[LINK] Collateral Onboarding Application
- Who is the interested party for this collateral application?
Details about the LINK token and Chainlink system were graciously provided by an anonymous member of the Chainlink community.
- Provide a brief high-level overview of the project, with a focus on the applying collateral token.
Chainlink is a generalized blockchain agnostic framework for building decentralized oracle networks that provide smart contracts with tamper-resistant access to real world data, events, and payments that reside on off-chain systems.
The LINK token is used to pay node operators for delivering off-chain data/compute through LINK’s ERC677 (ERC20 compliant) transferAndCall() function. LINK will also be staked by node operators in service level agreements (SLAs) as collateral which can be slashed for malicious activity, unresponsiveness, or any other predefined condition in the SLA. The LINK token is essentially economic bandwidth for Chainlink oracle networks.
SmartContract retains roughly 27% of the total supply of 1,000,000,000 LINK tokens out of an initial 30% allocation. SmartContract also controls an additional 35% of the token supply that is allocated to incentives for node operators. Roughly 38% of supply is circulating (35% from the initial token sale and 3% from SmartContract sales/dispositions).
- Provide a brief history of the project.
SmartContract was founded in 2014 as a development company for externally connected smart contracts. Chainlink had a token sale in September 2017 with a cap of $32M. The Chainlink mainnet was launched in May 2019 with an ETH/USD reference price feed. Since then, there are now 30+ price feeds connected with 16 DeFi projects.
- Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
Source Code: https://github.com/smartcontractkit/chainlink
- Link any available audits of the project. Both procedural and smart contract focused audits.
- Link to any active communities relating to your project.
- How is the applying collateral type currently used?
LINK is currently used within the Chainlink ecosystem as a means of payment to oracle node operators for delivering external data/compute to a specific blockchain environment. The LINK token will also be staked by node operators as collateral in service agreements which can be slashed for poor performance or non-responsiveness.
LINK is also used as a collateral asset, representing 34% of Aave’s total market size ($23M of $67M) and 40% of Aave’s total value locked ($22M of $54M) as of 21 May 2020.
- Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?
No organization bears legal responsibility for the collateral. The token is open source and permissionless, with no blacklisting/whitelisting or minting functionality.
SmartContract retains roughly 27% of the total supply of LINK tokens, and including the 35% reserved for node operator rewards retains effective control of roughly 62% of total token supply. It looks like the ICO and company token holdings are managed through SmartContract Chainlink Ltd SEZC, which is registered in the Cayman Islands. SmartContract’s primary place of business is in the US state of California.
- Where does exchange for the asset occur?
LINK is traded on centralized exchanges including Coinbase, Binance, Kraken, Gemini, Huobi, OKEx, Bittrex, as well as decentralized platforms such as Kyber, Uniswap, 0x, Loopring, and Oasis.
- (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
I am not a lawyer and no part of this collateral application is legal advice. I am not aware of any publicly available legal opinions addressing the project or token’s regulatory standing.
For context, LINK is listed on US regulated exchanges such as Coinbase, Gemini, and BinanceUS that are not qualified to offer exchange/brokerage services for securities.
This article (https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets) from the SEC may also help frame discussions on the token’s legal classification.
- (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.
- (Optional) List any possible oracle data sources for the proposed Collateral type.
The centralized exchanges listed in (9) may offer data feeds that can be used for a LINK/USD oracle.
Chainlink also has a LINK/USD price feed live on mainnet. It is updated every 1% price deviation by 9 independent security reviewed nodes connected to multiple price data aggregators such as BraveNewCoin (feeds data to bloomberg terminal), Coingecko, and Kaiko.
- (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.
Full disclosure: At time of writing I own 60 LINK.
Previous discussions relevant to LINK: