Network Economics

Definition ∞ Network Economics refers to the study of economic principles and incentives that govern the behavior of participants within a blockchain network. This includes analyzing transaction fees, block rewards, staking mechanisms, and token distribution models. It focuses on how these economic structures influence network security, decentralization, and participant engagement. The design of network economics is critical for the long-term sustainability and functionality of decentralized systems.
Context ∞ News often discusses network economics when evaluating the viability and security of new blockchain protocols or major upgrades to existing ones. Debates frequently center on balancing miner or validator incentives with transaction costs and token inflation. Understanding network economics is essential for assessing the health and resilience of a digital asset ecosystem. It provides a framework for analyzing the complex interplay of technology and economic incentives in decentralized networks.