Thread by @ChainLinkGod

1/ Some clarity on #Chainlink and @arbitrum

TL;DR At launch $ETH will be used at the protocol level for transaction fees and bond from validators, while $LINK will be used at the app level to pay for oracle services such as Price Feeds, verifiable randomness, & L2->L1 messages

2/ An important note: Ethereum (settlement layer), Chainlink (oracles), and Arbitrum (L2 rollup) are entirely complementary technologies, each is an important piece of the puzzle that will allow for the growth of the #DeFi ecosystem at scale

Each component is needed

3/ Starting with Arbitrum's current developer documentation

$ETH will be the medium of exchange that users pay for transactions fees and is the currency staked by validators who post fraud proofs

developer.offchainlabs.com/docs/inside_ar…

4/ With Chainlink oracle networks on Arbitrum, users will need to pay these oracle nodes in $LINK to gain access to services like Price Feeds, VRF, any API, etc

This is similar to existing Chainlink oracle networks on Ethereum, Polygon, BSC, xDai, Heco, Starkware, etc

5/ In early 2020, Ed Felten published the blogpost "Scalable & Low Cost Computation of Ethereum Smart Contracts Using Arbitrum, on the Chainlink Network" which explored some of the synergies between Arbitrum and Chainlink

medium.com/offchainlabs/s…

6/ This post described using the Chainlink Network for oracle services (e.g. price feeds) as well as to bootstrap the validator set of the Arbitrum network using the existing collection of highly reliable Chainlink nodes who stake $LINK for cryptoeconomic security

7/ This level of deep integration between the two protocols is why the Chainlink community has been so feverishly excited about the release of Arbitrum (in addition to the 270x lower fees)

It would use the Chainlink network for off-chain computation of smart contracts

8/ This deep level of integration doesn't appear to have been implemented into the current version of the Arbitrum protocol yet (I'm going off of public information/docs), causing some confusion

It may or may not still be the plan for the Arbitrum network in the long term

9/ However to note, Arbitrum is a framework for creating multiple Rollup L2 chains with permissionless validators

Stand-alone Arbitrum rollup chains can be launched and use $LINK at the protocol level to scale specific Chainlinked applications

10/ Example: A high-throughput gaming dApp could launch their own Arbitrum rollup using Chainlink nodes as validators who stake $LINK and pay for L1 gas fees in $ETH, while users pay TX fees in $LINK and/or $ETH

This generates value accrual for both tokens, entirely synergistic

11/ Beyond the usage of Chainlink to validate Arbitrum blocks and post fraud proofs, there are some major positive synergies that we do know about

1. High-frequency data feeds
2. L2->L1 message passing
3. Fair Sequencing Services

12/ Chainlink is a blockchain agnostic protocol that can operate at the native speed of any blockchain or L2 network

As a result, Chainlink Data Feeds on Arbitrum (such as Price Feeds) will be extremely low cost to operate, allowing for higher frequency updates

13/ As we see with the integration on Starkware, Chainlink can support sub-second oracle update latencies and extremely low deviation thresholds for updates

This advantage will provide #DeFi applications on Arbitrum with an extremely fresh source of external data

14/ dApps launching on Arbitrum like @AaveAave @MonteCarloDEX @Bancor plan to use Chainlink Data Feeds to secure their applications and they will be paying in $LINK to do so

As more Chainlinked dApps launch on Arbitrum, more $LINK needs to be acquired to pay for oracle services

15/ In addition to data feeds, in a recent Q&A, Arbitrum CTO Harry Kalodner noted that Chainlink oracles can be used to bypass the 1 week optimistic rollup dispute period to enable instantaneous L2 -> Ethereum L1 messages

A use case is a L2 DAO controlling a process on L1

16/ This would allow a DAO to vote on L2 for nearly zero fees, and then relay the final decision of the vote back to the Ethereum network using Chainlink oracles where it can be used to modify a smart contract, move funds, etc

Chainlink is the L2->L1 message highway for Arbitrum

17/ This L2->L1 messaging passing use case is still being developed, but it is just one of a myriad of ways regarding how Chainlink oracles enhance dApps on Arbitrum

This last use case I'll mention is more speculative on my part but has a good reason to become reality

18/ Ed Felten of Offchain Labs and Ari Juels of Chainlink Labs are extremely aligned in their views regarding the mitigation of MEV through decentralized transaction ordering to prevent users from getting exploited and losing funds due to frontrunners

19/ While the Arbitrum chain will initially launch using a centralized sequencer run by Offchain Labs, the long term plan is use a decentralized sequencer based on research from a team at Cornell Tech (where Ari Juels is a professor of Computer Science)

20/ Co-founder of Offchain Labs Steven Goldfeder and Chainlink Labs researchers Ari Jules and Lorenz Breidenbach were all co-authors of the infamous Flash Boys 2.0 paper that exposed the problem of MEV and transaction frontrunning on Ethereum

arxiv.org/abs/1904.05234

21/ The Chainlink Labs research team, led by Ari Juels is working on a decentralized transaction ordering mechanism known as Fair Sequencing Services

Once launched, FSS would provide the ideal solution for mitigating MEV on Arbitrum once and for all
blog.chain.link/chainlink-fair…

22/ With transaction validation, high-frequency data feeds, L2->L1 message passing, and Fair Sequencing Services (different stages of integration), Chainlink will be dramatically enhancing the Arbitrum network, resulting in a net benefit for the Ethereum ecosystem as a whole

23/ I hope this thread brought some clarity in regards to Chainlink's role in the Arbitrum tech stack

The information I presented here is based upon publicly available information, things can change and evolve over time

We are all in this together