Incentive System

A blockchain network’s built-in reward and penalty structure that encourages positive behavior and discourages malicious actions. In Proof-of-Work networks, this system uses computational energy costs and token rewards to ensure network security, as bad actors would incur significant energy costs without returns when attempting to introduce fraudulent blocks, while honest miners receive newly minted tokens for successful block validation. In Proof-of-Stake networks, the system uses staked tokens as both incentive for honest validation and collateral that can be reduced (“slashed”) for malicious behavior.