13 June 2022: Leading oracle protocol Chainlink (LINK) recently unveiled its Economics 2.0 roadmap that outlines the specifics of staking to enhance security & community involvement in the protocol. Chainlink secures tens of billions in value by providing various categories of oracle services, verifying data on-chain.
Chainlink provides the "link" between data providers off-chain and entities on-chain. Some of Chainlink's notable partners include the following:
- Associated Press
- Google Cloud
- Amazon Web Services
- CoinGecko
- Binance
- AccuWeather
The introduction of staking kick-starts a new economic chapter for LINK - helping to counter criticisms that the actual LINK token has no true usability.
Top Things to Know:
- Chainlink staking will add new security layer to the network
- Annual rewards for v0.1 are projected to be ~5%
- Staking provides LINK with real token utility & incentivizes growth
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Overview of LINK Staking
The implementation of LINK token staking aims to improve the protocol in a number of different ways. Chainlink outlined four specific goals of Chainlink staking, listed below:
- Increase cryptoeconomic security
- Enable greater community participation
- Create sustainable rewards
- Empower node operators to access higher-value jobs
The obvious primary goal and working utility to justify staking is on-chain security. By locking up staked LINK tokens, it incentives oracles to remain truthful in exchange for added rewards. This will essentially allow oracles to showcase their reliability through locking up LINK. If an oracle fails to provide optimal performance, their locked up LINK can be slashed and face penalties. This also gives the community the opportunity to delegate LINK tokens to support high-performing nodes.
This ties in directly with the second objective of Chainlink staking - community participation. Members of the community holding LINK can essentially place their vote of confidence in different oracles whom they believe is worthy of increased support. This also allows oracles / node operators to chase after higher-value jobs, creating even higher rates of return by completing higher-paying duties on-chain. The more users pay for Chainlink oracle services, the higher the rate of return via rewards.
Specifics of LINK-Staking Reward Generation
The major pull for LINK investors and supporters is the ability to earn rewards in exchange for participating on the network and locking of LINK tokens. The goal here is to solve the problem of diminishing returns on the Chainlink oracle network. showcased in a Chainlink-generating graphic below:
Chainlink staking will be rolled out in a cohesive, systematic roadmap with staking v0.1 utilizing native token emissions to facilitate the release of rewards to LINK stakers. The estimated rate of return from staking is an annual rate of ~5%, per Chainlink's projections. Chainlink also plans to launch a Partnership Growth Program (PGP) in relation to staking. This will allow partners of the Chainlink network to participate in Chainlink staking to accelerate partner growth and value creation.
In the future, Chainlink plans to have a staking-based reward system in place for concepts like loss protection in addition to user fees, emissions, and PGP incentives.
Closing Analysis
The introduction of LINK staking to the Chainlink network solves the token's longest standing investment issue - diminishing returns and the lack of real world utility for the token. Staking will now allow both the Chainlink community and ecosystem partners to earn rewards on their LINK tokens. This will help to encourage a greater rate of growth & adoption for both the Chainlink network and the LINK token itself.
Historically, the LINK token has significantly lagged other cryptocurrency tokens in terms of value. With the ability to earn passive income from LINK combined with the ability to earn higher yields from healthy data & increased participation, the market should place greater emphasis on correcting the low value of LINK over time.
To put Chainlink in perspective, as of Q2 2022 Chainlink secures an astounding $75 billion in value versus the LINK token's market cap valuation of ~$2.8 billion.
Coming RekTimes Articles:
- Proposal Report Update (Ampleforth) - JUNE 15 RELEASE
- RekTimes Weekly Markets 1.37 - JUNE 17 RELEASE
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- Q2 Summary Report - JULY 1 RELEASE
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- Investigation on MOBI - Q3 2022
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