At Coindesk’s Consensus 2022 festival in Austin, Texas, Chainlink co-founder Sergey Nazarov gave a virtual presentation on Chainlink Economics 2.0, which will officially begin with the launch of Chainlink staking in the second half of 2022.
Nazarov outlined society’s inevitable shift toward cryptographically guaranteed systems, following the precedent set by end-to-end encrypted messaging. Encryption, he posited, is “society’s defense mechanism” for institutions and technology platforms that fail to deliver on their promises and lose the faith of consumers.
As recently as ten years ago, few people understood the value of end-to-end encryption in digital communication; now, Nazarov pointed out, the “average teenager” understands why it’s so important.
“This proves to me, even in a very near-term way, that the difference between a paper promise and a cryptographic guarantee is extremely valuable and highly valued by users, once they understand what that guarantee is,” he explained.
Now that end-to-end encryption is the “new minimum standard” for messaging platforms, he expects that standard to extend to people’s economic lives.
“This is what I predict will happen to the rest of the world,” he said.
“At the end of the day, it all comes down to the same thing: the expectations and guarantees that users thought they have, they don’t have. And they won’t have those guarantees until they become cryptographically guaranteed.”
He explained how society’s shift toward cryptographically guaranteed systems will be enabled by trust-minimized applications, the infrastructure for which Chainlink continues to provide.
He believes a proliferation of trust-minimized applications in both web2 and web3 will eventually constitute a global market of cryptographically guaranteed digital relationships between peers, platforms, and institutions, regarding everything from commodities, equities, real estate, derivatives, advertising, ticket sales, gaming, insurance, etc.
Nazarov said the increase in applications integrating Chainlink oracle networks, which will soon surpass 1,000, coincides with the decreasing cost – a 10x reduction since 2021 – of providing those decentralized oracle network services. As blockchains compete with each other to achieve greater speed and scalability, more Chainlink oracle networks become profitable.
He highlighted two additional dynamics – a “fast lane” for transactions related to oracles as a public good and blockchain grants that boost developer ecosystems – that could further increase revenue as costs decline.
With staking available on the Chainlink Network, a greater share of revenue will flow to node operators and those providing stake to ensure the network’s cryptoeconomic security. The initial v0.1 release of staking will launch a basic reputation framework and staker alerting system, while successive versions will follow an intentionally “slow, methodical” approach to enable slashing, staking rewards, and loss protection mechanisms.
Nazarov said staking – along with Chainlink’s global inter-blockchain messaging standard, CCIP, which would allow enterprises to interact with multiple blockchains through a single interface – will ultimately expedite a universal standard for cryptographic guarantees that Nazarov calls the truth machine.
“A society powered by cryptographic guarantees needs a system of cryptographic truth to prove what happened, whether that’s about random numbers, market data, weather events, or even just computations that the trust-minimized application needs,” he said. “This is the world that we’re moving towards.”
Watch Sergey Nazarov’s presentation at Consensus 2022.