Chainlink released a report about the long proposed and highly anticipated Chainlink staking feature on July 27, which will see users and organizations binding their LINK tokens as collateral and assisting with the processing & security of the most widely used decentralized oracles network. This will ensure that most participants in the network are honest and dishonest participants are penalized by slashing & losing a portion of their stake.
The recently released report titled “Explicit Staking in Chainlink 2.0: An Overview” references the earlier released vision for Chainlink 2.0 – which would feature decentralized oracle networks (DONs) capable of performing off-chain computations. Chainlink staking would supplement the vision of high value hybrid smart contracts by raising the cost required to attack the network and attempting to make it economically unfeasible.
Chainlink staking has been designed to defend against a variety of attacks by well funded adversaries to the extent that they are required to spend more than the combined deposits of all nodes in a decentralized oracle network (DON) resulting in high cost-efficient security, which makes these attacks extremely expensive and unfeasible by raising it above the value that can be extracted.
It defines the service agreements that form the basis of all decentralized oracle networks (DONs) defining key parameters and performance requirements, data sources used, update latency, node payments, LINK tokens to stake etc. DONs have reporting rounds, where they release oracle reports with each node’s response for a piece of data. The service agreements define the process for doing so and conditions for slashing. Chainlink marketplace can help filtering out nodes based on their performance, data sources used, networks supported etc.
Chainlink Staking Two Tier Network
A two tier network would be used in Chainlink staking, where first tier would consist of the low cost and high efficiency decentralized oracle network (DON) of nodes staking LINK tokens and responsible for generating reports regularly. These will be complemented by maximum security and higher cost second tier DON networks, which would oversee the first, provide arbitration and apply penalties for mass data deviations / malicious behavior.
How Disputes Are Resolved?
The decentralized oracle networks (DONs) complemented by Chainlink staking have a dispute resolution mechanism, If a dispute were to arise, all users would vote on the accuracy of the original report by “using a cryptographic TLS proof produced by DECO that provides definitive Zero-Knowledge Proof based evidence from one or multiple data providers”.
Since the oracle reports are critically important, second tier voters are economically incentivized to provide correct dispute resolution or risk their own security, reputation, usability of their products plus the value of their own token. These second-tier participants are likely to be the core development teams behind protocols as well as Decentralized Autonomous Organizations (DAOs) governing them.
Chainlink staking has concentrated rewards, allowing the slashed amount from the misbehaving participant to be paid to the node raising the alarm or the dispute regarding data accuracy, this allows for a system design, where each tier one node has to be paid extensively to cause sabotage or malicious activity.
It raised the cost of the attack to the maximum. The security increases with the number of nodes in the system. It would also feature misreporting insurance to protect against incorrect alerts causing problems. A definite date for Chainlink staking mechanism coming live hasn’t been released, but from the look of it, work appears to be progressing fast.
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