Empowering retail users: LinkPool
These last few weeks have been as exciting as they have been hectic. The recent announcement of the migration of the LinkPool token to LPL (its ERC20 counterpart) has triggered an avalanche of new curious users eager to learn more about LinkPool.
However, it is quite common to find two archetypes of users:
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One, eager to know as much as possible about the project as soon as possible, but especially anything related to tokenomics, probably in search of some quick speculative profit.
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Another, calmer, interested in delving a little deeper into the fundamentals behind the project and learning what’s behind all the noise that LinkPool has raised these past weeks.
Don’t get me wrong, it is not for me to judge any of these user profiles. Everyone has their own circumstances and is entitled to their own way of approaching the exciting world of blockchain and the smart contract ecosystem. However, this post will be a more comfortable read for the second type of user.
To understand LinkPool it is important to understand the context in which it was born. If you haven’t already done so, I encourage you to browse this article.
Let’s start from the beginning…
LinkPool is one of the leading Chainlink node operators and tooling providers (creators of the Chainlink Marketplace and recipients of a Chainlink Community Grant). You may have heard something like this before, but what does it mean? Let’s put it all in context.
Chainlink is a permissionless protocol and an open-source framework for the creation of decentralized oracle networks that feed reliable and high quality data into your smart contracts. While this sounds like a fancy word salad, there is a lot of substance behind this concept, but it is quite hard to understand without prior grasping what are smart contracts:
“Smart contracts are digital agreements that exist as an immutable software program on the blockchain with conditions attached to its execution.” - (Source: What Is a Smart Contract?)
Sounds like another dressing for the word salad, right? Well, not quite. These digital agreements will always self-execute upon the pre-established terms and there is no way to tamper with its outcome without tampering the blockchain itself, which luckily is increasingly harder (and more expensive) as time goes on. The good news is that those smart contract terms & conditions are written in the form of open source code, so are publicly auditable and available for everyone to see. In addition, it is important to stress that while the smart contract concept might sound apparently simple, it is rather revolutionary as it enables a whole constellation of real-world use cases.
Chainlink’s greatest accomplishment
Of course, it wasn’t going to be that easy, there is always a catch, and you know a catch is big when it has its own name: the oracle problem. Said problem is that while permissionless blockchains are extremely secure networks, they are isolated systems lacking the ability to understand external systems information, which ultimately means that blockchains are “blind” and unable to see what is happening off-chain. Why is this relevant for smart contracts? Well, it is estimated that over 80% of smart contract use cases require real-world and external events data. Fortunately, oracles allow blockchains to communicate bidirectionally with the real world.
“A blockchain oracle is secure middleware that facilitates communication between blockchains and any off-chain system, including data providers, web APIs, enterprise backends, cloud providers, IoT devices, e-signatures, payment systems, other blockchains, and more.” - (Source: What is the Blockchain Oracle Problem?)
Having reached this point, another question you may be asking yourself is, why Chainlink? Traditionally oracles were centralized entities responsible for managing the data that the execution of the smart contracts relied upon, therefore they were single centralized points of failure. At the end of the day, if you build digital & tamperproof agreements on the most secure networks of this planet, why throw all the security guarantees away by relying on a centralized entity that could manipulate your data? That is why Chainlink has so much merit: it translated the reliability and the determinism of the blockchain consensus layer to the oracle layer. This is achieved by decentralizing the power held by the oracles in the form of networks of independent Chainlink node operators, which make up the backbone of the protocol.
The best part is that Chainlink efforts are still on-going, which seems to be emphasized by the recent publication of the Whitepaper 2.0, a new technical document released by Chainlink Labs summarizing Chainlink’s multi-year vision and showing the many advances that will be possible in the field of decentralized computing thanks to Decentralized Oracle Networks.
The importance of trustless staking
However, one thing that has not changed much is that, in the future, Chainlink node operators will be able to deposit a bond -in LINK- within the penalty & deposit contracts in order to show their commitment towards an honest behaviour within the Chainlink network. dApp developers will want guarantees that their smart contract data can’t be tampered with, so they will ask for sufficiently high bonds that will exponentially increase the demand for collateral in the ecosystem.
That is basically what staking with Chainlink is about: the ability for node operators to place a LINK deposit into their nodes in order to be eligible for data requests that require it; an act of good faith, and real skin in the game that will allow node operators to have something to lose. In short, a series of mechanisms that help mitigate counterparty risk and prevent nodes from colluding to defraud the network. So, where does that leave regular users?
You may have already noticed at this point, but the Chainlink network does not have a built-in mechanism for regular users to trustlessly provide liquidity in nodes operated by third parties so that they can satisfy their demand for LINK collateral and users can get some returns on it, which was precisely one of the reasons why LinkPool was born: to create a trustless infrastructure and platform that would allow retail users to stake LINK in nodes that require it.
Conclusion
LinkPool is strongly focused towards lowering the technical barriers of entry to the Chainlink ecosystem which has already crystallized in several initiatives like the current LinkPool staking model, the creation of the Chainlink Marketplace and future marketplace-centric features, such as empowering contract creators to deploy new oracle networks thanks to an intuitive UI and by facilitating other service and data providers the ability to offer their own services directly from the Chainlink Marketplace. LinkPool’s efforts are aimed at empowering and making life easier for the Chainlink community, whether they are developers or regular users. We can’t forget, that -in the end- we are all in this together.