Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
With a fully diluted market cap just over $6.6B, Chainlink (LINK) remains one of the most well known cryptooasset-based protocols for “providing a secure, reliable, and decentralized source of off-chain data to power unique smart contract use cases for DeFi and beyond.” Long before DeFi was even a word, Chainlink’s Founder Sergey Nazarov identified a pressing need for building decentralized data feeds, most commonly recognizable today as Chainlink oracles.
When you trade on GMX, lend/borrow on Aave, or check a price on CoinGecko, chances are that you’re benefiting from the Chainlink protocol.
- We cannot issue and settle loans, liquidate undercollateralized positions, trigger collateral swaps, or help protect against insolvency without Chainlink oracles.
- We cannot enable exposure in DeFi to real-world and on-chain assets using on-chain collateral without Price Feeds as the reference point for minting and redemption.
- We cannot depend on nearly $150B in stablecoins across Ethereum, L2s, and other L1s without Chainlink oracles to determine the collateralization of stablecoins, automate mint/burn operations, or trigger rebasing functions.
There’s an endless list of use cases for Chainlink, which is why it remains one of the most popular DeFi protocols with over 995 Chainlink oracle networks, having helped over $6.7T in value transact on-chain, thanks to over 5.6B on-chain data points.
As a more senior cryptoasset protocol with its design dating back to 2017, Chainlink only recently announced an inflection point in the Chainlink security and economic design by implementing an initial staking v1.0. LINK staking will now act as a new mechanism to secure the network. As most of us have experienced firsthand, it’s very important we have reliable Chainlink data feeds or else DeFi applications and markets quickly fall apart. One of the most commonly used vectors for hacking/exploiting DeFi and Web3 protocols is through the manipulation or failing of a data feed/oracle.
Chainlink Economics 2.0 is designed to incentivize “a virtuous cycle that increases value capture of the Chainlink Network, fueling the adoption of decentralized services and the growth of the Web3 ecosystem.” Here’s a quick overview of some of the long term goals behind Chainlink Economics 2.0.
- The primary goal of staking is to increase the cryptoeconomic security and user assurances of Chainlink data feeds. This is achieved by enabling LINK tokens to be locked up as a form of service-level guarantee around network performance. If an oracle network fails to meet their obligations outlined in its on-chain service-level agreement, then a portion of their staked LINK can be slashed and redistributed.
- Staking provides another key incentive and penalty mechanism for Chainlink nodes to consistently generate accurate oracle reports and deliver them in a timely manner.
- The anticipated increase in Chainlink oracle security and user assurances will be key in helping scale the future multi-trillion-dollar DeFi and Web3 markets.
- Another key goal is enabling more community members to directly participate in the Chainlink Network by…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
