Chainlink And The Curious Tale Of The Missing 600,000,000 LINK Tokens

Chainlink is the premier and the most well known decentralized data oracles project, supplying smart contracts (especially those related to DeFi) with accurate and manipulation-resistant data through it’s aggregation from multiple free sources. Since it’s ICO launch in ‘17, Chainlink has grown to be a $9.6B protocol and an integral component for most decentralized finance services. It’s maximum supply is 1B, out of which roughly 400M tokens are in circulation, so where are the rest of the tokens?

Chainlink ICO And The Token Distribution 

It’s worth noting that during Chainlink Initial Coin Offering (ICO), 350M LINK tokens were offered at a rate of $0.11 per token. It was hugely successful and all tokens were sold. The below present graphics shows the token distribution announced at that time. As per the plan, the remaining 350M tokens are reserved for node operators to incentivize them. The remaining 300M are held by the Chainlink company for further development.

But why is it necessary to reserve a large amount of tokens for node operators? That’s because the node operators run the Chainlink network. They are paid in LINK tokens, which is further required for subsidies. Eventually, this will be used for staking rewards, once it goes live on the network and strengthens the network’s security.  

LINK Supply Discrepancy Has Been A Persistently Little Known Fact

Despite all the popularity and usage of Chainlink, the explanation of apparent discrepancy between the circulating and total supply of LINK tokens has persistently been a little known fact and a commonly repeated criticism for the project. In reality, the Chainlink token distribution isn’t much different than other cryptocurrency projects, which generally reserve tokens for usage and growth of the ecosystem. 

Unlike older projects which had all or majority of the total supply in circulation, DeFi projects generally start with 4-15% circulation of the total supply. This is largely because most activities (farming, staking, liquidity provision etc.) are continuously incentivized on the network and scheduled inflation is required for that purpose. Chainlink has nearly 40% of the total supply in circulation, which is nothing to be alarmed about. Hence, the curious tale of 600M missing LINK tokens is actually not such a great mystery.