What are incentives?
Incentives encompass rewards or consequences that sway the behaviors and choices of individuals engaged in a blockchain network. These participants may include transaction validators, block creators, token senders or receivers, app developers, or any other entity involved in network interactions. These incentives can take the form of financial rewards like fees, subsidies, or tokens, as well as non-financial ones such as reputation, acknowledgment, or impact. Crafting these incentives hinges on factors like the network's objectives, the consensus algorithm employed, the degree of decentralization, and the attributes of the participants involved.
Why are incentives important in blockchain networks?
Incentives play a pivotal role in blockchain networks by ensuring that the actions of participants are in harmony with the network's objectives. For instance, on the HIVE blockchain, if the aim is to uphold security, decentralization and deter attacks, incentives should dissuade nodes from engaging in collusion, censorship, or transaction falsification. Similarly, if the goal is to enhance efficiency and scalability, incentives should motivate nodes to swiftly process transactions, prevent congestion, and utilize resources efficiently. Furthermore, in pursuit of fairness and egalitarianism, incentives should strive to equitably distribute rewards and influence among participants.
What are the incentives on HIVE?
For block producers
Hive operates on a delegated proof of stake (DPoS) consensus mechanism, which means we, the community members, or token holders, delegate our voting power to a selected group of nodes that validate transactions and earn rewards. These witnesses are incentivized to run their nodes consistently and also maintain their servers so that they’re constantly processing blocks, in return for processing blocks they will get $HIVE tokens.
For content creators
The first incentive for creators is economic. Community members are said to be rewarded with a percentage of the rewards pool for our creation of high-quality, educational, insightful and engaging content. What constitutes “good” content is, of course, largely subjective.
I’m of the opinion that a lot of content I consider to be “good content”, flies under the radar of individual curators and curation guilds. Since there is currently no incentive to give your out-of-pocket rewards to content that was published outside of the 7 day reward window, older content rarely gets rewards.
The inleo team has mentioned that content published from the inleo front end is eligible for evergreen rewards based on the number of page views it gets, I still think this is an area the Hive blockchain could improve on.
It could also be argued that in a blogging ecosystem where everybody is a creator and nobody is a consumer, the incentive is to write as many blog posts as possible with catchy headlines and good looking thumbnails. Not too many though, as to not alert the Hive spam police. This is up for debate.
Aside from the rewards pool, there are other incentives on HIVE such as reputation and the fact that text can be stored in an immutable, decentralized way, meaning you own your data and your community potentially forever.
For users of the Hive and $HBD tokens
As users or “spenders” of any one of the native tokens of the Hive blockchain, the incentive is to have non-KYC, decentralized and fee-less form of sending value to other users. In the case of $HBD, you can hold a crypto asset without exposure to price volatility, which is useful for folks that are risk off mode.
Not only can you send it from your desktop and sign the transaction with Keychain, you can also use keychain on mobile and send HBD/HIVE from there OR use v4Vapp to pay Bitcoin Lightning invoices. This last use case has huge potential in my opinion, because it gives anybody that is earning $HIVE or $HBD in one way or another, options to use it in every day transactions such as paying for lunch or even buying items at a convenience store.
I've made a few videos using Hive Keychain and v4vapp to pay for food and drinks.
Please check out some of my videos here:
@alex-rourke/dlqfdnft
@alex-rourke/dbzxyzkg
@alex-rourke/wbqphjpp
@alex-rourke/nsxqczdc
@alex-rourke/xhnhspef
For developers
Now, because I’m not a developer myself, I don’t have a full understanding of the reasons for which developers might chose to build on HIVE as opposed to other blockchains. I will gladly update this part when I get more information. But from what I’ve heard from the likes of Blocktrades, the Hive Application Framework (HAF) allows developers to build using common programming like SQL Database programming which can be done with common languages such as Python as opposed to specialized languages like Solidity which is largely used to write smart contracts on blockchain networks like Ethereum and could be considered a difficult programming language to learn depending on the programmers prior experience.
Source: The Crypto Maniacs podcast ep 92 with Blocktrades.
These are some of the incentives I've identified on the Hive blockchain as well as my thoughts on the current rewards distribution system on Hive. As the title suggests, it's far from perfect, but it's achieving one of its goals which is distributing the token far and wide. Can it be improved? most definitely. Is it providing value as it is? absolutely.
What are some of the ways you think the rewards distribution system could be improved?
