If you want more cryptocurrency analysis, including full-length research reports, trading signals, and social media sentiment analysis, use the code "Publish0x" when subscribing to CryptoEQ.io to make your first month of CryptoEQ just $10! Or simply click the button above!
ICO
In September 2017, Chainlink held its Initial Coin Offering (ICO) with a $32 million hard cap. The ICO originally offered LINK at $0.09 per coin with a 20% bonus, depending on how early the purchaser invested. The following public sale sold LINK at $0.11 per token. In all, both sales distributed 350 million LINK to the public. 1 billion LINK in total were initially issued. The token distribution was as follows:
- 35% allocated to the token sales investors
- 35% reserved for node operators and ecosystem rewards to incentivize network participants
- 30% allocated to SmartContract.com, Chainlink’s parent company
Source
In May 2019, Chainlink went live on the Ethereum blockchain and with it came its own ERC-677 utility token, LINK. An ERC-677 token is a token whose functionality is based on the ERC-20 token standard but also has ‘transfer and call’ functionality.
Super-linear Staking
Super-linear Staking aims to ensure that the capital requirements for a successful network attacker would have to be quadratically larger than the combined deposits of all nodes.
In April 2021, the Chainlink 2.0 whitepaper was released, introducing a new architecture for Decentralized Oracle Networks. Decentralized Oracle Networks function similarly to layer 2 solutions, significantly increasing the speed of data delivery and boosting security. Furthermore, Chainlink introduced its super-linear staking model, a crypto-economic security mechanism that incentivizes nodes to deliver accurate oracle reports and significantly increases the cost of attack for malicious actors.
In April 2021, the Chainlink Foundation released the Chainlink 2.0 White Paper outlining the future of Chainlink. Authored by a world-class roster of academic researchers specializing in fields such as security, cryptography, distributed systems, game theory, mathematics, and computer science, Chainlink 2.0 enhances the cross-chain interoperating Decentralized Oracle Networks (DONs). Notably, Chainlink 2.0 introduces super-linear staking for the $LINK token, which requires a malicious attacker to have significantly greater resources than the combined security deposit of all DON nodes in order to succeed. This creates greater security guarantees for high-value smart contract applications in a cost-efficient manner. The introduction of staking implements a new lever impacting the liquid supply of $LINK.
Token Distribution
As of Q3 2022, 47% of supply is circulating across 550k+ total wallets. 35% is controlled by the node operator’s incentive fund, 25% is held by the team for development, and ~16% is held in exchanges. No wallet outside of the team, nodes, or exchanges holds over 1% of funds.
The proportion of LINK “whale” addresses (owning more than 1% of supply) has been slowly decreasing over time. In 2018, whales owned ~70% of the supply and as of 2022 now own just ~55%.
Incentives and Fees
LINK works to align incentives, promote cooperation, and reward accurate data providers for the good of the network. LINK is used to compensate data providers and serves as collateral within the system where node operators stake LINK deposits when providing data (giving them “skin in the game”). Nodes get rewarded for retrieving and providing data, and the reward amounts are determined by the contract creator. Currently, when Chainlink nodes make on-chain transactions, they incur gas costs that are covered by LINK token rewards paid to nodes. These nodes must convert some LINK rewards to a chain’s native coin to pay for transactions, but Chainlink 2.0 aims to reduce these on-chain gas costs. Additionally, the rise of increasingly diverse and cost-efficient blockchains has led to a reduction in oracle network costs. As this trend continues, economics for Chainlink oracle networks will continue to improve, and nodes will be able to hold onto more of their LINK rewards, which will be further locked up via staking.
When users create a smart contract, they set a price (in LINK) on how much they’re willing to pay for this particular data retrieval. Nodes then bid on the request in LINK. As the node returns acceptable data to the smart contract, it will be paid for both partial and/or whole completion.
As the demand and value locked within smart contracts grow, oracle nodes will need to deposit greater and greater amounts of LINK collateral to ensure the security of the network. Because deposits are required to participate in the network, this creates demand for the LINK token and, ultimately, a supply sink for a fixed-cap token.
