Staking is a core element of the Chainlink 2.0 economics, aiming to build a new layer of cryptographic economic security for the Chainlink network. Participants in the ecosystem, including node operators and community members, can secure the level of oracle services through staking and receive corresponding rewards.
In December of last year, Chainlink released the first version of the Staking plan (v0.1) and launched a staking pool with a limit of 25 million LINK tokens to secure the cryptographic economic security of the ETH/USD Data Feed on Ethereum. In the v0.1 version, both community stakers and node operator stakers can participate in the decentralized alarm system to monitor the level of oracle node services and receive staking rewards.
The next version of Chainlink Staking (v0.2) is planned to be released in the fourth quarter of this year, and the staking pool will be initially expanded to 45 million LINK tokens. The v0.2 beta upgrade will be phased to expand the range of participation. The first phase is the “Priority Migration” phase for existing v0.1 stakers, followed by the “Early Access” phase and the “General Access” phase.
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v0.1 is the first version of the staking plan, while v0.2 has been restructured and upgraded to a fully modular, scalable, and upgradable Staking platform. v0.2 focuses on the following goals based on v0.1:
- Greater flexibility: Community stakers and node operator stakers can have greater flexibility, and the staked LINK tokens are still held in the same secure non-custodial mode.
- Greater security: Chainlink Staking provides greater security for oracle services.
- Modular architecture: Compatible with future upgrades and changes, such as expanding staking to more oracle services.
- Dynamic reward mechanism: Perfectly supports future new sources of rewards, such as user fees.
Security is a top priority in the Chainlink ecosystem, so the code repository for Chainlink Staking v0.2 officially started a public code audit competition on the Code4Rena platform today. The competition will last for 18 days and has a prize pool of $250,000. The code repositories for Staking v0.1 and CCIP have also been audited on the Code4Rena platform. In addition, many top projects such as ENS, OpenSea, The Graph, and Aave use Code4Rena for code audits.
This article will provide an overall overview of the release process for Staking v0.2 and its new upgrades and features. More detailed parameters about v0.2 will be announced before the mainnet launch.
Staking is a core element of the Chainlink 2.0 economics
Phase 1: Priority Migration
Chainlink Staking v0.2 will be rolled out in multiple phases to encourage participation from the Chainlink community and contribute to the security of the Chainlink network. The v0.2 staking pool will have wider coverage and involve more small-scale community participants, thus enhancing the security of Chainlink Staking.
Phase 1: Priority Migration
Stakers from v0.1 can prioritize migrating their staked LINK tokens and accumulated LINK rewards from v0.1 to v0.2, or withdraw them. The priority migration phase will last for 7 days. During this period, v0.1 stakers can migrate all or a portion of their v0.1 LINK staked tokens and accumulated LINK rewards. If a staker chooses to migrate only a portion of their LINK, all staked tokens and rewards that have not been migrated from v0.1 will be withdrawn. If v0.1 stakers do not take any action, their LINK staked tokens and rewards will remain in v0.1 and the accumulation of rewards will stop.
Since the v0.2 staking pool is larger than v0.1 and includes accumulated LINK rewards, v0.1 stakers will definitely be able to participate in the priority migration phase of v0.2. After the priority migration phase, v0.1 stakers can still migrate and withdraw their tokens in the subsequent early access and general access phases. However, there is no guarantee of participation in these two phases as the staking pool has a maximum capacity.
It is important to note that during the priority migration phase, the LINK tokens migrated by v0.1 stakers must not exceed the total amount of their staked tokens and rewards. If v0.1 stakers want to stake more LINK within the limit of each wallet address, they can try in the two subsequent phases.
Phase 2: Early Access
After the priority migration phase, LINK token holders who meet at least one early access eligibility criterion will have the opportunity to stake LINK tokens in v0.2 until the limit for each wallet address is reached. Similar to the early access phase of v0.1, meeting the eligibility criteria only represents the opportunity to stake in the v0.2 staking pool, but it does not guarantee participation as the pool has a maximum capacity. The early access phase will last for two days. The eligibility criteria will be based on the v0.1 version. Similar to v0.1, we will also launch an “Early Access Eligibility App” prior to the release, where everyone can check if they are eligible.
Phase 3: General Access
After the early access phase, the v0.2 staking pool will be open to the public. At that time, if the v0.2 staking pool has not reached its capacity, anyone will have the opportunity to participate in staking until the limit for each wallet address is reached.
Chainlink Staking v0.2 will be phased out
Iterative upgrade with modular framework
The codebase of Chainlink Staking v0.2 has been refactored and upgraded to a modular set of smart contracts. With modularity, we can perform a series of upgrades, such as adding new features or changing configurations. Stakers do not need to migrate to the new smart contracts in their entirety to achieve the upgrade.
For example, v0.2 will support ETH/USD price feeds on Ethereum and the alarm conditions will be similar to v0.1; future iterative upgrades of Chainlink Staking can add other new alarm condition modules to expand to other oracle services (e.g., CCIP). As Chainlink Staking provides security for more oracle services in the future, the modular design and upgraded reward mechanism of v0.2 will allow us to easily introduce new sources of rewards (e.g., user fees).
Upcoming upgrades of Chainlink Staking also include providing new tools for the BUILD program to distribute Chainlink BUILD rewards to stakers. We look forward to the continuous addition of excellent projects to the BUILD program in the coming months. Rewards for user fees and participation in the BUILD program will be based on user fees and the BUILD program, continuously driving ecosystem members to provide higher security for the Chainlink network. Specific information about Chainlink BUILD rewards, v0.2 staker qualification, and v0.1 stakers will be announced in the future.
In addition, Chainlink Staking will expand the reputation system for node operators in the future, comprehensively incorporate the staking mechanism, and build a more comprehensive penalty and alarm mechanism to establish a more robust security guarantee.
Expand staking pool size and accessibility
The staking pool limit for Staking v0.2 will be increased to 45 million LINK tokens to cover a wider range of LINK token holders. The staking pool limit has increased by 80% compared to v0.1 and accounts for 8% of the current LINK circulation.
The expansion of the v0.2 staking pool size aims to enhance the security guarantee of oracle services and increase user confidence. In addition, we always pay attention to security while expanding the staking size. Increasing the staking pool limit can also provide support for the sustainable development of the Chainlink network before new staking reward sources (such as user fees) are implemented. The staking pool size is expected to expand over time, especially as Chainlink Staking will cover more and more Chainlink services in the future.
A key design principle of Chainlink Staking v0.2 is to provide greater flexibility and predictability for LINK stakers in managing LINK tokens. Therefore, v0.2 introduces an unstaking mechanism.
The unstaking mechanism plays a critical role in the security guarantee of Chainlink Staking. It can maintain the stability of the staking pool over a long period of time. When a valid alarm is triggered, it ensures that there are enough LINK tokens in the system to be deducted (i.e., to prevent LINK staked tokens from being withdrawn before being penalized).
Stakers can withdraw their staked LINK tokens at any time from v0.2 and then enter a “cooldown period” lasting several weeks. Once the cooldown period is over, a “window period” lasting several days will begin. During this period, stakers can withdraw their staked LINK tokens. If the tokens are not withdrawn during this window period, they will automatically re-enter v0.2. Therefore, if a staker changes their mind after initiating the withdrawal process, they can choose not to take any further action.
The staked LINK tokens will continue to accumulate rewards during the cooldown period and subsequent window periods until they are finally withdrawn. It is worth noting that withdrawing the LINK tokens through the unstaking mechanism may result in the deduction of accumulated rewards, depending on the length of time the staker has participated in v0.2 (details will be explained below).
Claimable Rewards and Ramp-up Stage
V0.2 will introduce a new LINK reward mechanism aimed at further enhancing the stability of the v0.2 staking pool, improving the security of staking, and increasing the flexibility of staking rewards.
During the staking process, stakers will receive attributed rewards, which include “claimable rewards” and “locked rewards”. Claimable rewards can be withdrawn at any time without penalty. Locked rewards will gradually become claimable rewards during the ramp-up stage. The ramp-up stage lasts several weeks and is tracked separately for each staker. At the beginning of the staking process, the proportion of claimable rewards is 0% and will linearly increase to 100% over time. The proportion of claimable rewards is directly proportional to the progress of the ramp-up stage.
For example, if a staker’s ramp-up stage reaches 50%, 50% of the attributed rewards will be converted into claimable rewards. When a staker’s ramp-up stage reaches 100%, all attributed rewards will be converted into claimable rewards. Furthermore, all newly acquired attributed rewards will automatically be converted into claimable rewards.
If a staker successfully withdraws any amount of staked LINK tokens, their ramp-up progress will be reset to 0% and all locked rewards obtained will be automatically invalidated and added to the public reward pool, which will be distributed among all stakers of the same type. For example, rewards invalidated by a staker from a particular community can be distributed among all community stakers. The ramp-up stage will be reset when a staker withdraws their staked LINK tokens, and all attributed rewards can only be converted into claimable rewards after the ramp-up stage is completed.
It is important to note that stakers can withdraw claimable rewards at any time, and the ramp-up stage will not be reset after withdrawal. For node operators staking LINK, the ramp-up stage only applies to the base rewards generated by their staked LINK tokens and does not apply to automatic delegation rewards from community stakers.
In the table below, you can see the different types of rewards in Chainlink Staking v0.2.
|Attributed Reward||The total LINK reward given to the stakers, including both claimable rewards and locked rewards. Locked rewards can be fully claimed after the ramp-up phase ends.|
|Claimable Reward||LINK rewards that can be withdrawn at any time. The proportion of claimable rewards to attributed rewards is proportional to the progress of the ramp-up phase.|
|Locked Reward||LINK rewards that cannot be claimed temporarily. The proportion of locked rewards to attributed rewards is inversely proportional to the progress of the ramp-up phase.|
|Nullified Reward||If stakers withdraw their pledged LINK tokens before the end of the ramp-up phase, all locked rewards will be nullified and returned to the bonus pool.|
Similar to Staking v0.1, a portion of the attributed rewards of community stakers will be distributed to node operators as delegation rewards. In return, node operators will provide services on behalf of the community stakers (i.e. performing oracle computations). This mechanism is similar to the existing delegation mechanism, where the staking rewards generated by community stakers will be used to further enhance the security of the network.
In v0.1, the tokens pledged by community stakers are automatically delegated to node operators, but node operators do not control the tokens pledged by community stakers. In v0.2, the amount of delegation rewards received by node operators is proportional to the amount of LINK they have staked.
Dynamic Reward Rate
We have adjusted the calculation method of the reward rate in v0.2 to incentivize staking behavior and better support future sources of staking rewards (e.g. user fees). In v0.1, the reward rate is fixed, meaning the reward rate for all community stakers remains constant regardless of the staking ratio in the staking pool. In v0.2, the reward rate will be adjusted dynamically.
The dynamic reward rate is based on the premise that the total rewards given to all stakers are fixed, and the rewards are distributed proportionally to all stakers in a unit of time, regardless of the total amount of LINK in the staking pool. Therefore, the reward rate for stakers is not a fixed value, but dynamically changes based on the staking ratio in the pool and the amount of rewards generated in a unit of time. When the staking pool reaches its maximum size and the fixed total rewards, an effective minimum reward rate can be formed. If the staking pool is not filled to capacity, the same amount of rewards will be distributed proportionally to fewer stakers, resulting in a naturally higher reward rate, and vice versa.
Due to the gradual shift of future Chainlink Staking rewards towards user fees, and the fact that user fees are subject to dynamic changes, the calculation method for reward rates needs to be adjusted.
Deducting LINK Tokens Staked by Node Operators and Validators
Chainlink Staking v0.2 allows for the deduction of a portion of the LINK tokens staked by node operators and validators as a penalty. These node operators stake LINK tokens to ensure the quality of the oracle services. Deducting LINK tokens further enhances the cryptographic and economic security of the Chainlink network. When a valid alarm is triggered and the penalty conditions are met, a portion of the LINK tokens staked by the node operators will be deducted to punish them for providing subpar services.
In the future, as Chainlink Staking expands to more oracle services, the conditions for alarms and penalties will continue to evolve. In v0.2, community stakers will not have their staked LINK tokens deducted. However, these stakers will need to upgrade to the new Staking version. Additionally, if the node operators and validators provide oracle services beyond the Staking scope, they will not be at risk of having their LINK tokens deducted.
Upgrades Using Time-Locked Smart Contracts
If any significant iterative upgrades, such as modifications to the slashing mechanism, need to be made to the modular Chainlink Staking v0.2 codebase that would have a major impact on stakers, these upgrades will be announced in advance to allow stakers to decide whether to withdraw their staked LINK tokens on-chain.
Another security measure is that all on-chain configuration changes and upgrades critical to security must be implemented using a time-locked smart contract. The contract will have a delay of several weeks, with the most critical configuration changes having the longest delay (note: longer than the time required to unstake). This time-lock mechanism allows the community to thoroughly evaluate the updates and decide whether to opt-out before they are implemented on-chain. Only emergency features or certain advanced features (e.g., adding rewards) are exempt from the delay. However, all configuration changes and upgrades must go through the time-lock before deployment.
It is worth noting that the smart contracts for Chainlink Staking v0.2 will still operate in a non-custodial manner. This means that stakers will always have full control over their staked LINK tokens, and no third party can withdraw them. When upgrading from v0.2 to the new Staking version in the future, stakers will still need to manually migrate their staked tokens.
The Evolution of Chainlink Staking
The development of the V0.2 beta Staking platform was built upon v0.1. We also took feedback from the community, node operators, and other service providers into account. We would like to thank all the stakers who participated in Staking v0.1. The community is crucial to the success of the Chainlink network, and we support the most active members of the ecosystem through various mechanisms, including early participation.