Built on top of the highly anticipated introduction of Chainlink Staking v0.1, stake.link brings liquid staking to the Chainlink Network. For us, this is a momentous announcement as it’s the start of a new era that was first conceived in 2017 and is the culmination of 5 years of hard work, expertise, and growth. There is a lot to cover, so let's dive in!

What is stake.link?

stake.link is a DeFi protocol built on top of Chainlink Staking that allows users and Chainlink node operators to assign collateral directly to nodes and the wider network. In return, LINK Stakers are provided the liquid staking receipt token stLINK that will form the cornerstone of DeFi composability for Chainlink Staking and the ecosystems that it secures.

At a high level, the platform is designed to be incredibly simple for people to use. Under the hood, the protocol is the product of multiple ideas and initiatives we’ve championed over many years, resulting in an intuitive platform that benefits all participants.

The SDL Token

With the substantial scope of the new stake.link platform, it required a new way of thinking in regards to tokenomics, incentives, and governance for its participants. The high-level question: How can the protocol be architected and governed to ensure each participant is rewarded fairly and is directly incentivized considering changing collateral requirements and fluctuating reward amounts based on the amount of work a node operator undertakes? Our answer to this is the new protocol token: SDL (stake.link). Each participating node operator receives an amount of SDL that reflects their allocation in the pool, and by LINK stakers. The SDL token serves three core purposes:

1. SDL enables stake.link governance - SDL holders actively contribute to the platform by proposing, discussing, and refining SLURPs, electing Governing Council Members, and providing input on strategic decisions.

2. SDL facilitates reward distribution - it streamlines the allocation of rewards to platform participants. Stakers earn rewards and offer their collateral to Providers, while Providers receive incentives for making their staking allocations available.

3. SDL offers priority staking access - by staking SDL, stakers can reserve their spot in the queue for guaranteed LINK staking allocations when additional space is offered.

Detailed in the Early Access section below, where possible SDL stakers will have first access to stake additional LINK into the LINK pool as the capacity of the pool continues to expand.

DAO Progression

The stake.link protocol is designed to be governed by SDL holders, though this process will be an evolution. It’s imperative that during the initial beta launch the initial governing council can respond quickly to remedy any unfavourable circumstances.

Token Distribution

The distribution of SDL tokens positions stake.link as the definitive protocol for Chainlink liquid staking. The initial cohort of participating node operators of stake.link each receive a 10M SDL allocation with the DAO treasury receiving 50M and LinkPool receiving 50MM.

Every participating node operator has 100% of their SDL allocation automatically staked on mint, with 99% vested over a two-year period (6 month cliff, 18 month linear vest). The initial total supply of SDL is 260MM. The circulating supply is determined by the total amount of tokens moved out of their initial mint address. The current circulating supply can be seen here in real time.

Ecosystem Participants

We’re thrilled to have Chainlink Labs as a member of the stake.link DAO in our Ecosystem Participants initiative. As an Ecosystem Participant, Chainlink Labs will receive an SDL allocation of 20M SDL Tokens. Further expansion of the Ecosystem Participants initiative will be defined through governance.

Node Operator Council

Initially, all contract ownership and the DAO Treasury wallet will be controlled by the Node Operator Council. This will be a 5 of 7 multisig, which includes a subset of the initial members of stake.link.

In practice, this means any parameter change within a governed protocol contract will have to be approved by 5 out of the 7 participants of the multisig. The council will also be directed by proposals voted on by SDL holders, making the changes once the proposal has passed. Due to some of the contracts being upgradeable and there being options in the pool to change fees, the ownership of contracts needed to be not governed by just one entity to provide node operators and users confidence about the platform’s security and operation.

In the longer term future, stake.link members will be discussing governance options that allow the stake.link platform to be democratically governed. This includes ideas such as a two-tier governance structure where SDL holders issue and vote on proposals and an elected council votes on implementation.

DAO Treasury

The protocol treasury is assigned 50M SDL tokens to support the protocol's adoption, growth, and success. At launch, the treasury will be governed by the stake.link Node Operator Council. Initial initiatives will center around incentivizing liquidity and rewarding external protocol contributors. The initial allocation of the DAO Treasury is as follows:

Pool Dynamics

The contract design of the stake.link pool is intended to incentivize deep LINK staking collateral liquidity and high capital efficiency. Each pool consists of one or more Strategies that automatically receive LINK to be staked as collateral. Strategies can represent any way for LINK to be put to work, resulting in some reward. To give a practical example of how that can work, there will be Strategies for deploying collateral to all forms of Chainlink Services that need it in the future: VRF, Automation, CCIP, and Proof of Reserves.

At launch, this will take the shape of a Strategy for each Chainlink node operator and potentially Chainlink’s Community Pool as staking evolves. When applicable in future Chainlink Staking iterations, LINK collateral will be locked and relocked with the most efficient lock-in periods to promote the highest security and garner the highest rewards possible, and pool ceilings will increase dynamically as necessary. Since platform users receive stLINK in exchange for their staked LINK collateral, the pool and its Strategies can enforce security with the highest lock-in periods because each user continuously maintains access to their staked collateral.

Early Access

stake.link will initially launch in its own early access mode. During this time, only stakers of SDL will be able to stake LINK. The amount of LINK each SDL holder can stake is based on the total size of the pool proportionate to the amount of SDL they stake with a configurable multiplier.

In the beta release of stake.link, it is expected that the multiplier will initially be set low, monitored closely, and increase over time before opening the LINK Pool for wider community availability for those who do not have SDL.

To facilitate early access mode the protocol will launch in Reserve Mode, during which any staked SDL cannot be unstaked. Reserve Mode will end when the pool opens to non-SDL holders or when the pool is full.

Reserve Mode may be re-enabled periodically when total collateral limits are raised, per governance decisions, in order to allow SDL stakers first rights to stake their LINK. It is currently unknown how quickly and when LINK staking capacity will increase. In circumstances where the stake.link DAO has sufficient advanced notice of limits increasing, proposals can be raised to put the pool into Reserve Mode.

Rewards

In an article released last month, the Chainlink Foundation detailed the anticipated rewards for staking LINK, both for the community pool and for node operators. Since stake.link was designed to pool together node operator allocations, we can anticipate the rewards that an end user can expect for staking LINK at stake.link. After fees (detailed below), end users can initially earn an effective annualized reward rate of up to ~5.13%.

It is expected that the reward rate will change in the future as the pool size increases and Chainlink Staking evolves. One initiative which could have an early impact on the reward rate relates to the Community Pool. The node operator council will monitor how fast the Community Pool fills and expands in capacity. If there is sufficient capacity, stake.link may expand to offer liquid staking within the community pool. The result of these potential changes will be a blended reward rate.

Fees

Delegation Fee

In exchange for node operators contributing their staking allocations into the stake.link protocol they receive SDL tokens which represent their proportionate allocation contribution.

A delegation fee of 20% is applied to all LINK rewards generated by the pool, which is distributed to SDL stakers. This fee can change through governance, depending on various factors, including incentive programs and the targeted end-user reward rate. For node operators to want to participate, they need incentives to receive delegated collateral. For stakers to participate, they need to receive equivalent rewards for putting their tokens to work in providing economic security and value.

Core Contributor Fee

In addition to the delegation fee, there is an overall 3% core contributor fee. This fee will initially be directed to LinkPool for maintenance and development of the platform. As the stake.link protocol matures the core contributor fee rate and the allocation will be determined by governance.

Future Growth

The Chainlink Staking v0.1 Launch Details blogpost enumerates the threshold amounts of LINK collateral that can be deposited by community members and node operators. These thresholds have been well understood by the LinkPool team over many years due to the unique characteristics of securing a decentralized oracle network that rewards participants in user fees rather than inflationary rewards. This initial launch of stake.link has been designed and built to accommodate these characteristics, ones that are unique in the broader liquid staking industry.

Over time, these thresholds will increase as the required collateral grows from the community who alert within the network and the node operators that secure the network. As previously detailed, this will result in dynamic increases of the collateral that can be staked into the pool but also two other potential situations: new node operators joining the pool and additional SDL mints to reflect the potential differences in node allocations as collateral requirements change, both of which will be directed by governance

New Node Operators

The vision of stake.link is to build a unified staking pool with the highest reputational node operators who secure the highest value activities within the Chainlink Network. This cohort of node operators will grow as more high-value decentralized oracle networks (DONs) are created within the Chainlink Network. With this in mind, we’ve outlined a process for new node operators to join the staking pool.

Each node operator with a desire to participate in stake.link will present a proposal detailing a certain set of parameters such as their collateral allocation, rewards, and reputation. SDL holders will then signal on proposals to determine whether the proposed node operator is allowed to participate in the platform. If successful, the Node Operator Council will make the necessary contract changes to enable the new node operator to join.

Each new node operator in the pool will receive newly minted SDL upon joining. The amount of SDL that a new node operator receives is based on the LINK allocation that they contribute to the pool, as well as the application and governance process. The freshly minted SDL is automatically staked and vested on the node operator’s behalf, with the vesting schedule also determined by the application and governance process.

Collateral Changes

In the future of Chainlink Staking, it’s reasonable to envision a system where allocations between node operators are continuously updated based on the value they secure. In the initial v0.1 of Chainlink Staking, each node operator is allowed to stake 50,000 LINK, but as collateral requirements grow and the network expands, we see this increasing significantly and variably between each node operator.

Due to this, stake.link and the members who support it will govern the amount of SDL to be minted as the collateral requirements of the nodes change dynamically. The thesis underpinning this determination is to build a more decentralized system, lessen the signaling power of any single node operator with a large collateral allocation, and better reflect the ever-changing collateral amounts in the pool.

The platform is designed to be flexible to any changes that may require updates, ensuring incentives are aligned between all participants. We look forward to the discussions, proposals, and conversations that will take place around the expansion of stake.link in the future.

Cross-Chain Initiative

stake.link will launch on Ethereum Mainnet. However, in the future, there will be other networks that require LINK collateral to secure value. Our goal is to deliver an incredibly simple-to-use, beautiful user experience while avoiding fragmenting liquidity across multiple networks.

In turn, stake.link will proudly leverage the Cross-Chain Interoperability Protocol (CCIP), which is powered by Chainlink node operators, to enable LINK collateral to be interoperable across all different blockchain networks that require it. Ethereum Mainnet will serve as the central hub, and the pool will have numerous deployed Strategies that purely serve the purpose of distributing collateral cross-chain. An end-user will be able to stake on a single network while their collateral is distributed across every participating node and network with a completely blended yield.

Security Audit

The smart contracts powering the protocol have been iterated over many years, with various security audits performed by Sigma Prime along the way. The most recent audit was completed in August 2022. Final changes to the contracts have been resubmitted to Sigma Prime and will be publicly posted once available, at which time the contracts will be verified on etherscan.

Conclusion

This announcement has been 5 years in the making, it’s a pleasure and a privilege to get to this point and we sincerely hope that all who read it share the same level of excitement that we do. Not only does this usher in a new era for LinkPool and Chainlink, but with the launch of stake.link and the underlying Chainlink Staking protocol, it marks a new era of blockchain infrastructure that will further build on the existing foundations of definitive truth that has already been the catalyst to incredible advancements, innovations, and adoption.

Join stake.link and share your thoughts on Twitter: @stakedotlink and on Telegram: https://t.me/stakedotlink. The pool is open!