What is Chainlink Economics 2.0?

– Increasing network revenue
– Reducing operating costs
– Cryptoeconomic security via staking

In this I’ll break down how $LINK is rapidly evolving to become a productive asset that captures real value

The economics of a decentralized Web3 services platform like Chainlink is crucial

Not only for accelerating adoption but for ensuring the long term sustainability of the network where service providers are paid for their work


That last part is important, this isn’t paying value to passive actors who contribute nothing

But rather enabling service providers to get paid for the value they provide

Oracle nodes :: computation
Data providers :: data provisioning
Stakers :: cryptoeconomic security

Since mainnet, the Chainlink Network has been in growth mode, deploying resources to capture market share

With market dominance established for key services like Data Feeds, the Chainlink Network is now shifting towards value capture and monetizing its network effect



The first step in accelerating value capture is increasing revenue / revenue opportunities for Chainlink service providers

Historically, revenue opportunities has been driven by the deployment of new services and supporting new chains (which will continue)

In addition to increasing fees paid by existing users, new ways for pre-revenue early stage projects was needed

Such projects don’t have the resources to pay in traditional ways but they do have a lot of their own tokens

This is where Chainlink BUILD comes into play

/ Chainlink BUILD is a new Econ2 program where projects pay a significant portion (3-5%) of their native token supply in exchange for oracle services and technical support

Such tokens can then flow to service providers in the Chainlink ecosystem like stakers


More specifically, BUILD partners get access to wide range of benefits

This includes early access to beta-stage Chainlink services, custom oracle networks, and the ability to boost the security of services they use by incentivizing stakers

A win-win economic relationship


As BUILD participants scale up and begin to generate their own revenue

This revenue can be shared with the Chainlink Network on a percentage point basis (or other schedule if that works better)

Revenue that can be converted to $LINK and paid to service providers


As a $LINK staker, this effectively means that in addition to $LINK rewards, you’ll also have the chance to earn a basket of tokens from projects in the Chainlink ecosystem

Congrats, you’re now effectively seed investors in some of the most promising early-stage projects


More info on Chainlink BUILD, including initial participating projects, can be found here


The flip side to revenue is costs, specifically operating costs

The operation of oracle networks is not free, as there are associated on-going costs like on-chain transaction (gas) fees

Minimize these costs and profit margins can increase

There’s already been major strides made in this direction over time like the Off-Chain Reporting (OCR) protocol in 2021 reducing gas costs of oracle network by up to 90%

OCR 2.0 will further reduce gas costs by another 25%, allowing for even more data to be brought on-chain


In parallel blockchains are finally starting to scale

Rollups, sidechains, subnets, supernets, shards, etc

As chains become more efficient, the costs for oracle networks on those chains also reduce

But that’s the beginning

This is where Chainlink SCALE comes into play

Chainlink SCALE is a new Econ2 program where blockchain projects commit to offsetting the operating costs of Chainlink oracle networks on their chain

The significantly increases profit margins and eliminates the need for subsidized oracle rewards for those networks


For example, @avalancheavax joined SCALE meaning Chainlink oracle networks will receive grants in AVAX to cover on-chain gas fees on their chain

This is another win-win relationship as chains need more oracle data to fuel their dApp ecosystems (as has been historically seen)


Even as blockchains scale, the gas costs won’t be zero and data delivery delivery throughput is usually also increased

Chainlink SCALE covers the primary costs of oracles, meaning economic resources can be used more efficiently like driving more revenue opportunities


The last major part of Chainlink Econ2 is the long-awaited staking

By locking up $LINK in smart contracts, Chainlink service providers can prove their commitment and increase the cryptoeconomic security of oracle services

As explored in a June blog post, Chainlink Staking will rollout in stages and evolve with more functionalities over time

This starts with an initial v0.1 beta which is launching this December 👀

Chainlink Staking: Exploring the Long-Term Goals, Roadmap, and Initial Implementation


v0.1 sets the groundwork for staking by introducing a decentralized alerting system for reporting node mal-performance

For future versions, this enables stake slashing and eventually Loss Protection as a form of insurance for users if an oracle network breaks its SLA

In Staking v0.1, the pool is capped at 25M LINK and will expand to 75M LINK over time

Initially there will 22M LINK available for the community to directly stake and 3M for node operators

Rewards will start with subsidized LINK and evolve to revenue sharing and BUILD fees


v0.1 will start with an Early Access period and then later open up to a General Access phase

Early Access eligibility is based upon historical on-chain and off-chain activity

Introducing staking to the most widely adopted oracle standard is no small feat, hence the progressive rollout where feedback can be incorporated before scaling up

Excited for what the future brings here

To sum it up, the Chainlink Network is evolving from a growth oriented approach to growth + value capture approach:

Chainlink BUILD increases revenue
Chainlink SCALE reduces costs
Chainlink Staking increases security and participation

Welcome to Economics 2.0

This sentiment is just cope at this point, there’s already four BUILD partners who have contributed 3-5% of their token supply, four blockchains who are covering operating costs of DONs, and staking v0.1 is launching this December

he cart can’t come before the horse, not to mention we’re in the worse macro economic conditions since 2008

Becoming the standard isn’t free, but SCALE has blockchains (incl Avalanche) subsidizing oracle networks, and BUILD and revenue sharing reduces need for oracle rewards

I mean you understand native chain coins and dApp token subsidies is why alt-L1 blockchains have the TVL they do right?

Avalanche has a higher inflation rate than Chainlink currently, and that isn’t necessarily a bad thing, it’s for accelerating growth


Leave a Reply

Your email address will not be published. Required fields are marked *