Blockchain Infra Provider Lava Network Unveils “Industry First” Incentive Structure

Infrastructure protocol Lava Network has distributed more than $60,000 in ATOM to its core contributors. Although the amount isn’t noteworthy – it is only a fraction of a new $1 million pool allocated for network participants – the revenue distribution mechanism is novel.

Payouts, which will go to Lava network validators, data providers, and restakers, are generated from the blockchains that leverage the Lava Network for their infrastructure needs. Although the protocol currently only supports Cosmos on mainnet, projects like Starknet, Evmos, and Filecoin are being tested and have earmarked tokens for Lava contributors.

Amir Aaronson, head of the Lava Foundation, told The Defiant that this is “an industry first.” He said, “This is a groundbreaking model in blockchain infrastructure, where contributors are paid directly in the native token of the blockchain they support, not a single governance or utility token – and in lieu of inflation as seen on other protocols.”

Aaronson added that “ the real innovation is enabling contributors to earn revenue in the native tokens of the blockchains they help power.”

The team will distribute revenue on the 17th of every month.

LAVA, the network’s native token, trades for $0.08 with a $84 million market capitalization.

Validators, Data Providers, and Restakers

Revenue on Lava Network will be distributed among three sets of contributors: validators, data providers, and restakers.

It depends on factors such as the type of contribution (running a node versus restaking), provider performance, stake size, commission rates, and the number of active providers in each incentive pool. Lava validators will also receive a portion of the rewards.

For restaking, a practice that has become one of the most novel inventions in crypto and now has $14 billion in total value locked (TVL), distribution is influenced by the provider’s behavior and the pools they participate in. A rewards calculator allows participants to estimate rewards, though the team noted that as Lava launches more pools, the APR may rise along with the potential tokens to be distributed.

Novel Token Reward Structure

Lava Network’s reward structure, which involves the native tokens of the blockchains it supports, hasn’t been tried before.

Usually, contributors will receive a portion of pre-allocated tokens when an airdrop takes place. In proof-of-stake (PoS) systems, validators are incentivized through staking rewards, where they lock up tokens (to maintain the protocol’s security) for a determinate amount of time and are later rewarded for doing so.

Another mechanism is through transaction fees or revenue-sharing models.

Uniswap, Ethereum’s largest decentralized exchange (DEX), offers a revenue-sharing model. Liquidity providers (LPs) supply token pairs to pools, receiving trading fees in return. The DEX collects roughly 0.3% of each trade, which is then distributed to LPs in UNI tokens proportional to their contributions to the pool.

In contrast, blockchains and rollups create incentive pools on Lava consisting of their native tokens. These pools attract contributors to Lava, who can serve as validators, secure the network by staking LAVA, or provide data by running RPC nodes. RPC providers support essential on-chain actions such as transactions, minting, staking, and deploying smart contracts.

The new mechanism creates a positive feedback loop for existing blockchains to get more support from infrastructure providers and also helps newer chains, which often struggle to secure the reliable infrastructure they need to scale.