Chainlink’s Staking v0.1 as a bigger picture of Chainlink Economics 2.0: What you need to know about it
What is Chainlink Staking v0.1, and what are the initial rewards and features? Read more to find out.
Chainlink, one of the largest decentralized oracle networks (DONs) in the blockchain space, has recently announced the implementation of staking for their native token, LINK, as one of the core changes in Chainlink’s Economics, dubbed as Chainlink Economics 2.0 — and it has been a long time coming with holders (aka LINK marines) eager to participate when it releases.
But first, what is Chainlink Economics 2.0, and why is it needed?
In Chainlink’s initial tokenomics, the focus was placed on getting adoption for oracles and also making sure that these oracles were as accurate as possible. Hence, the LINK token was utilized to compensate the network’s data suppliers for their work — and paid for by subscribers of these data.
For a data supplier to be able to supply data, they first need to use the LINK token as collateral and lock it in a smart contract to pay subscribers if the data given is inaccurate or null. Thus, the likelihood that subscribers will choose a data provider increases based on the number of tokens locked in this collateral pool, as they are viewed as a provider who is generally more secure.
However, as of the recent quarter in 2022, Chainlink has grown to more than 1,000 oracle networks, and the current market for trust minimized applications in cryptocurrencies is small when compared to other industries, such as crypto vs. gold (1T vs. 10.9T) or crypto vs. stocks (1T vs. 89.5T).
Hence, the purpose of Chainlink’s new economics is this: to grow the Chainlink network exponentially while also keeping it secure through various growth initiatives such as:
- Using the LINK token to support oracle rewards and staking rewards for stakers.
- Furthering Chainlink’s technical standards, specifications, and best practices for developers and node operators.
- Operate a grant program for funding hackathons and improvements of oracles and Chainlink’s dependencies.
And much more — also, the LINK tokens will fund many of these initiatives, with only 5% of the circulating supply (50 million LINK) being used for this, but we will not go in-depth into those. Today, however, we will look at what will be relevant for you, the Chainlink Staking v0.1, and how to get involved.
The beta of Chainlink’s staking will go live on the Ethereum mainnet on the 6th of December, 2022, at noon ET, and addresses who qualify for early access can stake up to 7,000 LINK tokens. 2 days later, on the 8th of December 2022 at noon ET, this staking pool will then be opened up to the public with an initial limit of 7,000 LINK tokens as well, with a 25M pool cap (to be scaled up to 75M over time).
If you are unsure whether you qualify for early access, you can check here.
Besides just staking for rewards at a baseline reward rate of 4.75% (ie. 4.75% of annual staking rewards), there are some other neat features that you should know about.
One feature that will increase the security of the ecosystem is through decentralized alerting capabilities — creating a slashing mechanism that allows stakers to raise a flag if a particular oracle has not met the certain performance standards that is predefined.
For a start, stakers can use this alerting system for the ETH/USD feed during the v0.1 if an oracle has not submitted a report for over three hours since their previous on-chain update, and as a staker, you can earn 20% of your staking amount with a cap of 7,000 LINK, if the alert is valid.
However, because node operators are the most experienced with price feeds and have already operating grade infrastructure, they get a 20-minute headstart (ie. Priority period) to raise an alert, if it has been 3 hours since an oracle last submitted an on-chain report.
Only after this period (ie. 3 hours + 20 mins), then can the public raise an alert.
In the first version of staking, community stakers will have their stakes auto-delegated across node operators equally, and works similarly to delegated proof-of-stake (dPoS) — after which, users can then re-delegate their stakes to other operators who are more economically aligned to them.
Because node operators earn a commission for performing services on behalf of community stakers for rewards such as operating oracle computations in LINK, community stakers can expect a baseline reward for staking of 4.75%, and in future releases, this might increase as the node’s reputation increases.
That is it for Chainlink’s Staking v0.1! As we all know, LINK holders have been waiting for a very long time for staking to be implemented, and this staking feature alongside other neat features like alerting rewards and auto delegation makes it much more attractive to stake so that we can keep Chainlink economically secure.
Let us know in our Discord what you think about this, and if you are excited about this as well! If you haven’t joined our Discord already, here is the link to join!
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.