The “Economic Incentives” of Nostr
Got it. With this understanding, it’s easy to develop a field called “tokenomics,” where “economic incentives” are one of the most common topics of discussion in tokenomics and the entire crypto space. Almost every blockchain project lays out economic incentives very clearly in their whitepapers, and this is often what people care about the most.
But is this necessarily correct?
Actually, no. With a bit of thought, it’s easy to overturn the idea that “without economic incentives, nothing is possible.” I’ve found that not many people in the crypto space know much about the early history of Bitcoin. If they did, many issues that have been discussed for years would already have answers.
For those who haven’t read “The Writings of Satoshi Nakamoto” or “Digital Gold,” I highly recommend doing so. After reading, you’ll realize two things:
1. Although the Bitcoin protocol clearly outlines economic incentives for mining, early Bitcoin participants invested significant electricity, computing power, and storage space without receiving substantial economic returns. Bitcoin didn’t have a price at the start. You invested all these resources and got a string of “code” that couldn’t do anything. Why would you do that?
2. While Bitcoin’s economic incentives for mining are clear, there are no economic incentives for running full nodes. According to the logic of shitcoiners, no one would run full nodes, right? Wrong. In fact, Bitcoin has the most nodes of any blockchain project. With no economic incentives, why are there so many full nodes?
In both “early stage Bitcoin mining” and “full nodes,” people were motivated by love.
I used to be deeply influenced by “tokenomics” and couldn’t understand the motivations of these early participants when reading those two books. As I gradually understood libertarianism, I realized why — freedom itself is the incentive.
People sacrificed their storage space and electricity without any “economic” incentives. Shitcoiners (like my former self) would naturally question, “I don’t understand their motives” or “I’m in the crypto space to make money,” leading to the creation of a whole set of rules where “everything must have a token.” Should we then create a Bitcoin “Proof of Storage” token to solve the economic incentive problem for full nodes? [eating popcorn]
The best way to resolve this question is by referring to economic principles. “Tokenomics” overly emphasizes economic incentives but lacks real economic discussion. Economics not only discusses “what you get after you do something” but also “what you lose if you don’t do something.” In “tokenomics,” the latter is often missing. Instead of thinking about the economic incentives for running Nostr and relays, think about what you lose if you don’t.
What you lose is freedom.
Don’t always think “issuing a token can solve everything.”
The “Economics Incentives” of Nostr
To understand why someone would be motivated to run a Nostr relay purely out of passion, I must introduce a new concept: “economic incentives” to address questions that direct “financial incentives” cannot.
Yes, many people believe that Nostr and Nostr relays lack financial incentives, but this view is somewhat one-sided. If you disagree with my earlier arguments about freedom and insist on probing the economic incentives of this protocol, I can only tell you that, yes, there are incentives — just indirect and non-monetary ones. These incentives align with economic principles.
Therefore, we need to define the following:
1. Nostr and relays lack “financial incentives”: At the protocol level, there are no direct, monetary incentive policies.
2. Nostr and relays have “economic incentives”: The reason you choose a decentralized protocol like Nostr over a centralized server app developed by a big company, and run your own relay, is due to indirect, non-monetary, or sometimes monetary incentives.
・ “Financial incentives”: Direct, monetary incentive policies usually manifested at the protocol level in whitepapers and tokenomics — through issuing tokens.
・“Economic incentives”: Indirect, non-direct incentives generally seen at the societal level, which can be monetary — but not through token issuance.
The narrative of “issuing a token to solve problems” is very popular, claiming to “solve issues,” but in most cases, issuing tokens doesn’t solve anything and creates more problems.
From ICOs to NFTs, the financialization of everything through token issuance has not made the world better; it has often made things worse (I could write a whole separate article on this).
Returning to the initial topic, what exactly incentivizes people to use Nostr and run relays? Is it purely “powered by love”? Is it a perpetual motion machine?
Let’s start with “powered by love,” because this term is misleading. It presupposes the absence of “returns,” especially “financial returns.”
In the English-speaking world, “powered by love” is not a popular term. Instead, “Value for Value” (V4V) is more common:
The idea of value for value is simple: information is provided free of charge, directly, without any paywalls or middlemen. If the information was valuable to you, you are encouraged to give value back.
In the V4V narrative, it presupposes the existence of “returns,” including financial returns.
If you read about Nostr, you’ll find that Nostr is essentially a V4V solution:
1. Nostr is not a paid application — it’s “free.”
2. Nostr enables peer-to-peer information transmission — it’s “direct.”
3. Nostr does not use centralized servers from big companies — there are “no paywalls or middlemen.”
4. Nostr integrates Bitcoin’s Lightning Network — “encouraging you to give value back.”
In conclusion, Nostr is a better UGC solution. In the Web2 narrative:
1. Your account belongs to the company; you only have the right to use it, not own it.
2. UGC copyrights do not entirely belong to the creators.
3. Indirect economic incentives (coins, tips) cannot be directly monetized and do not use peer-to-peer payments.
I’ve written about this before: in the Web2 narrative, “self-media” is a misnomer. Essentially, you are working for big companies. Think about how much ad revenue your content generates for these companies and how much “economic return” you receive.
I know a Bilibili content creator with over a million followers who has received less than five figures in “economic returns” for all their videos. What exactly motivates them? This is clearly a worse UGC model than Nostr’s “economic incentives.” Do you see the irony here?
Now, let’s talk economics. There’s an important concept in economics called “opportunity cost”: the cost of forgoing the next best alternative when making a decision.
Tell me, what is the opportunity cost of not engaging with Nostr and instead working for a Web2 platform as a cog in a big corporation? This is the core of Nostr’s “economic incentives.”
If I get more direct “economic incentives” through a better UGC protocol compared to Web2 — but these incentives are more indirect than “tokenomics” — why wouldn’t I spend a little to run a relay?
Nostr is an open-source protocol, and most clients are also open source. If you encounter bugs, please submit them on GitHub!
And most importantly:
DYOR!
Don’t Trust, Verify!
Disclaimer: This article does not constitute investment advice. Users should consider whether any opinions, viewpoints, or conclusions expressed herein are applicable to their specific circumstances and ensure compliance with the relevant laws and regulations of their respective countries and regions.