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Bitcoin

What is a Schelling Point?

Sometimes when listening to Bitcoin related podcasts, you will hear this term “Schelling point”.

I’ve heard this phrase before, but it seems to be one of those concepts that you understand implicitly, without being able to explain explicitly.

A Schelling point refers to a focal point, that people will use to coordinate, without communicating explicitly.

It is a game theory concept, explained by this quote from Wikipedia, very well.

In a simple example, two people unable to communicate with each other are each shown a panel of four squares and asked to select one; if and only if they both select the same one, they will each receive a prize. Three of the squares are blue and one is red. Assuming they each know nothing about the other player, but that they each do want to win the prize, then they will, reasonably, both choose the red square.

Wikipedia

I think the clearest explanation is from Naval Ravikant. He says, “(Shelling Points allow us to) … Use social norms to cooperate when you can’t communicate”.

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