Definition ∞ Node incentives are rewards provided to participants who operate and maintain a blockchain network’s infrastructure. These incentives, typically in the form of cryptocurrency, compensate nodes for their computational power, storage, and bandwidth contributions. They are designed to encourage active participation, secure the network, and ensure the continuous validation and propagation of transactions. Proper incentive alignment is critical for the long-term health and decentralization of any distributed ledger system.
Context ∞ The structure of node incentives is a fundamental aspect of protocol design guidelines, directly influencing a blockchain’s security and economic sustainability. Debates often concern the optimal balance between rewarding participants and managing token inflation or supply. Changes to these incentive structures, such as those seen with Ethereum’s transition to Proof of Stake, can significantly impact network dynamics and participant behavior. Maintaining a robust and diverse set of network participants relies heavily on well-calibrated incentive mechanisms.
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