Oracles: Revenue and Tokenomicsby@firststagelabs
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Oracles: Revenue and Tokenomics

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The typical revenue model involves validators setting a fee for a data request to cover their gas and maintenance costs, while users pay for each request. Validators use the platform's token as collateral, and the protocol selects the validator with the most staked tokens to fulfill the request. As a result, fees represent most of the protocol's revenue, while demand for the utility token creates upward pressure on its price. Oracle protocols also receive grants from foundations and compensation from Web2 organizations for integrations and consulting services. Monetizing oracle platforms can be challenging. Popular platforms do not disclose their profits, but it is believed that most of their revenue is distributed to node operators and token holders through node incentives and staking rewards. While Chainlink is not viewed as a for-profit project, it likely generates revenue through partnerships and integrations with its commercial entity, SmartContract Chainlink. However, specific revenue figures are not publicly available. Attracting a partner is likely to be a better option compared to building our own protocol, considering potential challenges with monetization and the saturated market. There are various partnership options, including partnerships between entire networks or individual projects and an oracle provider, collaborations between foundations and oracle providers, running a node in exchange for the oracle provider's decentralized services, or the participation of individual projects, such as DEXs or DeFi protocols, in the oracle provider’s acceleration programs. Chainlink comprehensively outperforms its competitors in terms of adoption, indicating substantial barriers to entry in the market. Even new blockchains and emerging protocols prefer to adopt Chainlink due to its reputable node operators, reliable data aggregation, and high degree of decentralization. Therefore, it is advisable to consider an interim solution, such as parsing price feeds using a cryptographic signature from a market data source, and later explore the possibility of attracting Chainlink instead of an alternative oracle provider.

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by First Stage Labs @firststagelabs.A venture builder & VC firm focused on launching and scaling Web3-startups for mass audiences from the ground up
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