Thread by @DefiDrew

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

1/n

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