Chainlink Staking – More Details Emerge On Its Future

Chainlink staking has been long proposed to enhance the cryptoeconomic security of the most used decentralized oracles network, what is it?

Dennis Weidner

Dennis Weidner

July 28, 2021 9:32 PM

Chainlink Staking – More Details Emerge On Its Future

Chainlink released a report about Chainlink staking. Many crypto enthusiasts were awaiting this event. It will start around July 27. Users will witness how their LINK tokens serve as collateral and assist with the processing & security of the oracle network. This will ensure that most participants in the network are honest. Dishonest participants get a penalty and will lose a portion of their stake.

In this deep dive, we explore explicit staking as described in the #Chainlink 2.0 Whitepaper, covering prioritized watchdog reports, concentrated alerting rewards, & the two-tier oracle network design with a second-tier adjudication layer composed of users

The recently released report titled “Explicit Staking in Chainlink 2.0: An Overview” references the earlier released vision for Chainlink 2.0. It would feature decentralized oracle networks (DONs) that are capable of performing off-chain computations. Chainlink staking would supplement the vision of high-value hybrid smart contracts. This is done by raising the cost required to attack the network and attempting to make it economically unfeasible.

Chainlink staking got a defensive design against a variety of attacks from well-funded adversaries. This goes to the extent that they are required to spend more than the combined deposits of all nodes in a decentralized oracle network (DON) resulting in high cost-efficient security, which makes these attacks extremely expensive and unfeasible by raising it above the value that can be extracted.

It defines the service agreements that form the basis of all decentralized oracle networks (DONs) defining key parameters and performance requirements, data sources used, update latency, node payments, LINK tokens to stake etc. DONs have reporting rounds, where they release oracle reports with each node’s response for a piece of data. The service agreements define the process for doing so and conditions for slashing. Chainlink marketplace can help to filter out nodes based on their performance, data sources used, networks supported etc.

This long-awaited staking would use a two-tier network. The first tier would consist of the low cost and high-efficiency decentralized oracle network (DON) of nodes staking LINK tokens. It is also responsible for generating reports regularly. These will come with maximum security and higher cost second-tier DON networks, which would oversee the first, provide arbitration and apply penalties for mass data deviations / malicious behavior.

What is the Resolution of the Disputes?

The decentralized oracle networks (DONs) complemented by Chainlink staking have a dispute resolution mechanism, If a dispute were to arise, all users would vote on the accuracy of the original report by “using a cryptographic TLS proof produced by DECO that provides definitive Zero-Knowledge Proof based evidence from one or multiple data providers”.

Since the oracle reports are critically important, second-tier voters are economically incentivized to provide correct dispute resolution or risk their own security, reputation, usability of their products plus the value of their own token. These second-tier participants are likely to be the core development teams behind protocols as well as Decentralized Autonomous Organizations (DAOs) governing them.

Chainlink staking has concentrated rewards. The misbehaving participants will pay to the node raising the alarm or the dispute regarding data accuracy. This allows for a system design where for each tier, one node has to be paid extensively to cause sabotage or malicious activity.

It raised the cost of the attack to the maximum. The security increases with the number of nodes in the system. It would also feature misreporting insurance to protect against incorrect alerts causing problems. A definite date for the Chainlink staking mechanism coming live didn’t launch yet, but from the looks of it, work appears to be progressing fast.

Dennis Weidner
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Dennis Weidner

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