1/ What actually IS Chainlink and how is a Chainlink node different to other nodes/stakers/miners? ELI5 with analogy:
Chainlink is not a cryptocurrency, not a platform, not a blockchain. Chainlink is a network of node operators, running software to fetch, aggregate and send data
Chainlink is not a cryptocurrency, not a platform, not a blockchain. Chainlink is a network of node operators, running software to fetch, aggregate and send data
2/ It's not competing with your altcoin. It's not 'the new, better Bitcoin/Ethereum'. It's not making a base blockchain layer obsolete. Chainlink makes sure, that your smart contract is still with 100% uptime, immutable and automatically enforced WHEN it uses external data.
3/ Uptime of Bitcoin or Ethereum alone, is basically 100%. Every smart contract on Ethereum, using internal data such as managing tokens or crowdfunding stuff, is still with 100% uptime, 100% immutable and automatically enforceable. An attacker would have to break either layer 1,
4/ the blockchain, by acquiring 51% hashrate or break the next layer, find an exploit in the smart contract. Both is so extremely secure (for known smart contracts that are audited and proven for years, like basic crowdfunding for example), that attacking it is not
5/ economically viable. It stops being so in the moment you add in data from the outside world, via a third party/node. Now your immutability and automatic execution becomes dependent on the data and the third party/node that delivers the data.
6/ Your uptime and security for the whole contract setup potentially diminished/decreased completely/heavily. As an attacker, I would now attack the third party/node or the data source, which is a lot cheaper. For example, paying 100,000$ to a website reporting price data, to
7/ change the price of asset X so that the contract of my opponent triggers wrongfully/at the wrong time and me profiting from it potentially in the millions. What we need is to raise the cost of attacking the third party/node and data layer so much, that it becomes as
8/ economically unviable as attacking a proven smart contract and the blockchain base layer. This is what Chainlink is doing with its node software and network of node providers. Imagine a 1,000,000$ contract that handles a synthetic gold asset between a few parties.
9/ Ethereum is secure enough, the smart contract is proven and audited by dozens of prominent code auditing firms. The data this contract needs is gold. Instead of relying on a single third party or a few centralized nodes that can be bribed easily, for example by paying
10/ them half of the money you net from that attack.
Instead, you chose the Chainlink network with hundreds of nodes, each fetching the price of gold from different data provider, potentially having hundreds of different sources with hundreds of nodes each wanting to profit from
Instead, you chose the Chainlink network with hundreds of nodes, each fetching the price of gold from different data provider, potentially having hundreds of different sources with hundreds of nodes each wanting to profit from
11/ serving jobs with data. Each node has assets on stake they would lose for forwarding wrong data, a reputation score where metrics like uptime, response time, total jobs, and average size of job comes in. Reporting wrong data, results in losing assets on stake and decreases
12/ the reputation score. And this one is even more important than the stake in my opinion. Take an ebay powerseller for example: Those people might have 4.96 stars out of 5 and over 5000 reviews. Almost a perfect score. There are other powersellers that might only have 800
13/ reviews and a score of 3.85 for example. Which do you chose? The best one. These powersellers make the most money long term, on more jobs/sells and the highest reputation. Out of hundreds of provider of the goods you want, you pick the one with the best metrics. It's the
14/ exact same with data provider. There are now 21, in the future over hundreds of nodes online, each striving for the highest uptime, honesty and total reputation score, because this makes their profit longterm. They are pushed to have the highest standards in hardware and
15/ security, because their income depends on it. For blockchains doing PoW or PoS based consensus jobs (checking hashes), it doesn't matter if they send a wrong hash one time or thousands of times, it doesn't fucking matter if they go offline for 1 hour or 1 months.
16/ no one gives a shit. They can just start mining again after being offline for a month and profit the same as everyone else with the same hashrate. It also doesn't matter what hardware these miners run. Slower hardware? Less profit... AND for many blockchain platforms, less
17/ performance for the overall network. This surprises you?
More nodes does not equal better performance. In fact, it's the opposite, as more nodes, with very different quality of hardware, as slower the network might be. It gets more stable, but not faster. To make it faster,
More nodes does not equal better performance. In fact, it's the opposite, as more nodes, with very different quality of hardware, as slower the network might be. It gets more stable, but not faster. To make it faster,
18/ you need the slowest nodes to be still of high quality/performance. The bottleneck is the slowest computer.
There is no incentivize for masternodes of blockchain platforms to ONLY have the best hardware. But you do have this for Chainlink, because it directly scales immensely
There is no incentivize for masternodes of blockchain platforms to ONLY have the best hardware. But you do have this for Chainlink, because it directly scales immensely
19/ with your profit. My point here is, that these Chainlink nodes, even if in a lot smaller numbers than we have miners and stakers for the most popular blockchain platforms, are bringing an insane level of security/uptime level with them. More than enough to feed our 1,000,000$
20/ smart contract with data. Because the economical incentive to stay honest for all of these Chainlink nodes, is in total a lot higher than the underlying value of the contract. You have to convince +51% in numbers to try an attack once, which may result in them staying
21/ a LOT less profitable for maybe weeks and months. It's expensive to pay/convince miners to mine an dishonest chain, but it's a lot less economically viable for Chainlink nodes to do so. Blockchains don't care/remember when a miner mines dishonest blocks.
22/ An unsuccessful attack to Chainlink might kick you out of business for a long time or even forever. Chainlink nodes are like powersellers on ebay, but in high numbers, bringing a security in form of economically unviable attack vector, on almost the level of a blockchain.
23/ dApps on Ethereum were fine using centralized oracles or a few internal running nodes to get data for their application, like the price of Ether. But with a rising valuation and a higher motivation for attackers to break this weak point, they HAVE to move to a more
24/ decentralized solution. Not moving, means your dApp, that runs on smart contracts and a blockchain, are actually less secure than some centralized services. Just because the data input is centralized. It's always the weakest points you have to look at. Attackers will use that
25/ over trying to 51% attack the Ethereum blockchain. Synthetix recently moved to using Chainlink, now that their total network value jumped up into the hundreds of millions of dollars
In my opinion, all top Ethereum dApps will have to move to a decentralized solution in the upcoming bullmarket. Else, they will get successfully attacked. The number one solution by far is Chainlink. That's a fact. #Chainlink
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