorting to brute force.

Mancur Olson’s stationary bandit settles on a particular land and forces nearby settlements to pay regular tribute, essentially becoming a feudal lord.

And here the first sprouts of civilization appear...
A strong player passively benefits from the projection of his power, while a weak player receives protection in exchange for paying tribute/taxes.
Since weak players are now the assets of a strong player, the latter is interested not only in not attacking his assets but also in protecting them from other players.

Such a system of relationships is a proto-state. We believe that in the future, players will build more complex and efficient models using smart contracts, including on-chain laws and DAO parliaments. But this topic deserves a separate article. Let’s move on to a practical solution.

Mithraeum shares system

Each production building in Mithraeum is tokenized on a share basis. Each building shareholder receives a percentage of its income equal to the percentage of the share.

Initially, the owner of all 100% of the shares is the initial owner of the settlement. However, he can transfer/trade them to anyone for various purposes.

The owner of the settlement can also recall shares back, but only on the condition that the treasury of the building is less than 30% full. This is possible only in the case of robbery or long-term non-stop development.

There are a lot of use cases for using shares, for example, the implementation of the palace economy models for guilds, but the most interesting case that we will consider in the context of this article is so-called Portfolio Diplomacy.

Portfolio Diplomacy

Portfolio Diplomacy is a model used by political sides that cannot trust each other to incentivize collaboration by exchanging the shares of their enterprises. Since shares are tokens, in a sense, the parties “put each other” in their portfolio, hence the name. The players literally “own” each other.

In more scientific words, it is a way to create a rational interest of the parties in mutual support and removing externalities, through the exchange of property rights, the clarity of which is provided by the mechanism of shares. According to the Coase theorem.

There are two types of Portfolio Diplomacy: asymmetric and symmetrical.

The asymmetric model is typical vassalage when only one of the parties shares a share of income. Such a model occurs when there is a large power imbalance between the parties. In this case, the weak will have to pay the strong in exchange for security guarantees, thus one becomes the subject of the other. Pure feudalism:

The blue player gives a portion of his income to the red player. The red player is interested in defending the blue one because from now on he is a share of income for the red.

The symmetrical model is the alliance model. The parties exchange shares of equal value, while their personal income does not change at the time of the exchange, but from that moment on they are interested in mutual security and mutual growth since their “fates” are tied. Such a model takes place in the case of equal sides in strength:

Both players exchange resource income crisscross. They are interested in mutual protection and growth.

25% is just the author’s assumption. The higher the percentage, the stronger the rational connection between the parties. However, it is not always politically beneficial to create super strong ties.

It is also worth noting that, thanks to the mechanism for recalling shares in the event of an empty treasury, the parties have an additional interest in each other’s security, while leaving the opportunity to break the relationship unilaterally if these incentives are ineffective:

Being plundered, the “taxpayer” declares himself “bankrupt” and recalls his shares.

Conclusion

Despite the fact that Portfolio Diplomacy is based on proven theoretical scientific works and the model of feudal relations, it is considered the most natural model of political relations. A lot of purely gaming conventions enter the system, ranging from complex game design decisions, such as the Threat of Wipe, and the irrationality of the players.

It is worth noting that the irrationality of the players who often pursue the process rather than the result is a potential razor for any interesting but complex game theoretic solutions. However, we believe that such irrationality will be overcome by the competitive blockchain environment, where due to the liquidity of game assets, the game becomes serious and the players become rational and obey the game theory.

In view of these factors, the model is still considered experimental and may require further refinement at the level of mechanics.

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