Chainlink: The Glue of Decentralization...... Centralization?

Chainlink: The Glue of Decentralization...... Centralization?

By Cje95 | Chronic Illness and Crypto | 8 Dec 2021

Decentralization might have been one of the biggest words this year. It was something that even my 67-year-old father asked me about as he wanted to understand the hype and conversation around decentralization. While I love decentralization as much as the next person there is an inherent issue with it and that is well.... you have to have a way to link all of these different data streams. That is what Chainlink does as it is a data oracle.


Chainlink collects data from multiple different nodes or data locations and passes along the accurate findings to whom or whatever requested the data. This has been huge with DeFi and connecting and making sure people get the best rates possible. Inaccurate information could lead to swaps on decentralized exchanges or DEXs that are very very wrong and burn the trader due to the bad information. This linkage is key for a healthy ecosystem.


Chainlink has been extremely successful in getting projects to choose its services and integrate them into their protocol. However, their success is almost becoming a detriment now as Chainlink by far is the leading decentralized oracle. By beating out other names like Band Protocol among others the importance of the Chainlink native token LINK has become more important and thus more valuable. 


The underlying way that Chainlink function is that people stake or delegate their LINK tokens to a certain oracle. As long as this Oracle is correctly relaying information and not doing anything that would try to undermine the system they are further rewarded. If you misbehave you lose your LINK that is staked as punishment. This leads to the first nodes who have played by the rules to rapidly gain more and more LINK and thus shift power to a more centralized nature. 


Whales have been a known issue for Chainlink in the past as their wallets have had a huge percentage of the current total supply. At last check, roughly 86% of circulating LINK tokens were in the wallets of the top 1% of LINK holding addresses. While this is definitely something to monitor going forward as it currently stands and as Chainlink has had more and more people sign up for their service it is not an issue. Could in the future though someone act out of malice though this poses a huge issue. It also highlights an issue a ton of people wouldn't think of and that would be your product (data oracles) being so good and so well known that it starts to become a monopoly of sorts for the data price streams.


I would expect in the future and in some way some form of a governance token will be issued as LINK is not a governance token rather it is just the means to pay for the oracle data. If this is done the way that the distribution takes place will be a key thing to follow because typically you would have it done in a way that benefits early adaptors and hodlers but that number at the moment would be very centralized as well. I look forward to seeing how this is handled as it could become a future prime example of what not to do or what to do in this very situation. 


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Graduated from Texas A&M in May of 2020 had dabbled in crypto since 2017 but dove in at the end of 2019. December of 2020 packed up and moved to D.C.! Huge sports fan, space nerd, and international newsreader! Follow me on Twitter @Cje95_

Chronic Illness and Crypto
Chronic Illness and Crypto

Cryptocurrency and Blockchain are going to be a huge part of the future and no matter who tries it isn't going to be stopped! Here I try to give my best insight and thoughts into the latest crypto news, features, developments. Further, I look to discover any link to news from the United States ranging from social-political issues to stock market and economic data.

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