Interoperability and dependence on the Ethereum blockchain is a concern that crops up now and then in chainlink circles. Even commenters with technical backgrounds have trouble grappling with the idea that a token could be independent from the blockchain it’s built on. At a high level, if you think a team expressly focused and specialized in bridging off-chain to on-chain data would have no trouble producing an agnostic system, then read no further. At a deeper level though, this doubt might arise from a misunderstanding of how tokenomics will apply to open source projects going forward. We will go over these thoughts, review some past blockchain-token migrations, and how they will be handled in the future. Keep in mind the concern here is already based on a pessimistic outlook: one where Ethereum is not the standard for widespread smart contract use, or where it is fragmented among multiple smart contract platforms of considerable use, necessitating “agnosticism”.
Also note the arguments here are explicitly attributed to the Chainlink token as an reliable and enduring account of network value, not merely as a surviving idea or software protocol. We’ll review some strong forces at play binding them together.
As additional smart contract platforms gain native support by the Chainlink network in the future, details will be released about how to transfer LINK to that blockchain.
Chainlink FAQ
Past Migrations
Complete abandonment/migration of platforms have been pulled off in the past with surprising ease. Since blockchains are historic ledgers after all, it’s easy to track and release tokens to the rightful owner. Since many people have copies, it’s even possible to re-distribute in the extreme event that the original blockchain grinds to a halt. Storj is just one of many projects that have made transitions in the past, without major hiccup. The tokens were re-distributed fairly at a 1:1 ratio from Counterparty(built on bitcoin) to Ethereum. Project creators know that it’s best not to screw over your token holders as they will be the ones needed to bootstrap the network later. Similarly, Tether also made a major transition from Omni(built on Bitcoin) to Ethereum. Apparently 2nd layer solutions are not desired when compared to on-chain token solutions.
Atomic Swaps
In a scenario where two or more prominent smart contract platforms exist, there may be a way to create a lockup or burn when transferring to another platform. Thus preserving the scarcity of the token. Enforcement of scarcity might be an emergent property in the future. Just as today, silver and gold coins are tested to make sure they are “real”, token holders of the future may audit an atomic swapped token’s history, to make sure the original token was burned or locked.
Tokenomics
It is well-known that once a network effect takes hold, it can be very hard for competing systems to gain adoption. Failed networks that lose momentum are often abandoned due to unnecessary barriers to entry, price-fixing and lack of flexibility. Once value/utility is well established, history has shown that simply allowing participants to adjust their own parameters is enough to prevent defection to competitors. This openness fits well with the chainlink team’s ethos.
We created a framework with minimal requirements, yet unbounded flexibility, so you can focus more on the functionality of your smart contracts.
Chainlink Solidity Reference
Currently, chainlink configuration variables are freely adjustable for node operators and should therefore be flexible to market forces. MINIMUM_CONTRACT_PAYMENT can be used in the configuration variables for node operators wishing to earn certain levels of income. Meanwhile LINK_CONTRACT_ADDRESS is used to hold any required staking as part of a contract request.
You might think that requiring people to use the chainlink token is an artificial barrier. Although, as we pointed out in a previous post there are now dexs that will enable seamless conversion and use between platforms. If you are a oracle consumer or smart contract creator, but hold no chainlink tokens, it’s not hard to envision a simple add on, which converts your ETH seamlessly in the background as part of the agreement.
If you are still unconvinced of chainlink’s token utility, then simply envision a future in which the protocol changes to allow both Ethereum and Chainlink tokens for smart contract payments and deposits. The only things really needed for a medium of exchange and deposit is sufficient value, liquidity, and stability. Since the Chainlink’s token supply is fixed, Gresham’s Law does not apply. There is no way to debase in the token economy. Meanwhile ETH would be slowly inflating. Compared to other Cryptocurrencies, Chainlink would still be relatively scarce. As one of the most popular tokens trading, liquidity is sufficient for people to aquire and sell, meanwhile any instability in the token can be hedged with increased stake/payment amount. On the plus side, in a future where everything is priced in ETH, staking an asset that steadily increases in value(albeit more volitile) against ETH might be seen as a better signal of long-term reliability of node operators.
Also note that token use and distribution will likely be used in a variety of creative ways not in use/understood today. For example, certain developer groups and accreditations may require a minimum stake of Chainlink tokens. Today, despite the numerous options for people to download media and software for free on torrenting sites, people are still willing to pay for official products for convenience, the latest updates, security and to support creators. I suspect a similar dynamic will be in play incentivizing people to use the original Chainlink network despite any forks and alternate payment systems.
Technical challenges
You might think that as opposed to an economic challenge, there could be some bug or technical challenge that the Chainlink protocol has wrong that could put the network at risk in the future. Although I argue that these problems are not catastrophic once the network reaches a certain size and momentum. I argue that we are already past this stage now with Chainlink. Chainlink’s large head start in terms of awareness, adoption and developer activity means that critical flaws may be rerouted and competitor advantages absorbed.
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