Chainlink’s Liquid Leap: Stake.link Charts the Course for DeFi's New Horizon

Imagine a future where your digital assets are not just a static investment but a living, breathing entity that works for you around the clock. Jonny Huxtable, a visionary in the blockchain space, takes us on a journey through the intricate world of Stake.link, where he's redefining what it means to 'stake' in the ecosystem of Chainlink.

From his early days mining BTC to his pivotal role in liquid staking, Jonny's story is not just about the ascent of LinkPool but also the potential of decentralized finance to empower the individual. As we unpack the mechanics behind stake.link and its mission to infuse liquidity with security, we stand on the cusp of a new chapter in blockchain's narrative—a chapter where every participant holds the power to shape the network.

Unlocking Chainlink's Potential: Stake.link's Strategic Vision for a Liquid Future

Ishan Pandey: Hi Jonny, great to have you here for our "Behind the Startup" series. Please tell us about your background?

Jonny Huxtable: Great to speak. For me, I got into the space like most people would do. I had some BTC in 2014/2015, but I really got into things before the 2017 cycle, and I became interested in Chainlink as the token offering took place in 2017. I joined the Chainlink slack channel, started speaking to everyone about the project, and I came to understand the premise of the project. I saw promise in Chainlink. It was that promise that made me want to get more hands-on in the space, and that’s when I started LinkPool.

LinkPool began as sort of a bedroom project I worked on the side of my full-time job. It was one of the first third parties to build on top of Chainlink, run infrastructure, and carry it on from there. LinkPool was one of the first three node operators that went live on Ethereum mainnet in the Summer of 2019, and we’ve played a significant role in not just breaking down the barriers to participation in the Chainlink Ecosystem, but also developing the tools and the infrastructure for node operators on the network.

Stake.link: The First-Mover Liquid Staking Protocol in the Chainlink Ecosystem

Ishan Pandey: Stake.link is described as the "first-mover liquid staking protocol in the Chainlink Ecosystem." What motivated the creation of stake.link, and what unique value does it offer to users?

Jonny Huxtable: To answer this question, it was the original vision and drive of a pooling system for Chainlink in 2017 that drove the vision to build stake.link but on a much grander scale. With the explosion of LSTs with the rise of Ethereum staking protocols, it became clear that with the launch of Chainlink Staking it would also greatly benefit from a liquid staking protocol that has a cohort of the very best Node Operators that participate in the Chainlink network. That’s what stake.link is, the premier staking protocol for Chainlink backed by the very best.

The Concept of Liquid Staking and Stake.link Protocol

Ishan Pandey: Could you explain the concept of liquid staking and how it works within the stake.link protocol?

Jonny Huxtable: Liquid staking is a concept that allows users to stake their tokens in a way that they remain liquid and tradable, rather than being locked up in a staking contract.

• Traditional staking typically involves locking up tokens in a network's smart contract to support its operations and earn rewards. These tokens are usually illiquid and can't be readily traded or used elsewhere.

• Liquid staking, on the other hand, enables users to stake their tokens while still having the freedom to trade or utilize them for other purposes. It's made possible through liquid staking tokens, LSTs, representing the staked assets' value, which can be traded or used in DeFi applications. These are very visible in the Ethereum network, and we’re working to make it just as visible for the Chainlink Ecosystem.

• This is currently the case with General Access Staking in the Chainlink Community Staking Pool, and the stake.link protocol addresses the issue of locked staked tokens.

• At the core of this is the withdrawal capability feature. This feature provides a liquidity buffer in the protocol, allowing users to withdraw their staked LINK from the protocol by depositing their receipt tokens that they are given after they’ve staked LINK: this is the stLINK which represents the staked amount of LINK.

User Journey on Stake.link

Ishan Pandey: Could you elaborate on the user journey on stake.link, from connecting a Web3 wallet to earning rewards and withdrawing assets?

Jonny Huxtable: Sure thing. The protocol is built to be as seamless as possible even for people who haven’t been involved in DeFi or moved their tokens off of exchanges in the past.

• Right now, Chainlink is at the end of its version 0.1 of Staking and all space is taken up. Chainlink Labs who builds the infrastructure for the entire Ecosystem has announced that Staking v0.2 is coming in Q4 2023, so between now and the end of the year. This version of staking entails an increase to the amount of tokens that can be staked from 25M in v0.1 to 45M in v0.2.

• To start the user journey on stake.link, a user would first need to connect their Web3 wallet containing LINK tokens to the platform, and deposit LINK tokens in the “holding zone” that we call the Priority Pool.

• Once Staking v0.2 arrives and General Access opens to the public, the LINK deposited in the Priority Pool will be staked in the General Access Community Pool using Chainlink Automation contracts. That means we’ve crafted smart contracts that recognize down to the second when the General Access Pool opens up to the public, and they will immediately begin auto staking Priority Pool LINK so that the users don’t have to.

• Once a user’s LINK is staked, they’re then able to claim their staked LINK receipt token, stLINK to their wallet and decide for themselves what they’d like to do with it. Users will then earn rewards for staking their LINK tokens. Node operators, who provide services in the Chainlink Ecosystem, earn rewards in the form of a delegation fee through stake.link’s native SDL token. Community stakers, who supply LINK collateral to secure the network and act as alerters if they notice the ETH/USD price feed has not updated within a set time frame, receive rewards after delegation and core contributor fees to the protocol.

• The rewards earned depend on the staking strategy and the capacity of the staked pool. At launch, stake.link enabled a "Node Operator" strategy pool, and in 2023, the pool capacity will be increasing for node operators. We’re excited to bring liquid staking to a portion of the Community Pool. The combination of these two strategies results in a blended reward rate.

Engaging with the Stake.link User Community

Ishan Pandey: How does stake.link engage with its user community, and what channels do you primarily use for client outreach?

Jonny Huxtable: Our community includes LINK holders encompassing retail users to institutional, banking users, and everyone in between seeking seamless access to staking the LINK token. Client outreach primarily takes place on LinkedIn, Twitter across the profiles of stake.link node operators, multiple Telegram channels, and a dedicated Discord for the stake.link protocol.

• One of the core reasons we’re able to deliver for the community is because of open dialogue and constructive feedback that they provide in our Telegram and Discord channels, and this is certainly the case on Twitter. We listen to that feedback every day and actively incorporate it into the protocol to make for a better overall staking experience.

Key Challenges and Opportunities in Liquid Staking

Ishan Pandey: In your view, what are the key challenges and opportunities in the liquid staking space, and how does stake.link plan to address them?

Jonny Huxtable: Two of the big things that stand out in the Liquid Staking space are security and centralisation.

• Stake.link consists of 15 Chainlink node operators. 15 different teams, different companies, different people that are some of the most experienced and professional teams not just in the Chainlink Ecosystem, but across all of Web3, and this consortium directly addresses the dilemma of centralisation vs decentralisation.

• As for security, this is something everyone in the industry can relate to and we see it like clockwork: protocols, dApps, bridges being exploited for tens of millions, hundreds of millions of dollars. It’s a serious problem because not only are people losing their money, but that money is now in the hands of bad actors who can do real harm with that capital.

• That’s why we take rigorous security measures and work with some of the most prominent smart contract auditors in Web3. Our ethos is straightforward: audit, audit, audit, and then audit again, as well as work closely with our smart contract auditing firms to address every vulnerability – no matter how severe or seemingly insignificant.

AI-Driven Analytics and Data Insights

Ishan Pandey: AI-driven analytics and data insights are becoming crucial for decision-making in the crypto and blockchain space. How does stake.link plan to incorporate data-driven insights for its users?

Jonny Huxtable: It’s amazing to see the explosion of adoption and real-world use of AI technology in the last 11 months.

• In September 2023, we launched our first major protocol upgrade that included the rollout of our Chainlink-inspired chatbot called SergAI – named in honor of the Co-Founder and CEO of Chainlink Labs, Sergey Nazarov.

• You can think of SergAI as a massive repository of all things Chainlink Staking and stake.link.

• Everyone has lives outside of the industry. They can’t be online 24/7. That’s why SergAI is important: people are able to ask questions and get straightforward answers.

• We view SergAI as a significant step forward and a net positive for our overall user experience, and without revealing too much, it’s just the beginning of the direction we want to take in incorporating AI technology into the platform.

Stake.link's Role in DeFi and NFT

Ishan Pandey: With the growth of decentralized finance (DeFi) and non-fungible tokens (NFTs), how does stake.link envision its role in supporting these emerging ecosystems within the broader Web3 framework?

Jonny Huxtable: We’re excited for the future of onchain finance and we’re proud to have played a part in its success in even basic form as we saw in Summer 2020. Enabling decentralised applications to get accurate, up-to-date, precise reference data changed the game and enabled the sector to flourish as it did in DeFi Summer when applications were dealing with flash loan attacks due to the use of centralised price feeds.

The work that Chainlink node operators played providing reliable reference data in DeFi Summer can be considered as a sort of proof of concept for what can be done in the future for DeFi. Chainlink has rolled out, and the node operators have scaled the use of other Web3 services such as smart contract automation, Verifiable Randomness (VRF), and recently Data Streams where applications no longer have large deviation thresholds for price feeds – price feeds can now be updated at a hyperfast rate compared to the previous 0.5% deviation threshold as was the standard up until recently and in DeFi Summer.

Data Feeds has immense potential and was needed in order to cater to larger players in the broader financial industry that require hyperfast, reliable reference data with little to no deviation threshold in order to operate properly onchain.

This will only grow and enable further adoption. NFTs are another sector of Web3 ripe for adoption, and much like DeFi, can benefit immensely from Chainlink Web3 services. VRF is a critical one, ensuring that NFT mints are verifiably random and fair for all participating users – regardless if a user is retail, enterprise, or anything in between.

We also see a lot of potential in dynamic NFTs (dNFT) too. These are NFTs with encoded smart contract logic that enables them to automatically change its metadata, characteristics based on external conditions and events.

The market has already spoken in that it wants NFTs that update based on external events. The simplest form of this is a basketball card, for example. If someone owns a tokenized basketball player’s card (NFT), their statistics will change over time as the player continues their career. NFTs need the ability to update their characteristics, and node operators as those in stake.link enable just that.

Going beyond the very basic use-cases of something like a basketball card, though, is something like tokenized real estate – An NFT representing a property that could reflect numerous factors such as maintenance history, age, market value, and more. Tokenizing these everchanging assets requires NFTs that have the ability to update with changing metadata. We enable that and can provide that reference from the offchain world, and bring it onchain.

Regarding both NFTs and onchain finance / DeFi, it’s still very early for both sectors of the Web3 economy. These categories are going to play a significant role in how humans, businesses, industries conduct commerce, exchange data and value, and above all instill a layer of confidence in the capital markets industry.

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