Definition ∞ Value internalization is the process by which the perceived worth or utility of a digital asset or network is captured and retained within its own ecosystem. This occurs when the benefits derived from using the asset or participating in the network primarily accrue to its native participants and stakeholders. It contrasts with situations where value flows predominantly outwards to external systems or intermediaries.
Context ∞ Discussions surrounding value internalization often focus on how decentralized protocols can create self-sustaining economic loops that reward users and developers directly. This is particularly relevant in the context of DeFi, where mechanisms like yield farming and staking aim to incentivize capital retention within specific protocols. Key developments to watch include the design of novel incentive structures and the growth of integrated ecosystems that minimize reliance on external financial services.
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