Chainlink Staking: Exploring the Long-Term Goals, Roadmap, and Initial Implementation
Chainlink is foundational infrastructure for the smart contract economy, supporting nearly a thousand oracle networks that collectively secure tens of billions of dollars across hundreds of projects. With Chainlink continually being integrated on more blockchains and supporting new categories of oracle services, it’s important to further scale the security of Chainlink in order to match the increasing amount of value within Chainlink-powered applications. This new era of sustainable growth and security—Chainlink Economics 2.0—begins with staking.
Staking is a key mechanism that aims to bring a new layer of crypto economic security to Chainlink, where crypto rewards and penalties are applied to help further incentivize the network’s proper operation. The overarching mission of Chainlink staking is to give ecosystem participants, including node operators and community members, the ability to increase the security guarantees and user assurances of oracle services by backing them with staked LINK tokens. The staking of LINK in turn enhances the ability for nodes to receive jobs and earn corresponding fees within the Chainlink Network.
The following blog post highlights the long-term goals underpinning Chainlink staking, the initial implementation plan for the second half of 2022, and a roadmap for its anticipated expansion over time.
The Long-Term Goals of Chainlink Staking
Chainlink staking is being built around four long-term goals. These goals serve as the guiding principles behind its development and will be the pillars upon which to define its success over time as the staking system matures.
1. Increase the Crypto economic Security and User Assurances of Chainlink Services
The primary goal of Chainlink staking is to increase both the crypto economic security and user assurances of Chainlink oracle services. This is achieved by enabling LINK tokens to be locked up as a form of service-level guarantee around network performance. If an oracle network fails to meet the obligations outlined in its on-chain service-level agreement (SLA), then a portion of staked LINK can be slashed and redistributed. Loss protection is also being explored, in which a certain amount of slashed LINK could be used to protect sponsors of Chainlink oracle services.
Staking introduces another powerful incentive and penalty mechanism for Chainlink nodes to consistently generate accurate oracle reports and deliver them to specific destinations in a timely manner. Staking serves as a part of a larger defense-in-depth approach to Chainlink security that already includes a multitude of other key safeguards including decentralization, cryptography, implicit incentives, future fee opportunity, and modular reconfigurability.
Given the deep integration of Chainlink within leading smart contract applications, the increase in oracle security and user assurances brought about by staking will be key in helping the multi-chain smart contract economy scale to eventually secure multi-trillion-dollar markets across major global industries.
2. Enable Community Participation in the Chainlink Network
Another key goal of staking is empowering a greater number of community members to directly participate in the Chainlink Network by enabling them to stake their LINK tokens to support the performance of oracle networks. Importantly, stakers can raise alerts if they believe an oracle service has not met predefined performance standards, with the opportunity to earn a reward for timely and valid alerts. Community monitoring and alerting plays a key role in further decentralizing the Chainlink Network and enabling a robust reputation system and slashing mechanism.
Ecosystem participants including community members and node operators can stake their LINK tokens in distinct allotments within a staking pool. Furthermore, node operators can create or use a delegation system, serving as an additional avenue for community members to stake their LINK.
3. Generate Sustainable Rewards From Real Long-Term Use
The third goal of staking is the creation and distribution of rewards to stakers. We expect that there will be various sources of rewards provided to stakers over time. As network adoption increases and more protocol fees are generated, a greater portion of staking rewards can be sourced from non-emissions-based sources.
- Native token emissions from the LINK token supply will be used to create an initial base level of rewards for stakers, with the goal of tapering off over time as other sources of rewards grow and begin to be directed to stakers.
- User service fees from sponsors of Chainlink oracle services, with a portion directed to the stakers. The more users pay for Chainlink oracle services, the greater the amount of fees that can become available to reward stakers who help secure those services.
Another anticipated source of benefits for stakers is the Partner Growth Program (PGP)—an initiative where Chainlinked protocols and DAOs provide various incentives to accelerate their growth and facilitate cross-ecosystem participation. It’s expected that a number of projects benefiting from Chainlink’s security will take part in the Partner Growth Program.
Furthermore, we are exploring the possibility of loss protection, which would drive additional user service fees from sponsors of Chainlink oracle services seeking protection against supported oracle networks not abiding by their SLAs. The more value secured, the greater the potential demand for protection and the greater the amount of rewards potentially available to stakers.
4. Empower Node Operators to Access Higher-Value Jobs by Staking
The last goal of Chainlink staking is to establish a robust reputation framework for how nodes are selected to participate in Decentralized Oracle Networks (DONs). As Chainlink nodes approach parity in terms of their reliability and infrastructure security—reflected in metrics such as response time and accuracy—the next logical distinction for defining the node set within a DON is by the amount of LINK each node is willing to stake to back their oracle services. Over time, this will make staking a key mechanism for node operators wanting to gain access to higher-value jobs and more fee opportunities in the Chainlink Network.
Importantly, a reputation-and-stake-based node selection mechanism can bring even more cryptoeconomic security to end users of Chainlink oracle services. This evolution towards a holistic reputation system for node operators can also open up more insight for users regarding the performance and incentives of node operators.
Conclusion
The introduction of staking is a pivotal moment that marks the evolution to Chainlink Economics 2.0—a new era in Chainlink’s long-term security and network economics. While the initial implementation of Chainlink staking is designed to minimize risk for participants and create a strong foundation, the long-term goals revolve around scaling Chainlink into a global standard with a growing and sustainable user base, which in turn offers the greater opportunity for rewards for stakers who increase the network’s cryptoeconomic security and user assurances.
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