A thread on key differences in pricing dynamics between Chainlink and Blockchains like Ethereum
Comes down to what drives user fees
For gas tokens like $ETH, every bit of blockspace costs the same. Doesn’t matter if the transaction involves $1 of value or $1 Trillion
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For Oracle fees, the $LINK cost varies
Potential reasons for fees to vary
Different services - Price Feeds vs VRF
Different subsets of data within a service - $ETH vs $AAVE price feeds and basketball game results vs Football
Same service but different network #BSC vs #AVAX
Data Delivery example
Real world data has value and is demanded on chain. The oracle interacts with the data source and posts on chain.
Blockchain node operators can’t interpret the context of their chain’s transactions, just that they’re valid
This is why blockchains charge the same fee per unit of blockspace
Each oracle node however has a different level of access to the data and design of the systems being secured
Results in pricing dynamics that are much different, since nodes need to be paid to remain honest
Other ways to think about it
Nodes securing SWIFT will have higher fees than VRF for NFT mints on Polygon
If SWIFT started settling on Ethereum tomorrow, there wouldn’t be an immediate impact on gas fees
$ETH fees would scale with the aggregate value secured by its chain
The fee variability works in both directions. Chainlink can go ultra low fee for use cases such as gaming and social media.
It helps to not have to store data forever like blockchains
Chainlink is comprised of many micro networks, each with their own economics
Oracle services are inherently tied to the real world, where most items of value exist
Overall these differences give Chainlink a larger scope for value capture
Thus far, Chainlink has been minimally extractive
They mostly charge a small premium over gas costs
This helps dapps grow, limits competitors ability to undercut, and focuses on growth
MEV isn’t extracted by nodes either, despite their advance knowledge of the price data
This was a bit of a stream of consciousness
Let me know if I missed anything or got something wrong
There’s advantages to ethereum’s design as well, such as spiking fees when demand is high
Unclear how oracles can change pricing once it’s set
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$LINK staking to be released in three stages
v0.1 -> reputation framework and alerting system
v1 -> expand reputation framework to include more metrics and add slashing
v2 -> expand beyond price feeds and add Loss Protection
Four goals laid out for staking
1. Increase security (most obvious, what everyone thinks of) 2. Enable community participation 👀 (what the marines have been waiting for) 3. Reward real usage 4. Allow node operators to differentiate themselves as they compete for high value jobs
With the bear market fully upon us, I wanted to write a thread on why I have great respect for what @chainlink@SergeyNazarov and team are doing from the perspective of building a start up to achieving a grand vision for the future of crypto
A masterclass for entrepreneurs
1/n
2/n First I'll jump into the "team is dumping" criticism
Yes, they've sold ~100M coins since 2018/2019
Yes, this suppressed the price
As an ICO, chainlink eschewed traditional startup fundraising. No pre-seed, no series A, etc.
Free market trading of $LINK allowed for this
3/n
Selling tokens in the ICO and then on public markets was akin to raising from VCs
There are pros and cons to this fundraising approach: the main con being a lack of popular VC evangelists
The ability for early supporters to get in at $0.20 was a pro