What’s Wrong With the Chainlink 2.0 Whitepaper? (For Simpletons)

Spoiler for the impatient

The Academic Pedigree of Chainlink 2.0 Whitepaper Authors


What this debunking is about

  • This article debunks the long-awaited cryptoeconomic mechanism that everyone has always talked about would secure Chainlink in the future — staking
  • More specifically, it addresses the new, crucial form of staking which previously hasn’t existed in the Chainlink protocol, called explicit staking, unveiled in the Chainlink 2.0 whitepaper
  • It also debunks the ”super-linear (quadratic) security” claims

What this debunking is not about

  • If the LINK token is unnecessary (this topic is exhausted)
  • If the LINK token is overvalued (also exhausted)
  • The centralization of the LINK supply (also exhausted)

Why Chainlink’s “Explicit Staking” is One of the Most Half-Baked Ideas in the History of Cryptoeconomic Design

So what’s the problem?

Let’s define cryptoeconomics: cryptoeconomic security is the concept of making evil actions cost more for the attacker than what the upside is.It is about creating systems that punish evil actors financially for not doing what they’re desired to do, so much that you as a user can rely on them to act faithfully in alignment with a protocol’s mission. In a cryptoeconomic system, you don’t need to trust that people are honest. You just trust that people are economically rational and are doing what’s best for themselves financially.This principle is the core, or atleast it was supposed to be the core, of all that underpins the modern public blockchain invention: the idea that we can build trustless systems and do away with trusted points of failure.

Enter explicit staking

From the Chainlink 2.0 whitepaper.

The explicit staking model turned out to be retarded

How to steal money in Chainlink 2.0 without any cryptoeconomic punishments

  • One node in the first tier colludes with the second tier and incorrectly escalates an answer as faulty, stealing all the stake from the first tier which the colluding group can now split among itself. All this requires is that the second tier collaborates or controls one node in the first tier (which would actually be a rather normal scenario).
  • Think of the first tier and the second tier as a single large group of oracles (because that’s what it actually is) and nobody escalates any error. They simply report incorrect data and rob the DeFi ecosystem of all the funds that relies on Chainlink oracles they possibly can and share the profits among them.
Yep, you understood it correctly. The way to fix the broken Chainlink oracle security model is apparently to backstop it with a bigger set of Chainlink oracles that function under the exact same broken security model as it has always functioned under.But don’t worry. By the time people catch on to this problem, Chainlink will have released Chainlink v3 where the tier 2 group is backstopped by a tier 3 group with even more trustier oracles! So no problem. Cryptoeconomics, yo.

“Super-linear (quadratic) security”

“Watchdog” simply means any node among the tier 1 oracle group. They can escalate errors.

The second reason this paper is extremely infuriating

Chainlink explicit staking, visualized. We solve trust assumptions by adding a second tier of trust assumptions.

Final remarks



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