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Now That Chainlink Released CCIP, Time To Understand Super-Linear Staking!

By Michael @ CryptoEQ | CryptoEQ | 6 Aug 2023


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Chainlink 2.0 and Super-Linear Staking

The aim behind super-linear staking is the creation of a cryptoeconomic security framework under which an attacker will need significantly more resources than that which all Chainlink nodes have staked combined. One of the specific reasons for this aim is to resist attacks on the network from well-funded actors. Particularly, Chainlink aims to prevent its node operators from being bribed. In many staking networks, if a node has X amount staked, then a bribe of X+d, where d is some small amount, should be sufficient to incentivize an economically rational agent to take the bribe. Bribing all nodes (where there are nodes) would cost n * X. Super-linear staking aims to make the capital requirements for a successful attacker to be considerably more onerous, where the sufficient bribe budget must be greater than:

chainlink economic security graph Source

Superlinear staking is achieved via a tiered, or second layer, approach to watchdog priority. There's a default tier (the oracle network composed of n nodes) and a backstop tier composed of a user-selected set of nodes that have particularly good reputation scores or many more nodes. If an attacker wants to slip a nefarious entry past validators, then they might bribe a watchdog. Chainlink’s super-linear staking requires all node operators to be bribed since any of them can alert the network to a suspected malicious event. Hence, the quadratic scaling with n, where n is the number of nodes in the network. 

This model ensures nodes are incentivized to report correct values as agreed upon by other nodes. Each new user that joins the Chainlink DON, therefore, lowers the cost for other users on the network and also lowers the average cost per unit of economic security. Due to super-linear staking, more nodes existing in a network contributes to a more economically-secure network. Chainlink will now be secured by both implicit and explicit incentives, and super-linear staking signifies Chainlink’s approach to change economics to capitalize on network effects with incentives to run more nodes, as well as on economies of scale where security becomes cheaper as more nodes join. 

Chainlink’s cryptoeconomics aims to create a feedback loop in which increased user fees incentivize node operation, which, in turn, leads to more data being put on chain.

link tech Source

In addition to protecting oracles and their uses, this economic incentive-based data-security model makes it more profitable for data providers to lock up collateral. In addition to price appreciation in virtue of increased buy pressure, tokens are being locked up as deposits, thereby effectively taken out of circulation. Combine this with LINK’s non-inflationary tokenomic model (it's fashionable for many DeFi platforms, particularly those offering very high APYs to users out of inflationary token emissions), and there's a strong case to be made for LINK’s potential to accrue value. A buyback-and-burn or non-deflationary stake-and-earn model that diverts profits to token holders.

LINK security flywheel Source

​The long-term goals of Chainlink staking include increasing the crypto-economic security for Chainlink services, which is enabled by LINK tokens being able to be locked up as a service-level guarantee for network performance. An oracle’s stake can be slashed for violating the SLA terms. Another goal is higher community participation in the network and the generation of sustainable rewards for participation with the ability to stake LINK alongside node operators. Stakers will also have the chance to raise alerts against oracles and get rewarded if an oracle’s performance standards aren’t met. Related to user alerting, Chainlink is also introducing a reputation model for nodes to bring further security. This is another goal of Chainlink staking—to establish a reputation framework based on which nodes can be selected to participate in network services. Nodes will be judged based on response time and data accuracy as well as considering the amount of LINK each node is willing to stake for their oracle services.

Native LINK token emissions will set an initial base level of rewards, and as network usage increases, more rewards can come from other sources, such as user fees and loss protection. 

link roadmap ​Source

Chainlink v0.1 is projected for release later in 2022 and will first focus on a reputation framework and staker alerting system. A later v1 release will introduce additional functionality such as stake slashing and incorporating user fees as rewards. A later v2 release will introduce loss protection. The introduction of super-linear staking marks a new era for Chainlink’s network economics, with first releases designed to create a risk-minimized foundation and later releases designed to scale Chainlink into a global standard with a growing user base.

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


CryptoEQ
CryptoEQ

Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.

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