It has been a great year for Chainlink in 2021, with the ecosystem crossing the 1,000 integrations mark in early December, more than 700 oracle networks, and $75B+ in total value secured. The $LINK token also increased its value by a cool 53%.
And in 2022 it looks like the starts are finally aligning for Chainlink Staking, probably the most anticipated feature requested by the Chainlink community since the project’s inception in 2018.
Crypto staking is somewhat different for Chainlink though. Unlike crypto assets such as Ethereum, Solana and Cardano, Chainlink does not use staking in order to produce new blocks.
Instead, Chainlink creates consensus on hundreds of Oracle networks regarding price data, weather data and computations. That’s why Chainlink staking has been a challenge to build and has taken such a long time.
It wasn’t a matter of simply copying another blockchain’s staking mechanism.
So how is $LINK Staking going to work?
Chainlink Staking Mechanism Explained
The Chainlink 2.0 Whitepaper describes how explicit staking will secure DONs that are tasked with delivering financial market data on-chain, a common external data resource required by many DeFi applications. The proposed explicit staking mechanism consists of multiple independent components that combine to generate a significant amount of cryptoeconomic security.
Using the new super-linear explicit staking method, the Chainlink network will be able to support the next generation of hybrid smart contracts and secure an increasing amount of value.
Behind each DON is a service agreement that will define the number of LINK tokens each oracle node is required to stake and key performance requirements, such as how far an individual node’s response can deviate from the aggregated value and how far the aggregated value in an oracle report can deviate from the correct value it should represent. The service agreement can also define other parameters such as the data sources used, how often updates should occur, how much each node is paid, and more.
Chainlink’s explicit staking model is unique because it’s designed to protect against an extremely broad class of well-capitalized bad actors, as well as achieve a super-linear staking impact.
Super-linear staking is a mechanism where malicious actors are required to have a budget significantly larger than the combined deposits of all nodes, making it very hard and capital intensive to attack the network.
Why Does Chainlink Even Need $LINK Staking?
The Chainlink developers believe that $LINK staking will be critical in providing users the best guarantees for accurate, timely, and most importantly “tamper resistant” execution of dApps that rely on Oracle reports and computations.
Amongst the supporters for Chainlink Staking is Google’s Eric Schmidt, who served as the Chairman and CEO of Google for over 10 years and has recently joined Chainlink as an advisor. Schmidt believes that enhancing Chainlink’s Oracle capabilities with staking will allow the protocol to become a better “truth machine” that cannot be affected nor influenced by third parties and malicious actors.
LINK Staking Launch Date
There is still not exact launch date for Chainlink Staking in 2022.
Sergey Nazarov did say that after many years of working and designing the staking mechanism, the team finally feels like it has passed all the required usability and security milestones and is definitely ready for launch some time this year.
Once staking on Chainlink becomes available though, we expect all the big players – exchanges, third-party custodians and independent staking system to all follow suit and integrate $LINK staking into their systems very fast.
Potential Chainlink Staking APY was not discussed in this article as there is no data yet available. However, as with all new staking mechanisms, we usually see much higher staking rewards during the first few months of a protocols life.
If you’re a believer, or a “LINK Marine”, as the Chainlink community calls its members, staking early will get you the highest ROIs.