On-Ledger Incentives

Definition ∞ On-Ledger Incentives are mechanisms built directly into a blockchain protocol to encourage specific behaviors from network participants, such as validating transactions, providing liquidity, or developing applications. These rewards, often denominated in the network’s native digital asset, are automatically distributed by smart contracts or the protocol itself. They are designed to align individual actions with the overall health and security of the decentralized system.
Context ∞ Crypto news frequently discusses how on-ledger incentives influence network security, decentralization, and the economic models of various blockchain projects. Reports analyze their effectiveness in motivating participation and preventing malicious conduct. Understanding these incentive structures is key to comprehending the economic viability and long-term sustainability of different digital asset protocols.