Network Incentive Structure

Definition ∞ A network incentive structure describes the system of rewards and penalties designed to motivate participants to act in ways that benefit a decentralized network. These mechanisms are crucial for maintaining security, promoting participation, and ensuring the network’s operational integrity. Tokens often play a central role in these structures. It aligns participant interests with network goals.
Context ∞ For blockchain protocols, a well-designed network incentive structure is critical for decentralization and censorship resistance. News articles frequently discuss how changes to these structures, such as halving events or new staking mechanisms, affect miner or validator behavior. The effectiveness of these incentives directly impacts the network’s long-term viability. This design element is a key factor in project evaluation.