Why Do Crypto Protocols Need Incentives?

Crypto protocols without incentives are little more than "decentralized databases" that offer little utility, and the article argues that incentive mechanisms are needed for them to grow. It says such protocols rely on applications for usage, but data is portable, so successful apps can see their data and network effects taken by competitors, which deters developers. The article notes that protocols often build their own applications to bootstrap activity, which can discourage third-party developers. It cites Uniswap's liquidity provider rewards, Bitcoin's mining rewards, and prediction markets such as Augur and Polymarket as examples of well-designed incentives.