The Bull Case for $LINK (Chainlink) | ChainLinkGod & Fishy Catfish

Chainlink’s community is anything but weak. Today we brought on two of Chainlink’s most prominent community members, ChainLinkGod, a Chainlink Community Ambassador and FishyCatfish, a miner, investor, and all around crypto enthusiast. The two of them are here to give us the bull case for $LINK. ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT ----- 🔐 Get a Free Trial of Doppel https://bankless.cc/doppel ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 https://feeds.flightcast.com/%E2%81%A0https:/k.xyz/bankless-pod-q2 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask https://feeds.flightcast.com/%E2%81%A0https:/bankless.cc/MetaMask ⚖️ ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum https://feeds.flightcast.com/%E2%81%A0https:/bankless.cc/Arbitrum ⁠ 🔗 CELO | CEL2 COMING SOON https://bankless.cc/Celo ------ TIMESTAMPS 0:00 Intro 7:00 What is Chainlink? 8:32 Ultimate Vision of Blockchains 10:19 Why We Need Chainlink 16:15 $LINK Genesis Story 25:41 Role of $LINK 30:12 Chainlink Validating & Value Prop 35:02 Bonds & Yield 39:30 Chainlink Service Fees 44:53 Fee Price Discovery 50:42 Decentralized Computing Marketplace 54:39 Chainlink’s Unique Value 1:02:05 Composabilty & Scope of Fees 1:08:00 $LINK the Capital Asset 1:11:00 Chainlink Yield Hooks 1:12:10 Collateral Equilibrium 1:13:07 Tokenization of RWAs 1:20:24 Numbers to Focus On 1:25:25 David’s Bull Case For Chainlink 1:26:27 Chainlink’s Next 3 Big Bets 1:31:38 Get Further $LINK-pilled 1:33:00 Closing & Disclaimers ------ RESOURCES Sergey’s Bankless Episode https://youtu.be/AzQnY0CqHOw ChainlinkLinkGod https://twitter.com/ChainLinkGod Fishy Catfish https://twitter.com/CatfishFishy ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  The end case of what on-chain finance will ultimately look like, where it will be a hybrid of both on-chain executing code, as well as these off-chain collateralized assets, or natively issued on-chain assets like tokenized bonds, moving through the system using Chainlink price data, using Chainlink proof reserves, using identity data, like all these useful data inputs is ultimately the economy that we're trying to create. And a lot of that will end up settling on Ethereum itself as like this neutral meeting ground between different distrusting counterparties, where each counterparty has their own chain, but they want some settled ground to execute their contracts upon. So like this is a bull case for the whole industry. It's growing the pie for everybody effectively is really what Chainlink's trying to build towards.

• 0:43David Hoffman?

  Bankless Nation, welcome to the Bull Case for Chainlink. A few weeks ago, we hosted a long-awaited interview of Sergey Nazarov, the founder of Chainlink. We got the pitch for why Chainlink, what it does, what it wants to do, and what economic activity it potentially unlocks for the on-chain world. If you haven't listened to that episode yet and you're going down the Chainlink rabbit hole, I definitely recommend listening to that episode. This episode you're currently listening to is what I feel is the second half of that first conversation with Sergey. During our episode with Sergey, we stayed pretty high-level about Chainlink and what it is and what an oracle network is. We never really got the chance to talk about the link token specifically. Chainlink is understood to me now,

• 1:27David Hoffman?

  but the role and function and upside of the link token specifically inside of the Chainlink system was a stone we left unturned in that episode with Sergey. In this episode, we attempt to turn over that stone. What is the link token? How does it fit inside the Chainlink system? How does it capture value? Who is going to pay fees to Chainlink and why? And how do those fees become reflected in the link token? Sergey said that Chainlink wants to unlock the hundreds of trillions of dollars of real-world assets and bring them on-chain with Chainlink as the conduit, of course. If that happens, how does link token capture that value in that process? These are the questions I asked two of Chainlink's most prominent community members,

• 2:10David Hoffman?

  Chainlink God and Fishy Catfish, two crypto Twitter Anons who have seemingly committed their online lives to spreading the good word of Chainlink. So I brought them on the show so I could hear from them directly what exactly is the bull case for a link. Bankless Nation, I am putting on my bull cap today. That means that this conversation is biased to bullish. I am here to understand the bull case for a link and share that with you all. And if you want to understand the bear case for a link and the risks that the link token has, this episode will not provide that. You will have to do your own research. Bear hats don't fit very well on my head. I prefer making bullish content, so that is what you'll be getting today. Disclosures before we get into the episode with Chainlink God and Fishy Catfish. Nothing in particular. I don't hold any link tokens.

• 2:55David Hoffman?

  I'm just here to help articulate the bull case. I do own a bunch of ETH and we frequently talked about Ethereum in this episode, but that likely comes as no surprise to Bankless listeners. There is a link to all Bankless disclosures in the show notes, bankless.com/disclosures. So let's go ahead and get right into this episode, the bull case for a link with two of Chainlink's most prominent community members. But first, a moment to talk about some of these fantastic sponsors that make this show possible, especially our preferred crypto exchange in 2023, Kraken. If you do not have an account with Kraken, consider clicking the link in the show notes to getting started with Kraken today. You can buy Chainlink, the link token, on Kraken, as well as many of the other assets that they have listed because they're an exchange. Let's go hear from them right now. Kraken Pro has easily become the best crypto trading platform in the industry. The place I use to check the charts and the crypto prices, even when I'm not looking

• 3:40David Hoffman?

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• 4:23David Hoffman?

  Vitalik has shared its excitement for the Cello Layer 2 on the Cello forum, so has Ben Jones from Optimism. But why? The Cello Layer 2 will bring huge advantages, like a decentralized sequencer, off-chain data availability, and one-block finality. What does all that mean? Rock-solid security, a trustless bridge to Ethereum, and more real-world use cases for Ethereum without compromise. And real-world adoption is happening. Active addresses on Cello have grown over 500% in the last six months. With the Cello Layer 2, gas fees will stay low, and you can even pay for gas using ERC20 tokens. But Cello is a community-governed protocol. This means that Cello needs you to weigh in and make your voice heard. Join the conversation in the Cello forum. Follow @celloorg on Twitter and visit cello.org to shape the future of Ethereum.

• 5:06David Hoffman?

  Bankless Nation, I'm super excited to bring to you Chainlink God, a Chainlink community ambassador focused on breaking down the information asymmetry, on the role of decentralized oracle networks (we're going to talk about them today with Chainlink), and the role that they play in the on-chain economy. Commonly seen in the wild jungle of crypto Twitter, role-playing as a frog wizard, you probably know who Chainlink God is if you've ever encountered the Link Marines. All opinions from Chainlink God are his and his alone. Chainlink God, welcome back to Bankless. It's been a while, my man. Yeah, it's been a couple of years. Thanks for having me on. And coming in as well, we have Fishy Catfish. Fishy Catfish has been a minor investor and all-around crypto enthusiast since about 2013. In 2016, one of his friends

• 5:49David Hoffman?

  recommended him to get on Twitter, and he's been trapped in the mental asylum that is crypto Twitter ever since. In 2017, he happened to find Chainlink on /biz, a 4chan forum, and he has been link-pilled ever since. Fishy Catfish, welcome to Bankless for your first time.

• 6:05Speaker 02

  David, thank you for having me, bud. Appreciate you being here and thank you for extending the invitation to us to come on here. Is this the part where we say that this is not financial advice? And that goes doubly for me because I'm just a guy who found out the streets of Twitter, so.

• 6:17David Hoffman?

  Yes, this is certainly the place. It'll also be at the end. This is not financial advice. This, I think, is just like the other half of the conversation that we did with Sergey not too long ago. With Sergey, we got like the big download on what is Chainlink, what is an Oracle network, what is its ambitions? But we were never really able to talk about the link token specifically. So I want to take a moment to talk about one of the largest communities, the one of the biggest tokens that's had just like this crazy reputation over the years. I want to approach that subject head on, the link token specifically. And so we have to get two members of the community to help navigate that question. You guys, guys ready to do that?

• 6:59Speaker 02

  Let's dive in. I think we are.

• 7:01David Hoffman?

  Okay, so I kind of want to first set the stage. We did the what is Chainlink episode with Sergey. And I learned an immense amount of material all throughout that podcast. But that was 90 minutes of saying what is Chainlink? And so I kind of want to just try and get the two-sentence version, the three-sentence version of what is Chainlink? How do you very simply explain what Chainlink is? Chainlink, God, you want to take this one?

• 7:26Speaker 00

  Yeah, so I'll keep it brief. You know, if you want the full explanation, then definitely check out the Bankless episode with Sergey, very in-depth. But basically, at a very high level, blockchains are very decentralized, secure networks for processing transactions. But through their security model, they can't connect to external systems. So they can't connect to external data sources to trigger a contract. They can't connect to external data servers to trigger events in the real world, like IoT devices or any kind of other devices. And oftentimes, blockchains can't even connect to each other. So they're kind of these isolated islands. So what Chainlink ultimately aims to solve is what's called the blockchain oracle problem, providing a secure decentralized source of both inputs and outputs. So smart contracts can extend their capabilities beyond what's just a possible on-chain

• 8:10Speaker 00

  and connect to all the external data resources, the institutional backend systems, and to other blockchains in a secure way. So you can create this interoperable, secure internet of contracts where all the systems, Web 2 and Web 3 combined, create more useful on-chain applications. Like at a very high level, that's what Chainlink's aiming to achieve. But you know, watch Sergey's interview on Bankless to get the full deep dive there.

• 8:32David Hoffman?

  Yeah, Sergey's interview will explain how Chainlink gets that done. But I thought that explanation was pretty powerful. Just the blockchain oracle problem. This is a problem that exists if we reroll the dice of crypto. Like, that is, it's a fundamental constraint of what blockchains have. It's blockchains know about themselves, but nothing else. And so the problem of bringing external data, external state, external events onto a blockchain is not a solution that a blockchain produces internally. Endogenously, it needs an external source, an external system to bring that data into a blockchain system. So like, if we were to reroll the dice of crypto and like, there would be a different Bitcoin or a different Ethereum and a different Solana, there would still be

• 9:16David Hoffman?

  the blockchain oracle problem and there would still be some version of Chainlink. Is this correct, Chainlink God?

• 9:23Speaker 00

  Yeah, absolutely, because it just comes down to the security model. Like, the reason blockchains are so secure is because they're isolated. And the only thing blockchains validators care about is, is this transaction invalid? Or is it not invalid? And that's what makes them so robust against attacks. But you need, you still need these external inputs and outputs. And so you want to replicate basically the blockchain security model, but apply it to all these external data points that are fundamentally required for all the amazing use cases people love, like DeFi. It's probably the biggest one that if we didn't have oracles, DeFi would basically be Uniswap. Like, you wouldn't have basically any of these other financial applications that people want to do. And in my mind, at least 90% of useful smart contracts fundamentally need oracles in order to exist in the first place.

• 10:06David Hoffman?

  Fishy, what would you add to this definition?

• 10:08Speaker 02

  I view it as this kind of heterogeneous, general-purpose framework for compiling together these kind of external validator sets to basically provide services that blockchains need, but can't do themselves.

• 10:19David Hoffman?

  Beautiful, beautiful. And I think before we go on and start talking about the way that the link token plays a role in this, it's worth talking about these two potential futures that exist. There's like, the potential for crypto, blockchain, DeFi that exists without something like Chainlink. And then there's the version that exists with something like Chainlink. The, my aspirations for crypto is that it Is the global financial fabric that blankets the world, right? Everyone's using it. But that there's like a, there's two different paths. There's one that takes and has external data. And then there's one that's just like insular. Maybe Chainlink, God, you can like, talk about like the difference of crypto's success story with external data with something like Chainlink or without.

• 11:04David Hoffman?

  And like, why we kind of need it to be the one with it?

• 11:08Speaker 00

  Yeah, so when you look at what blockchains do and what you can do natively with just a blockchain, you can kind of bucket into like three different things. You can, you can mint a token, you can move a token around, you can swap a token for another. And I guess also a fourth, you could do DAO voting with private keys. But if you want to do anything else, you need some other type of trigger or some other type of external connection. So in that world, crypto would be very useful as a medium of exchange for payments, since you don't need external data resources. You just move tokens from one wallet to another. So like stable coins would be a good use case for that. But if you want to go and use those stable coins and you want to lend it out, or you want to collateralize a loan, or you want to do any more complex financial application with that, then that's the world where you need to start stepping into oracles.

• 11:50Speaker 00

  If you want to, you know, deposit your ETH onto AVE and then you want to borrow some USDC, you know, AVE needs to know what the price of ETH is so it can keep the loan collateralized. And it needs to know what the price of USDC is. So, you know, if there's a spike in value, it can, it could liquidate the position to keep the protocol solvent. That's where oracles fundamentally come in. But it also comes in, in terms of when institutions start to step in and they start tokenizing, you know, trillions of dollars of tokenized assets, they need to be able to access the most amount of liquidity across all these different chain environments. So they need a secure cross-chain solution to do that. And cross-chain solutions are just oracle networks where the data source is another blockchain, like if you boil it down. So if you want to create this interconnected economy where all these blockchains are connected together,

• 12:33Speaker 00

  assets can move from a bank's own private blockchain to another bank's private blockchain, or even to a public blockchain like Ethereum. You need this interoperability solution to move these tokens around and inject the data that's required, like identity data, proof reserves, pricing, net asset value, all these data points that institutions require for their assets. Those are oracles, like you need oracles to do that. So in my mind, the future vision of blockchains is that they're the ultimate settlement layer for all the assets in the world. But if we want to actually achieve that vision, you need the oracles and all these external services to make that possible from off-chain data, off-chain compute, cross-chain interoperability, like that's the world I want to live in. Like, we can have a world like with Bitcoin where Bitcoin's value prop is that, you know,

• 13:15Speaker 00

  it's its monetary policy, it's the store of value, meaning of exchange, it's very useful, but that's like a subset of what blockchain is going to be used for. And I think the vision is way grander once you start to have oracles in the mix here.

• 13:27David Hoffman?

  Yeah, I think to put on like my Oracle Network Bull hat, the world of which, in which crypto only has data about itself is one where it remains kind of niche and a curiosity and only services a small fraction of the total spectrum of what could be financial activity on a blockchain, which I think that financial and a financial activity on a blockchain is fundamentally better for all the reasons why people are crypto people. But without having data about the world, like the world of finance, the world of Wall Street, they can make statements in their financial contracts about the state of the world because of just the nature of pen and paper contracts. It's all subjective, it can be contested in court. And so they kind of have this world of like

• 14:12David Hoffman?

  the state of the world, state of finance, much more accessible to them. So maybe it's a little bit harder in the world of crypto networks because cryptography is inherently just math and numbers and that is harder to get data about the world in order to be interoperable with DeFi, with smart contracts. But nonetheless, if we were just confined to a world in which DeFi was about itself and not about the rest of the world, then in my mind, the crypto experiment is kind of failed. Like, we want to be the global financial system for the entire world and that needs, means that we need to be able to ingest state and data about the world in order to have a fully fledged financial system that does operate on a blockchain. That's kind of how I would articulate the most bullish version of crypto's future.

• 14:58David Hoffman?

  Chain that got anything you would add to that?

• 15:00Speaker 00

  Yeah, I mean, I think one thing is that people, you know, the crypto market cap in the ecosystem is about a trillion dollars. And I think people don't see how much value actually exists in the traditional system. Like Sergey kind of touched on this as well, but like it's not about adding another trillion. It's about adding the hundreds of trillions of private and public assets that exist in the financial system and importing them into an on-chain format. Like that is, finance is where all the money lives. And so if we want blockchains to actually reach a global societal scale and really impact people's daily lives, even if they don't realize they're using a blockchain, you have to connect with the external financial system itself. And it's not like all the institutions are going to go away. They're going to replace the whole infrastructure with the blockchain and that'll be the world. Like that's not, it's not very practical.

• 15:43Speaker 00

  So you have to like take these baby steps of connecting more and more systems to blockchains, bringing more and more assets on chain to the point there's not going to be on-chain finance and TradFi. It's just going to be finance and assets will be represented in whatever the most efficient format is. And you know, our bull case is that it's going to be on-chain. It's more transparent, it's more efficient, it's faster to settle, it's cheaper to move, like all these great properties. It'll naturally just converge towards an on-chain format. But you know, this is hundreds of trillions of dollars we're talking about. This is not like, it's not a small, small bull case that we're talking about here. It's a large opportunity.

• 16:16David Hoffman?

  I think this was a really good setting of the table and just providing context for the vision for what Chainlink wants to go after. And I want to start to narrow this conversation about specifically the link token and the role that link, the token plays in this future, this future version of the world that we all want. So like, let's talk about actually where link came to be, like where did it come from? What's the genesis story of link? How did it come to exist?

• 16:42Speaker 00

  So before Chainlink was even a thing, Sergey and Steve Ellis had founded and they ran a company called Smart Contract back in 2014, which was actually a centralized org as a service company. And so I actually got a chance to even meet Sergey before Chainlink made a launch back in 2019. And we actually got a chance to even talk a little bit about Smart Contract itself. And you know, one of the points he made to me was that, you know, it doesn't make any sense.

• 17:09Speaker 02

  To use a blockchain that has large numbers of nodes, you know, executing your on-chain contract code. And then you just combine that with like, you know, three guys in a basement somewhere who control your oracle. And then they end up triggering your smart contract with external inputs, right? And so I'm kind of like speculating here, obviously, but I took his comments to mean that they had likely realized that the path they were on was sort of destined to end with them being the three guys in the basement, where they would eventually sort of hit this hard ceiling in terms of the scale of adoption and value secured. Their system could safely support and that this service provider model would not be the correct path. If they wanted to fulfill their larger vision, as we now know it, of enabling a cryptographically secured verifiable web.

• 17:52Speaker 02

  So it's impressive that they were able to recognize this kind of so early in their journey. And they kind of began their pivot towards repurposing and transforming their centralized organized service company into the initial building blocks of what became Chainlink, which is this open network, general purpose protocol. For kind of putting together these decentralized validators to perform off-chain services that blockchains need, but can't do themselves. So it was impressive that they kind of figured that out and, you know, basically started from scratch.

• 18:23David Hoffman?

  And really just to kind of set the stage of the era that that was in crypto, 2013, that was two years before Ethereum. And so I think that when you are, you mean to say that it was impressive that they just thought they ran through this idea maze so early. There wasn't a lot of clay in crypto to work with prior to like DeFi, DeFi didn't exist, Ethereum didn't exist. Smart contracts were a concept, but not in production. And so like Fishy, what you're saying is that they kind of just ran simulated in their brains. What the future of crypto would be and kind of came to the conclusion that we're going to need something like a decentralized oracle network in order to get this job done.

• 18:58Speaker 02

  Yeah, it was actually a year, that was 2014. I'm not sure if you misheard me, but um, I don't know the full kind of tech stack of what they were using at the time. I know I've heard later on Sergey talk about that uh, he, you know, came across Ethereum and realized that they'll be building this portion of the tech stack. So then they kind of focused on the other pieces of the tech stack. But I think back then, um, they may have even been Kind of been building the piece of where the code kind of executes. So these were kind of very centralized types of services. And I even remember back on Biz, I occasionally come across screenshots of past work they actually done. As part of smart contract, right? Where they had kind of built these smart contracts. I think I came across, I remember like two or three of them.

• 19:39Speaker 02

  I think one was like a smart contract they built that was tied to SEO performance where basically they built a smart contract that said, hey, if your company is right now like ranked 30 on the search rankings, you know, let us, you know, do SEO for you. And then kind of pay us for the performance of moving you from like the number 30 slot up to like the number 10 slot kind of thing. So it's basically like a pay for performance smart contract where somebody does SEO services on behalf of your business or company. And then you basically have a smart contract that can just measure the delta of, hey, your company used to organically come up in the search rankings at this number. Now it's a this number, you know, pay for performance kind of thing.

• 20:17David Hoffman?

  Okay. So how did we get to the link token? Where does the link token enter this story?

• 20:22Speaker 02

  Before we kind of get into that, I would just kind of back up for just one more second. So to kind of set the stage for, you know, how kind of protocols work in their kind of early stages. And then we can kind of tie specifically like the role of the link token within the link ecosystem. So every single protocol kind of has this two sided marketplace of, you know, consumers on one end and suppliers on the other end, right? So on Bitcoin, those are miners and valuers on Ethereum, liquid providers, you know, in DeFi or on the chain link, right? And you can kind of think of them as, you know, independent contractors who are these kind of self-interested, economically rational agents that fulfill a set of purposes for a protocol. And they keep performing those services as long as it's profitable for them to do so.

• 21:05Speaker 02

  And that's independent from the profitability of the overall network, right? And so there's only two ways to pay them. You either have fees from users or you have inflation of the protocol's own token, right? So your protocol needs to have a source of funds to pay these, you know, independent contractors on day one. So the protocol uses, you know, inflation to pay them to kind of solve what's known as like the cold start or chicken and egg problem, right? And so. So like a well-run, you know, team is sort of using this token allocation to basically find product market fit for their protocol to build up a sort of self-sustaining source of user fees to over time replace the inflation of its own token, right? And so most protocols are designed to have kind of pre-programmed declines in their inflation

• 21:50Speaker 02

  schedules, but that doesn't necessarily mean they're going to have proportionate growth in their user fees to kind of offset that declining inflation, right? So if the protocol is not able to, you know, generate utility that users are willing to pay for, the fees will stay low, inflation eventually runs out, and then you'll be basically left with a token that's not worth anything, right? You'll have a kind of dead two-sided marketplace, no users, which means no user fees, obviously, and then no more inflation left to kind of pay the validators or like the LPs of your protocol, right? Alternatively, if our protocol is able to build up a lot of user fees and then sort of like, you know, taper down its inflation and then sort of achieve the revenue needs to pay its validators entirely from user fees, and if revenue still keeps kind of

• 22:34Speaker 02

  growing past that point, then you can, you're kind of setting the stage to have what becomes kind of an attractive token, basically, right? And so I basically just, I'll kick her back to CLG in a second here, but I first want to kind of set the stage for like what CLG and I see as what are the kind of desirable properties of a token in general, and then we can kind of talk about how does the linked token do that itself? And so to me at least, like a token that's desirable is one whose inflation rate is small as possible, and then on top of that, it has real yield, meaning that's yield generated from protocol use and not simply inflationary issuance of its own token, right? So you kind of combine these two metrics into one, and you have basically real yield net of inflation, right?

• 23:18Speaker 02

  So I don't know if CLG wants to kind of talk a little bit about like, you know, the linked token now specifically, but I want to set the stage for this kind of general definition for people to kind of have a mental model of what protocols are trying to do in their early days of their starts with their tokens and how the tokens are used to basically kind of work towards this kind of self-sustaining equilibrium.

• 23:38Speaker 00

  Yeah, so like with What I consider decentralized infrastructure protocols, you know, that's a protocol with independent validators said to come to consensus about some service. That's blockchains, but that's also oracle networks and they use tokens and basically very, very similar reasons. Fishy touched upon like the chicken or egg problem where, you know, node operators aren't going to join a protocol unless it's profitable. Users can't pay to use a protocol unless there's already profitable node operators providing a service. So tokens bootstrap a network into existence in the first place. So you can't even have these networks without a native token in the first place unless you raise debt or equity that has to be paid back. And that's just not credibly neutral or scalable way to to achieve that. The other side of this coin, I would say, is the crypto economic security that a token can provide a decentralized infrastructure protocol.

• 24:23Speaker 00

  Specifically, what I kind of bucket down to like explicit incentives and implicit. So like explicit incentives would be something like node operators, service providers have to lock up the token, stake it. And they're slashed if they don't meet certain protocol requirements of them. So I think people generally understand that mental model. The other aspect that I think people don't see as much, or it's more implicit, it's not necessarily protocol enforced, but it's when service providers have financial exposure to the network's native token, they are financially exposed to the network's health overall. So like an example that I use sometimes is like Bitcoin miners, they have exposure to Bitcoin. Both that's what they generate in revenue and that's what they hold on their books as well as their ASIC mining equipment itself, which is tied to the value of Bitcoin itself.

• 25:06Speaker 00

  So if miners colluded and attacked the network, they would effectively devalue their holdings, both their Bitcoin and their ASIC. So each independent actor within the Bitcoin network independently has their own financial incentive to be honest, because it is more profitable, to be honest. Bitcoin doesn't have staking, but Bitcoin's still secure because of these strong economic incentives. So it's kind of more of a nuanced point, but that's kind of a key aspect of how even if you don't have staking or you don't have slashing, because a lot of networks have staking without slashing, it's still secure because of this financial exposure to the token itself, which I think is a really, really key aspect to this, to the story here.

• 25:41David Hoffman?

  Okay. So I think what you guys are doing is you're starting to like draw us a map of how link maps itself into the chain link ecosystem, right? Where chain link is the Bitcoin system. Link is the incentive mechanism that keeps everything coherent. And so let's go into specifically the link tokens role in chain link. So like, what does the link token do in the system? How does it fit?

• 26:09Speaker 00

  Yeah, I can hop into this one. I kind of bucket this under two different things. On the one side of the coin, you have link as a payment token. So link is the standard form of payment for all chain like services. And that's both directly users or applications paying in link to network service providers for some service like data, compute or cross-chain. But also chain link is increasingly working on what's called like a payment abstraction solution where end users, applications can actually pay in the assets that they already have. And on the backend, it gets converted to link and paid to the node operator. So it abstracts that whole process away. And so in web three, that could be users paying in native L1 gas coins or stable coins that they already hold. And this can even expand in web two, do paying like with a credit card or paying with a, you know, bank account using something like account abstraction.

• 26:54Speaker 00

  Like it, it abstracts that whole process away. While on the backend, still enshrining link as the currency paid to network service providers, which is basically means as services are consumed, that means more link has to be consumed and acquired in order to pay the service providers, who then have their performance tied to the value of link itself. And that's kind of, that's always been kind of the historical utility of link ever since the day one launch. The other side of this coin, I would say, is link as a staking token, which that's something that's increasingly expanded over time. Chain link launched initial version of staking last year in December and a new version's rolling out later this year, V0.2. But that's effectively network service providers locking up link to back

• 27:37Speaker 00

  as a commitment, the performance of their, of the oracle services that they power. And it's very similar to blockchain staking in the sense that you're locking up tokens. But it's also very different because blockchain validators that stake, they're securing the validation of transactions and network state, which can be done in a very deterministic, predictable way, using historical state and cryptography. But in oracle networks, you know, you're dealing with a very non-deterministic, a very unpredictable environment. It's a little bit harder to come to a ground truth. So like you have some metrics like uptime and latency and participating consensus that you can track. But when it comes to each individual chain like service, data, cross-chain or compute, there may be different attributes that a user cares about. Like data accuracy matters for data feeds.

• 28:21Speaker 00

  For transaction automation, that's not really a concept that exists that you can slash node operators for. So each service will can have different, basically service level agreements defining this is what a node operator needs to do. But I think what People would really be interested in here is that eventually Chainlink node operators are going to basically be on par in terms of performance. There'll be 99.99% uptime, reliability, participating consensus. So how do node operators differentiate themselves? Because Chainlink's not one monolithic network. It's actually this two-sided marketplace for building networks. Ultimately, that's how much stake to link that they can actually put up as collateral to back the performance that they can offer users. And so it becomes

• 29:03Speaker 00

  this inner competition between node operators competing with one another, who could provide the most collateral, and ultimately, eventually even competition between different Chainlink networks within the whole Chainlink ecosystem of different service providers launching their own price feeds with their own properties, all operating on the same economic layer, but different independent networks competing with one another. And the stake link is effectively how they compete with one another. So as Chainlink services become more sustainable and more economically profitable, basically the surplus revenue gets paid to stakers to increase the cryptoeconomic security of those networks, whether through higher yield, attracting more stakers to come participate and secure that service, or just higher P&L for the node operators themselves, because that means a higher opportunity cost if

• 29:48Speaker 00

  they're malicious for whatever reason. So it's really these two different sides of the coin. So it kind of takes elements from Bitcoin, it kind of takes elements from Ethereum, and it's also kind of its own name, because oracle networks just operate in a fundamentally different way than blockchains do. But it takes a lot of the same properties, because why reinvent the wheel if we know that cryptoeconomic security already works in blockchains? It just needs to be kind of modified to work in this oracle universe.

• 30:13David Hoffman?

  I think that was really well said. The patterns that I'm seeing between Chainlink and other blockchains are pretty clear. So link is the native currency of Chainlink in the same way BTC is the native currency of Bitcoin, or ETH is the native currency of Ethereum. And when you want to pay for economic activity on any of these chains, including Chainlink, you need to use the currency of the native system. So you pay link for the services to link validators. But what you're saying, Chainlink God, is like the nature of being a Chainlink Validator is a little bit more like unwieldy versus an Ethereum validator, where Ethereum validator is pretty like, you know, step A, step B, step C, pretty objective, pretty straightforward, pretty binary.

• 30:57David Hoffman?

  Whereas chain link validating is a full broad spectrum of potential validating services. And that's a little bit more chaotic and hard to crowd. And that is like the nature of the chain link project, which is trying to set up this system that can validate more than just, you know, cryptographic transactions. Is that, is that a fair summary?

• 31:20Speaker 00

  Yeah, exactly. The, the way I kind of think of it is like blockchains ideally are kind of set and forget. You set up your validator, you make sure it's reliable. You have redundancies and backups and you set that up correctly. But then it's kind of, it runs on its own. You don't really have to touch it. Having an Oracle node is basically running a business. Like if you spin up a chain link node, you need to go do BD and marketing to go attract consumers for your Oracle services that you're providing. You know, it's when you join the network, you're like Fishy said, you're like an independent contractor and you have to actively manage it. You have to choose what data sources you can provide to people, what types of computation, what blockchains even you want to connect to and provide services. So it's a way more heterogeneous environment and staked link is like one of these differentiating factors that once everybody's basically the best node operator possible in the chain

• 32:04Speaker 00

  ecosystem, how much staked link that they can offer, which is basically how much can be slashed and even paid out to users who are harmed if you don't perform very well. That's like a huge differentiating factor and that'll be like a way a lot of these Oracle node operators compete as a, you know, as a service provider within this economy.

• 32:23David Hoffman?

  Fishy, is there anything you want to add to this?

• 32:25Speaker 02

  Yeah, there's a couple of things I'm gonna add. The fundamental value prop of like the lean token is you can think of it like this is that the lean token when staked is essentially a claim to a portion of the cash flows from the services provided by the chain link networks, right? So the aggregate kind of bundled service provided to a chain link user, meaning the apps using it, is this kind of a combination of the off-chain service itself provided by the chain link dons, plus the economic guarantees of state collateral being Put up as additional security. So a portion of fees are paid to the service providers and then a portion of fees are paid for the economic security through the staking portion, right? So the the value prop to a token holder can kind of be thought of as like for every dollar the link token costs,

• 33:10Speaker 02

  how many dollars worth of cash flows can I potentially try to earn through providing my portion of the bundled service through staking, right? That's kind of how I kind of think about it as the mental model, right? Now, some people also kind of will naturally wonder, okay, how does the token accrue value if you aren't staking yourself where you'll be directly getting cash flows? If it doesn't have, let's say, a burn feature like Ethereum with EIP 1559 or Maker DAO's buybacks through protocol profits, right? And the answer to that is simply by just having a market where people can buy the token. And so what I mean by that is even though you personally may not want to stake yourself,

• 33:49Speaker 02

  others are willing to stake your place and they will buy the token to then earn those cash flows themselves through staking. So let's say we imagine that the staking yield on something like like ETH is like 2%, somewhere between 2%, 3%, right? If Link presents a higher yield earning opportunity, let's say 5, 6, 7%, people will bid up the price of the token until the yield falls back down to some kind of like market determined equilibrium rates, right? Then as as the yield once again kind of falls back down to that rate because the cost of the token now went up again, as more and more services are spun up using the Chaining Protocol, launched on more and more chains, integrated with more and more users, all of that once again translates into more and more aggregate fees,

• 34:31Speaker 02

  which again translates into more yield opportunities to be earned by stakers, which will once again drive the yield back up again above that market equilibrium rate, which again entices people to want to earn that outsized yield once more and once again kind of bidding on the token, right? So, you know, given Chaining's kind of flexible general purpose design and it's chain agnostic, it's also future-proofed to be able to kind of deploy additional services which are kind of conceived of down the line, which again creates more revenue and staking yield opportunities in the future.

• 35:03David Hoffman?

  This kind of feels like a bond market where price and yields are related to each other. So if more economic activity is going through chain link, yields are going to go up because more fees are being paid through chain link. And therefore, the link token has a claim on more fees and so the prices go up. But does that make yields go down if if the price responds to the higher yields? Does that make yields go down?

• 35:31Speaker 02

  Yeah, well, because the yield is sort of like a ratio between the cost of the token and the dollar values that are earned through like your portion of the service fee. So like it's the ratio between dollars paid for, you know, on a particular node versus what the cost of the link token. What's the dollar value of the link token you have taken right now versus what are the dollar inflows you're being paid by applications for you putting up that economic security?

• 35:55David Hoffman?

  But but is the services provided by chain link denominated in dollars or is it denominated in link?

• 36:01Speaker 02

  It's it's denominated in dollars is my understanding. I think that's my understanding of it is because I think they wanted to sort of have this kind of implicit hedging kind of design built into it so that the volatility of, you know, the link token doesn't sort of like be a prohibitive source of friction towards applications using services. Because I think most applications want to have kind of predictable operational costs, right? And so if if things were kind of, you know, spiking up and down with the volatility of the token, that's sort of a source of friction. So I think it's kind of smart to have it denominated in dollars so that you're not creating this additional unpredictability with something like consuming a service, basically.

• 36:40David Hoffman?

  Yeah, and just to expand upon this, there's like different payment models within the chain like network. There's like a standard usage based payment model, which is either you pay it request or you fund a subscription contract that's drawn down upon. And like Fish, you mentioned, it's denominated in USD, but it's payable in link or payable in other assets like gas coins. That's ultimately converted to link. So if the link becomes more expensive, that doesn't mean chain like services become more expensive. It's it's still the flat rate model. And because Chainlink offers price feeds, it knows how much the tokens that people are paying with is worth. So they can charge accordingly. But there's also like other unique.

• 37:12Speaker 00

  Models like user fee sharing where there was a recent proposal to the GMX community that they approved where GMX V2 would use Chainlink's new data streams product, which is a pull-based, low-latency data feed solution. And the GMX protocol would pay 1.2% of the fees that they generate into the Chainlink network. So there, it's not tied to the price of USD, the price link or anything. It's just 1.2% of the fees GMX generates goes into the Chainlink network and that's for using data streams and getting technical support. But you know, there will be protocols, very early-stage, pre-revenue protocols. They don't have a lot of fiat or they don't have a lot of cash flows to pay for Oracle services. They have their own chicken or egg problem, basically. So Chainlink has what's called the Chainlink Build Program, which is kind of like an accelerator program where

• 37:58Speaker 00

  projects allocate a percentage of their token supply, usually about 3% to 7% into the Chainlink network. And they get access to Chainlink services and they get support from Chainlink Labs on like their go-to-market strategy, on technical roadmap development, creating custom Oracle solutions for their team. So it's like a very tight-knit, early-stage connection to basically try and grow these protocols so that they can eventually become revenue generating and they can sustainably pay for the Oracle services. They could pay for the blockchain. They could pay for all these different operating costs. So like Chainlink has like multiple tiers, different types of payments, depending on where the protocol is in its lifecycle. And this, this will probably even expand in the future. There's a whole nother one I didn't mention, the Chainlink Scale Program,

• 38:39Speaker 00

  where blockchains commit, basically they cover the operating costs of Chainlink Oracle networks operating on their network. So the end-users or rather the applications basically have their Oracle costs covered. So they can, they basically have time to start generating revenue themselves until they can start paying the on-chain transaction fees so the blockchain becomes sustainable and pay the fees to the Oracle network so that becomes sustainable. And basically bootstrapping these blockchain ecosystems. So there's already eight blockchain ecosystems covering Chainlink operating costs on their network and there's 80 projects in the, or 70 to 80 projects in the Chainlink Build Program that are, you know, very early-stage and that a portion of those tokens will end up in the hands of stakers for providing the security over the services used by build projects.

• 39:23Speaker 00

  So like, there's a whole list of different economic programs of how do users pay within the Chainlink economy that I've already rolled out.

• 39:30David Hoffman?

  Right, and I think you're illustrating one of the differences between paying for block space in a blockchain system versus paying for services from Chainlink. And so I kind of want to drill down this one little nuance here. If I want to pay for a transaction on Ethereum, I pay Ether and I calculate the gas and then there's a number that spit back out at me and then based on the market rate of what gas is going for for that block and then I just pay it in Ether and it's completely objective. It doesn't sound like Chainlink and paying for Chainlink services is all that kind of cut and dry. So can you guys explain how does the fee for what I'm paying for get determined? I want to ingest some

• 40:15David Hoffman?

  data, I need to pay for that in link tokens to some data provider and then I need to pay some amount. How does that amount get determined?

• 40:25Speaker 00

  Yeah, so within the Chainlink network, like Chainlink is this framework for building decentralized oracle networks. And so Chainlink Labs is like one entity who helps build oracle networks and works with node operators and basically wants to make sure that those independent service, those independent set of validators become sustainable. But ultimately Chainlink's a framework. So there's this inter-network competition where anybody can step in and launch their own decentralized oracle network within the Chainlink economy and work with node operators and basically set the rates that are the most competitive within that economy itself. And ultimately, the value flow happens on-chain and flows down to the node operators and flows down to the stakers providing those services. But ultimately, the goal is like not value extraction of just generating lots and lots of money, but

• 41:05Speaker 00

  it's generating sustainable, economically sustainable oracle services with the surplus going towards paying greater security, whether that's higher rate of yield for stakers so you get more state collateral or higher P and L for the node operators because that's a higher operating costs. But ultimately, you know, there's going to be different types of entities who want to be able to pay in different ways. And if you can reduce the payment friction for users as much as possible, then they're much more likely to be able to pay for greater cryptoeconomic security for the oracle networks that they consume themselves directly. So like, it's very different in the regard where like with block Blockchains, like you mentioned, have block space, which is a finite resource on a per-chain basis. Because chains have to deal with state bloat.

• 41:48Speaker 00

  They can't have unlimited block space because then the network will centralize. And that defeats the whole purpose of having a blockchain. But Oracle networks are, most of them are stateless. So they don't have to deal with that problem. So they can operate at the native speeds and scale of any blockchain network. And so they don't have to deal with these congestion spikes that, you know, blockchains have to deal with when they get really widely used and then they have to scale vertically via L2s and rollups and expand out horizontally. Rather, every chain-like service can basically scale up and down. Each node operator can allocate more resources and basically scale with the demand that's required. And if more Oracle services are required, then it can scale horizontally. So chain-like has like these two ways of scaling vertically and horizontally. So you don't get these congestion fee spikes that users have to deal with.

• 42:33Speaker 00

  Because you have all these independent networks that provide some particular service to some particular specific chain. So it's kind of a, it's like a different economic paradigm than people are, I think, used to with blockchains and block space.

• 42:45Speaker 02

  When blockchains get lots of applications and lots of users on the same network or same even ecosystem of networks, right? You know, you get positive network effects on certain variables like increased liquidity or potentially kind of synergistic composability between all those apps, even combined with other apps. But it also creates this kind of negative like network effect when it comes to cost because of chain congestion, right? So like the same transaction that cost you a dollar with a five second, you know, wait time last week. Now it costs $20 with a minute wait time, right? And so you can kind of analogize that to sort of like Uber, right? We have kind of like congestion pricing with Uber when there's too many riders trying to get a ride and not enough drivers. You get congestion pricing where the price of getting a ride kind of spikes up, right?

• 43:28Speaker 02

  And so, but chain like Oracles, again, don't have that kind of same congestion spike. Because again, there's no single chain-like network. Because this is kind of like horizontally sharded and, you know, infinitely replicable protocol that keep making more shards of itself. And so, so network kind of scales horizontally. And like, you know, CLG said, like it doesn't have to deal with the cost and the detriment of. Stay below, right? And so as a result, you know, the per user fees can kind of stay flat regardless of usage. So you kind of think of that as like, let's say Netflix launches a super popular show like Squid Games and it comes out. Everyone wants to watch Squid Games at the same time. Netflix doesn't charge you more money personally because a million other people want to watch Squid Games at the same time.

• 44:09Speaker 02

  And there's even other networks where not only is it neutral, but it actually may have positive network effects when it comes to usage, right? Because certain Oracle networks can have like, you know, effects where multiple users are actually splitting the cost of the same network. So I think of that as like, let's say you order like a UFC pay-per-view event, you know? And then the more friends you have over to watch it with you, more people kind of pitch in on the cost of it. And you can split the cost with more friends. So here, the more users you get, the cost per user actually comes down. So on the worst end scenario, cost per user stays flat. And a better case scenario, cost per user actually comes down once you get more users using that same resource. So that's kind of one of the powerful scaling benefits of the way Ching is designed, basically.

• 44:53David Hoffman?

  Right, and I think that was all interesting, like juxtaposition between like Chainlink and like, you know, typical blockchain economics. But the question I'm really trying to go for is like, how does fee price discovery happen? So like, there's a two-sided marketplace. Say I'm AVE and I need to buy, ingest the Ether price for a particular moment. Or I'm a different, you know, I'm a different ingester of different kind of data. And some Oracle network, a part of the Chainlink system, is providing me that data. How is the fee determined? Who determines the market rate for the fee? How do I know how much link to pay to get the data that I want?

• 45:31Speaker 00

  So ultimately, what Chainlink is effectively building towards is this decentralized computing marketplace, where you have node operators listing their services, they're listing their pricing. Users come to this interface, they say, hey, I need seven nodes. I want these seven data sources do this computation with this consensus model, then deliver this result back to my preferred blockchain. And so it's kind of the users meeting with the node operators and meeting this market equilibrium between these two providers. Currently, you know, during the early stages of the network, Chainlink Labs is one entity spinning. Making up basically pre-built Oracle networks where a lot of developers, they don't want to manage infrastructure. They don't want to deal with the complexities of it. They want to pass off basically outsourced like the Oracle team development to another team, which is actually more decentralized than everything being centralized in that core

• 46:15Speaker 00

  applications development team. And they basically help provide those pre-built Oracle services that they can plug into with the rates set based on what node operators need to become economically sustainable. So that's like the early stages of the network itself, just to bootstrap it into existence. Because if there's no coordinator type entity, it would be this cold start problem of nobody knows what they're doing. But the end state is that users configure everything they want, node operators set their own pricing, and it becomes this truly like inner competition between all these service providers on who could provide the best services at the lowest cost. And that kind of becomes like a really efficient market towards, you know, basically paying node operators based on how much state length they could provide because every node operator will eventually become the same performance wise.

• 46:59David Hoffman?

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• 47:43David Hoffman?

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• 48:27David Hoffman?

  So visit arbitrum.io where you can join the community, dive into the developer docs, bridge your assets, and start building your first app with Arbitrum. Experience Web3 development the way it was always meant to be. Secure, fast, cheap, and friction-free. Okay, so like say I'm some DeFi app again, like Ave, and I am a buyer of the ETH price, or the data that tells me what the ETH price is. And I need that to be secure and ungamable. So I need to buy the ETH price, the data that is the ETH price, from more than one oracle, because I need decentralization. I need to make sure that I'm not dependent on this one oracle. So I'm actually going to buy the data that is the ETH price from seven different oracle providers.

• 49:09David Hoffman?

  And so I'm going to go on to this eBay kind of, maybe just using your imaginations. Like I'm going to go on to the eBay of Chainlink, and I'm going to see all of the providers who are selling the ETH price as an oracle, as data. And I'm like, well, I'll buy the cheapest seven oracles that are going to sell me the price of ETH in this one particular moment. I'll add to cart, and they are all charging a fee. I'm going to buy those seven because I selected them. And then that's going to be the determining rate. And then if somebody who's like ETH who didn't make it onto my list is like, "Oh, I wasn't selected. I didn't get any link because my price was too high. I need to become a better oracle. I need to lower my costs. I need to charge a lesser fee so I can start to get the revenue." And then that's how like market discovery happens.

• 49:54David Hoffman?

  Is that kind of like the experience?

• 49:56Speaker 02

  Yeah, you're definitely on the right track, but there's other variables to compete on other than just price, because there's also the past performance of the oracles. Also, what's the economic stake being put up by a particular node operator versus others? So you're not just competing on price where they're kind of racing to the bottom. Do you can offer for the cheapest? There's also variables tied to performance and quality that kind of justify a higher price premium compared to other oracles. If you have a track record of never having your oracle ever go down, you've never behaved maliciously, you're willing to offer higher slashing collateral than other providers, then you actually have a justifiable case to charge a higher price than somebody else. So you're not just going to be on price, but a whole roster of variables. And to basically see who's offering a particular application the highest overall value,

• 50:40Speaker 02

  not who's offering the lowest price.

• 50:42David Hoffman?

  And one of those variables that you talked about, Fishy, that was super helpful, by the way. What is the amount of link that this one oracle is staking, correct?

• 50:50Speaker 02

  Yes.

• 50:51David Hoffman?

  Okay, and so like if I'm trying to be selected as a seller of data, I can compete with other sellers of data saying, well, I've got like 10 times the amount of link staked that they do. And so I'm at, I have 10 times more link at stake that might be slashed if I give you a bad, bad data. Is that, is that correct?

• 51:12Speaker 02

  I can't speak to this on specific terms because this is something that's like Sergey just sort of introduced recently at SmartCon. This kind of, he had a slide called, you know, decentralized computing marketplace. And obviously, you know, I'm not part of the Chainlink team, so I don't have any insight. But I can speak kind of in a, in a, in a general sense that basically, you know, you have, you'll basically have this kind of marketplace where nodes can basically advertise. Here's the, again, because remember, Chainlink isn't just price fees, it's also this whole roster of services. So I just kind of, the way I can substantially imagine it is like, I'm a node operator. Here's the list of services I provide. Here's my past track, just like on eBay sales, right? That they have the number of stars, past track record, here's like my customer reviews. Here's like, you know, how much I'm asking for this service, this service, this service.

• 51:54Speaker 02

  And then somebody will basically come together and they can kind of compile their own validator set. So like saying like, I want, I'm an application, here's my security budget. How, how's my security budget best spent to buy me the most amount of security, the most amount of performance for the lowest price, which gives me the highest amount of overall value? And then so should I buy, you know, 10 oracle nodes of this quality? Or should I buy 20 nodes of a slightly lower quality? Should I ask for this much stake collateral? Do I, you know, do I prioritize having, you know, 10 million link tokens staked or 8 million tokens? And then having a lower price. So you can, so each person can be, so the whole idea is not for channeling to dictate to applications.

• 52:37Speaker 02

  Here's how we want you using our services, but rather to kind of put all the building blocks together. So you can show up with your own personal utility curve to determine here are the things that I value. Here's my security budget. Here's, here's how I want to configure this to, for each application to define for itself. How it wants to spend its own security budget.

• 52:55Speaker 00

  And I think the, another dynamic here is like both with, you can go to the marketplace and you can choose, hey, I want these nodes and I want these properties. But you can also take existing Oracle networks that already exist and pay for those. And because Chan Lake offers all these different services, I kind of think of it as almost like a decentralized AWS platform. Where you can compose different services together. So you can have like a pipeline, you can have. Chan Lake functions basically reading an event that, hey, some user needs some data and computation. They fetch the data that's required, they run computations over it, they pass it over to C C I P to go bridge. Data between different blockchains and tokens between different blockchains. And then use chain like automation to go deliver the transactions automatically on change to these different environments. So you can kind of like define this pipeline of pre-built services.

• 53:39Speaker 00

  Compose together with Oracle networks you defined yourself. So if you're a user, you can go into the nitty gritty details of like every single property and configuration. But not every developer necessarily knows like, like Fishy mentioned, do I want? A smaller amount of high quality nodes, a larger amount of lower quality nodes, how much stake do I need? Like you can compose yourself with pre-built applicant or pre-built Oracle networks that you can compose together with. And then compose these Oracle networks together. So you can compose access to off-chain data. Off-chain computation and cross-chain interoperability as well as connections like enterprises and whatever else other services that. You know, channeling Oracle networks end up providing, you can combine those together. And eventually like the lines between like, in my mind, what a smart contract is.

• 54:21Speaker 00

  Will be defined not just by what the on-chain code is, but what all the off-chain code is and what all the Oracle networks. That it connects to is, and that'll be defined as the smart contract itself, because you can't just rip out one part and look at that part. It'd be like an incomplete contract, basically. So it's really both components at the end of the day.

• 54:38Speaker 02

  Go for it, Fishy. Yeah, I also want to add one other point too. I know if this is like a, is there a different topic? But it also kind of ties into the fact that like, because Chainlink is kind of designed as being this kind of giant, kind of decentralized platform of services, that that's also one of its largest kind of comparative advantages to other protocols in the ecosystem that I think kind of gets under-recognized by most people kind of looking at it. So I kind of want to just give a little piece about that. So when you think of like, let's say, Google competing with Microsoft, right? Like, you know, each one of them is sort of competes the other kind of tit for tat by having a product offering in almost every vertical, right? So you have, you know, Google search versus Microsoft Bing, Chrome versus Explorer, cloud versus Azure, Google Workspace on 365, right? Chainlink, on the other hand, right, they have competitors, right?

• 55:22Speaker 02

  But they only have competitors within specific verticals, right? So they have, let's say, Pith banned API 3 within the price feeds category. They have Gelato in the smart contract automation category, API 3 again in the randomist category. Obviously numerous competitors in the interoperability space like Layer Zero, Axel, Wormhole, right? But there is no vertically integrated equivalent platform that competes against Chainlink the way Microsoft competes against Google, right? And there's actually like several like large advantages that actually kind of come from that, right? So the first I'd say, there's three, three ones I kind of summarized it down to. One is network effects. So, you know, Chainlink is now like the only platform that Dev can kind of go to to get all their data compute and cross-chain connectivity services all in one place,

• 56:06Speaker 02

  which I think is usually kind of like the hallmark of like what the ultimate kind of category winner ends up looking like. So again, kind of tying it back to that, you know, marketplace, if I can come to this one marketplace and I kind of compile together all my validators, that's all in one place, to get all my service needs that my app needs all in one place, that kind of reduces the friction and the amount of work required for me to kind of design the tech stack of my own application. So I can kind of focus on building, writing the core code of my protocol. I don't need to spend a bunch of time sort of like sourcing and figuring out how do I source, you know, infrastructure from all these various kind of fragmented providers, right? The other big thing that also comes to you, and this is also a big kind of

• 56:48Speaker 02

  Theme in Web 3 is about trust assumptions and trust minimization, right? So, most Web 3 apps need a combination of cross-chain compute and data services. So again, price feeds, automation, durability, blah blah. And then just an unbounded amount of future services as innovation and demand kind of continue to permeate, right? So, using just Chainlink for that entire roster of services is much more trust minimized than getting all those same services from a combination of fragmented alternatives like Pith, API3, Gelot, or Zero. Because then you're actually layering on additional honest majority trust assumptions of more and more validator sets,

• 57:29Speaker 02

  along with some of them introducing potentially kind of essentialized points of failure in their tech stacks, right? So, when you're evaluating, so as a developer, as a Web 3 app developer, when you're evaluating the actual total trust minimization of these combined services, you need to aggregate together all the separate trust assumptions each separate service introduces, because they all add their own individual trust assumptions towards this kind of cumulative trust assumption metric that the application has onboarded. Or, if you get them all through Chainlink as a one-stop shop, you aren't layering on additional trust assumptions while you're adding on additional cross-chain compute data services, right? And so oftentimes, when I see analysts or researchers or even other teams kind of put forth analysis

• 58:13Speaker 02

  about the varying degrees of trust minimization between, right now, interoperability solutions are a hot topic in crypto, is that they sort of analyze the trust assumptions of the user in a vacuum. So, meaning that they sort of like start measuring from this assumed starting point of the user has no trust assumptions, and then they measure and estimate the marginal amount of trust assumptions that be added if, let's say, a particular interoperability solution will be integrated, and they just stop their analysis right there, right? But the reason that's sort of disconnected from reality is for twofold. A, most applications need, again, the combination of numerous cross-chain compute data services, which will all add more trust assumptions individually. So just analyzing the bridge by itself kind of gives you an incomplete picture. And B, most of the applications are already

• 58:58Speaker 02

  Using compute and data services as far back as 2019, which means they've already onboarded those trust assumptions. So you'd actually need to know what default trust assumptions does a particular application already have from the other services it's using before you could then kind of determine how trust minimized is this cross-chain protocol you're about to add on to what they're already kind of doing, you know? And so most of the kind of, let's say, interoperability teams, they only offer the bridging protocol as their only product. So when they write analysis, they view every user as someone who has zero trust assumptions. They figure out what sort of trust assumption their brain bridge now introduces to them. And then they view their bridge that they're offering as the only add-on service that the user will ever be using from now until the end of time.

• 59:43Speaker 02

  So that's kind of like the powerful fact that Chainly has from kind of being this kind of combined, you know, integrated platform. And the last point is also because Chainly is sort of like economies of scale is that because Chainly validators are offering all these other types of services, they actually don't need to charge as much money for each individual service because they have multiple streams of revenue. So if you're building some kind of infrastructure protocol and you only offer randomness, or you only offer proof of reserves, or you only offer the bridge, you sort of have to charge more money because that's the only thing you can offer, right? But if I'm a validator and I can offer this kind of integrated complete package where I get some money on this service, some money on this service, and this service, I don't need to quite charge quite as much on any one service. So you kind of put all that together, you kind of get this great value prop

• 1:00:26Speaker 02

  of having, you know, lower trust minimization, a common scale, and network effects.

• 1:00:31Speaker 00

  I think just to add on to that, like setting this into context, like what would an application that would require multiple services look like? And I think tying this to tokenized real-world assets, like first, you know, institutions need to be able to connect to all the hundreds of different blockchains that exist. And they can use Chainlink CCIP as an abstraction layer, a single integration point to connect to all these chains. But then they need to be able to inject those real-world assets with external data. So that's a whole other set of services that Chainlink natively provides, where you can inject it with proof reserves, identity data, pricing, and NAV to keep that asset updated. So, you know, institutions can actually interact with it and it becomes a useful, updated real-world. Then those institutions need to be able to move it cross-chain between different environments.

• 1:01:13Speaker 00

  So they can buy and sell real world assets between counterparties who aren't in their permission blockchain, or they can interact with public chains as like a neutral meeting ground. So then that's something that chain like CCIP also offers. But when you move tokens cross-chain, you need to make sure that those assets continue to get updated with the real world data that it requires to stay updated and relevant. So you really need a platform that offers both cross-chain and data at the same time, so that your asset doesn't get bridged to a chain. It loses all its context and the golden record on chain gets broken. So you really need a platform that offers both. And Chainlink is basically the only platform that offers both of those solutions securely at the same time, so that you can use real world assets in a very useful manner,

• 1:01:53Speaker 00

  both cross-chain and updated, so that users know exactly what the token that they're touching actually is. So that's like one tangible example of how you would compose these different services together.

• 1:02:04David Hoffman?

  I think the explanation that Fishy just went through and the way that you finished it off, Chainlink God, is just really rhymes well with why Ryan and I aren't poly-layer-one enthusiasts. Whereas just like there's every single new layer one just adds in like another risk dependency, especially when there's like a bunch of bridges and you bridge your ETH to Solana and then you bridge your Solana ETH to Avalanche and all of a sudden you have like three chain dependencies. And that we've only talked about three chains.

• 1:02:34David Hoffman?

  The whole idea of putting composability inside of this one single system, I think has a lot of just the network effect benefits that I see. When we articulate like kind of why we think that one chain will rule them all, it's kind of like the same articulation for what you guys are saying. Well, don't unbundle Chainlink into 17 different services. Put it all together because it's all the network effects and efficiency is just better if we put everything under one roof. I definitely resonate with that reasoning.

• 1:03:03Speaker 02

  And then also, what I also point out too is that like, you know, Chainlink is able to sort of like, offer value and generate value and capture fees at like all these kind of different parts of the modular tech stack. But I think as a layer zero, it offers things at the layer one and the layer two. But another thing that's also sort of unique to Chainlink, unlike, you know, other things, is that Chainlink is also kind of able to capture fees, you know, in the kind of private chain ecosystems as well too. So I know it's kind of like a taboo subject, but I mean, obviously as we're trying to kind of like, you know, work, as we're trying to see kind of Sergey's vision of this kind of internet contracts materialize, it's going to require kind of incremental stepping stones before that happens, you know? And so right now, the kind of first step for many of the enterprises on their ends is sort of, you know, beginning with their own kind of like, you know, private chains.

• 1:03:46Speaker 02

  And there's also like lots of regulations that are still sort of in place that are kind of restricting these enterprises from sort of being able to dabble maybe as much as they even like to in the kind of public chain ecosystems. So one of the things that like, you know, recently at SmartCon too, they had a representative from Euroclear, which is the big European settlement clearinghouse for Europe. And he was actually mentioning that they have such restrictive regulations in Europe that they as European-based entities, as EU entities, they can't even share a ledger with non-EU entities, okay? And so he was even making the point that, you know, you're going to have all these chains, you know, amongst, you know, the entities that they work with that are like, you know,

• 1:04:31Speaker 02

  sort of like defined by geography, by asset class, by types of counterparties, right? And so until regulations are sort of like laxed a bit to kind of make that more accommodating, you know, they're going to be kind of operating in this kind of more restrictive ecosystem. And then Chainlink CCIP is sort of like what acts as the kind of like the connective tissue that connects their ecosystems to being interoperable with public chains. And but in the meantime though, like, you know, going back to kind of like, where can Chainlink offer value and capture fees? You know, Chainlink actually has inroads to be able to offer, you know, not just CCIP, but also its other services like, you know, to update the nav with like, you know, proof of reserves, price data, chilling functions, to kind of service this kind of ecosystem of private chains until it's kind of more

• 1:05:13Speaker 02

  Integrated with the public chain ecosystem. So like what other protocol which has a publicly traded liquid token can you buy right now? That has potential for value capture in the private chain ecosystem, right? I can't think of any for right now. Other than link, right? So I just want to point out this other kind of unique advantage the link token has in that. It's able to sort of capture revenue and offer utility to this kind of isolated kind of ecosystem for now. That no other project can really tap into it for the for the time being because of the the restrictions that that's imposed upon them.

• 1:05:44Speaker 00

  And kind of expanding on the point of like the scope of fees, like when you look at, you know, blockchain L one coins. You're basically betting on that specific blockchain ecosystem being the dominant blockchain ecosystem that will have all the useful applications people want. When you look at specific applications and their tokens, you're not only betting that that use case vertical will take off and users will want it. But that that application you chose will be the winner within that market. It's much more of a concentrated bet. But when you're kind of looking at link in the chain link network, chain link offers services across data, compute and cross chain. And offers those services across any public chain and any private chain. And so any smart contract application across any use case vertical, any winner in that vertical.

• 1:06:25Speaker 00

  On any public or private blockchain, more likely than not is going to need a chain link service. Either directly because it's required for that use case or would benefit from using a chain link service to be more. More efficient, more trust minimized or just more accessible and interoperable. And so the scope of fees that can flow into the chain link network is basically the most diversified across the whole ecosystem. So at the end of the day, link is effectively a bet on smart contracts as a concept or technology itself, because it doesn't matter. You know, is NFT gaming going to take off? Is it going to be DeFi on chain finance with permissions? Is it going to be? So social tech like it? It doesn't really matter because each one of those services that takes off. Is going to be using a chain link services at its base layer. And so chain links basically.

• 1:07:09Speaker 00

  Positioned itself and really focused on growing the ecosystem during its very early stages, like. Chain link launched price fees in 2019 and that price data being made available on chain is ultimately what allowed. DeFi summer to explode as large as it could. Because those applications required price data to exist in the first place. So it's it's not only powering like these existing use cases, but enabling entirely new markets and use cases to exist as well across any of these different verticals itself. So that that scope of fee, I think people don't necessarily see or realize because a lot of it happens in the background. As an end user, you may not necessarily realize you're using Chainlink. But in the payment pipeline, as a user, a portion of your fees is flowing to the Chainlink network and turning into the format of a link to pay those service providers.

• 1:07:54Speaker 00

  So at the end of the day, the scope of fee is like the broadest possible funnel that that could exist across the ecosystem.

• 1:08:01David Hoffman?

  There's something in the link economics that I want to close the loop on. So we've talked about all these different possible ways of being a validator, all the different like Oracle services that they could provide. And then we also talked about like the marketplace competition to being the best Oracle provider across a variety of different ways of measuring that. And so like, say, I say, I'm a really good Chainlink operator, Node operator, Oracle validator operator. I don't know what you call what you call these things. But say I'm a really, really good one and I'm providing, people are paying me a ton of link in order to consume the data that I'm providing them. Why? And so and so therefore my yields or my revenue is is strong.

• 1:08:46David Hoffman?

  My yields are strong, but why does buying more link create more revenue for me? Like, how does that? How does link actually turn into a capital asset? Does that question make sense?

• 1:08:57Speaker 00

  Yeah, I mean, when you're like a node operator and you subscribe to a job, it may have some collateral requirement of like a thousand link or something. And so you have that link locked up in that service. And if you want to expand your services and offer other jobs and capture other jobs, you may have to put up additional link to back those services. And ultimately, it kind of comes down to, you know, as node operators compete and they stake more and more and they compete on this basis, like you can fall behind if you're not meeting up your collateral requirements over time compared to other node operators. Like, that's one dynamic in addition to performance. But that's like a key attribute. If I want access to more jobs that want their own isolated collateral because they don't want to be slashed by some other service. Or there may be some jobs that are okay taking stake to link that's already put up for multiple services. If you want to be the most competitive, you need to be able to meet both

• 1:09:41Speaker 00

  of those types of jobs and ultimately meet the collateral requirements by the marketplace of users. I mean, you could stay a small node operator and not meet those requirements. That's your prerogative. If you choose to go down that route, like it's not forced upon you. But if you want to compete with the other node operators, then ultimately you have to basically play the same economic game as everybody else.

• 1:10:01David Hoffman?

  Okay, so generally speaking, producing more economic activity through my node, again, generally speaking, requires more link collateral and more un-rehypothecated link collateral is just better. And so there's a general loose connection between me providing more services to more people and the amount of link that I have staked inside of my system.

• 1:10:26Speaker 00

  I would say like there can be a loose connection, but I think a lot of it can be like directly tied to it, where if I don't have the link to offer a particular service or get access to a job listing, I just fundamentally can't service that job itself. So my revenue would basically be capped at some kind of ceiling if I can't provide that service.

• 1:10:42Speaker 02

  Because basically, let's say you take on like five, six jobs and all your collaterals are already allocated to those jobs. And now jobs number 70, 90, 10 come through the door, but now all your collaterals are already kind of like allocated to those other jobs. You would now lose out on the revenue that you could have captured additionally by servicing these additional jobs.

• 1:10:59David Hoffman?

  Understood. And this is the way that link actually becomes hooked into yield. And it's kind of like a market force, forces mechanism, whereas like Ether, it's hooked into Ethereum's yield very directly. Like the protocol pays the yield as objective. There's no subjectivity there. But with link in the system, it's kind of like, well, the market forces connect the link token to the yield that you get. The chain link system does not provide link the yield, but it is meaningfully that way in a roundabout fashion, derived by all the market influences that create the demand to stake more link when there's more fees generated by the system, correct?

• 1:11:40Speaker 00

  Yeah, and I think it's kind of down to the topography where Ethereum is this like unified protocol where you join the Ethereum network as a validator and you have this specific job you're supposed to perform and the protocol pays you, where Chainlink is more of a framework for building Oracle networks and it provides the tools for people to define, hey, I want this amount of collateral, I need this amount of configuration for my job. And as people, as applications secure more and more value over time, they're going to need more security over their Oracle services. So they'll have to pay more in order to attract more collateral because people aren't going to put up collateral if they're not getting paid to put up that collateral in the first place.

• 1:12:15David Hoffman?

  Right, certainly. And I would assume that also due to market forces, say Chainlink succeeds all of its wildest hopes and dreams and the link price absolutely moons, the magnitude of collateral that people would need to put up in link terms would naturally come down because the link token went up in price. And so it actually doesn't price anybody out if the system is pricing link in dollars or just understands that as link goes up in value, the amount of collateral in link terms goes down.

• 1:12:46Speaker 00

  Yeah, but there's kind of like a network effect where if the Chainlink network is becoming more valuable, that usually means it's securing more value itself because it's becoming a more useful protocol. So it may not be like directly tied, but as Chainlink's securing more value and that improves the economics, then that ultimately means you probably will need more stake collateral to back those services in US dollar terms itself.

• 1:13:07Speaker 02

  Yeah, I was also just add a little bit more about the hot topic right now also into crypto is kind of like tokenization of the RWAs. And so I just wanted to talk a little bit about that, too. And so, Sergey, when we spoke with you, he explained that tokenization of RWAs is a very direct path of how the amount of capital within our industry and on-chain can grow by orders of magnitude, right?

• 1:13:32Speaker 02

  There's several good reasons why, like, I think that's a very plausible scenario and why Glink, you know, is sort of positioned to, you know, to sort of be the big catalyst for it. So at their core, you know, blockchains are asset ledgers, right? So the most practical way to kind of foster their adoption is simply pursue use cases that highlight who owns what assets and facilitates the trading of those assets, right? Now, banks and, you know, investment managers like BlackRock, they obviously, they own more assets than anyone else, right? So it only makes sense to get the people who have the most assets to use the technology that's best used for keeping track of assets, right? It's a natural pairing, right? Then if we also look sort of, you know, internally within crypto, at what sort

• 1:14:15Speaker 02

  of found success in becoming the killer app for crypto, I think most would agree that, you know, stable coins are, you know, arguably crypto's most dominant killer app thus far, right? But what people sometimes tend to overlook about stable coins, again, speaking about centralized stable coins like USDC or Tether, is that they are actually tokenized real world assets themselves with the asset being the US dollar, right? So it only makes a lot of sense to further iterate upon the vertical that's been the best demonstrated product and market fit within our industry, right? And then, and then again, kind of go back to the first point, it's, you know, the sheer size of what's sort of available to become tokenized also kind of justifies it as being like a, you know, a market worth

• 1:14:58Speaker 02

  pursuing. There's lots of, you know, studies that have been put forth by, you know, Northern Trust and HSBC that they predict that by year 2030, somewhere between 5 to 10% of global assets will be tokenized. Even recently, you know, BlackRock's Larry Fink, I know a lot of people have been talking about him with regards to the Bitcoin ETF, and I'm not very surprised to see a Ethereum ETF surely behind it. You know, he was also interviewed by Andrew Ross Sorkin, and he also, Larry Fink, was saying that he believes the next generation of capital markets will be tokenizing security. So, you know, Larry Fink is also very bullish on this kind of tokenizing of real world assets, right? And so, another point to also make is I know, among bankless, I know, like, one of the big ethos you guys have is sort of like democratizing access to

• 1:15:42Speaker 02

  Like to investments and you know the financial system across the board. I listened to also like a webinar from a gentleman by the name of Richard Walker. He works at Bain. And so he made the point actually that over the past 20 years, the compound growth rate of assets in these kind of private markets, meaning that like the private debt market, private equity and global real estate in the private market has you know four times outperformed that of public assets, right? And so, you know, and so and access to those private markets is kind of heavily restricted from sort of being accessible by a wider kind of range of people.

• 1:16:23Speaker 02

  And so if we were able to kind of like, you know, tokenize those assets to kind of make them more liquid, programmable, increase transparency, interoperability, reduce risk, risk costs. It was sort of, you know, democratize access to those asset classes, which I think is a net win for investors. And I know initially, you know, retail buyers would not have asked them at first barring regulatory concerns. But I think over time, I think those would also be made available, you know? And so I think kind of the eventual goal or vision that these institutions and banks have for these kind of private market assets is that if you think about how easy it is for you to buy a share of Tesla stock on Robin or E-Trade, you can do that in a few minutes from your phone.

• 1:17:04Speaker 02

  There's layers and layers of friction before a retail investor could get access into these better performing asset classes the way they get access to, you know, publicly traded stocks through these kind of brokerage accounts on these mobile apps, right? So I think the goal is eventually to use tokenization to make those asset classes as accessible as these publicly traded equities are on mobile apps on these brokerage firms. So I think that's the kind of the eventual vision they have for it.

• 1:17:31Speaker 00

  Yeah, and kind of just to tie onto that, like tying it back to Chainlink. Like a lot of what Fishy is talking about is not like theoretical, oh, please, please institutions get interested in RWAs. Chainlink's been working with like an array of institutions to make this feasible, where there was like a recent collaboration between Chainlink, Swift and 12 plus of like the largest financial institutions and market infrastructure providers on, you know, how do we bridge these? Public and private blockchains, connect them to institutions and move these real world assets between different environments. Like that was a collaboration earlier this summer and from that came other collaborations where Chainlink is working with the Australian and New Zealand bank. They have like a trillion dollars assets under management and they're working on or ANZ is creating a tokenized asset marketplace.

• 1:18:13Speaker 00

  And what they are doing with Chainlink is allowing those RWAs that they're issuing or allowing to trade on that marketplace to move cross-chain and cross-currency swapping currencies in the process and ultimately because of blockchains, it's cross-border as well. Then basically scaling that out. And there was also the announcement where the DTCC, which is a CSD settling, you know, two quadrillion, which, which Sergey mentioned. On the last podcast where they're working with Chainlink on basically bringing these capital markets on chains. Like this is not really a theoretical concept, but this is something that Chainlink is actually actively pushing towards. And I think one thing that when people look at like the market opportunity RWAs, they look at how, you know, what's the size of this existing market?

• 1:18:54Speaker 00

  And if we tokenize it, you know, that would be $10 trillion and we could probably do this within 10 years. But I think what people don't see is that tokenization is kind of like securitization where you create entirely new financial products. So what are the new types of financial products that are only possible because of the properties of tokenization itself? How large will those markets be? And how large will existing markets grow because of the efficiency offerings from tokenization itself? So I've like, I've seen various numbers of like, you know, if we bring this market on chain, it'll be massive. But I think even that's underscoring the creation of entirely new markets that'll fundamentally require something like CCIP. So institutions can connect to those chains and so they can move those assets between different blockchains and keep them updated at the same time.

• 1:19:38Speaker 00

  And like, that's ultimately like the end case of what on-chain finance will ultimately look like, where it will be a hybrid of both on-chain executing code as well as these off-chain collateralized assets or natively issued on-chain assets like tokenized bonds. Moving through the system using Chainlink price data, using Chainlink proof reserves, using identity data, like all these useful data inputs is ultimately like the economy that we're trying to create and a lot of that will end up and settling on Ethereum itself as like this neutral meeting ground between different distrusting counterparties where each counterparty has their own chain but they want some settled ground to execute their contracts upon so like this is a bull case for the whole industry it's growing the pie for everybody effectively is really what what channel is trying to build towards

• 1:20:24David Hoffman?

  yeah ultimately all of these trillions of dollars that Sergey was talking about the conduit is chain link and the settlement layer is Ethereum is is the case for that I potentially see here which I mean I like people buying as much Ethereum block space as possible are there any sorts of like numbers that we can model out or scope out back of the napkin math like put some numbers onto paper here about just like the magnitude of economic activity that potentially could flow through chain link I know this is all super speculative that a lot of the markets aren't established yet a lot of the partnerships aren't fully fledged yet but are there any sort of numbers we can talk about when it comes to like

• 1:21:06David Hoffman?

  dollars flowing through chain link economic value created through chain link is there any sort of numbers we can talk about

• 1:21:13Speaker 02

  well I mean I think Sergey has said that he thinks that tokenizing RWAs will 10x the amount of capital like the dollar value so in a Sergey sounds like he was saying at least 10 trillion dollars worth of assets can come on chain and then he also in your podcast he used the word quadrillions you know but again that's just the DTCC total settlement volume so again like you're saying it's hard to know exactly what's gonna you know happen on chain but it seems that we're I think we're talking at least you know I don't know how many zeros that is but you know tens of trillions if not hundreds of trillions of dollars worth of capital eventually making its way on chain

• 1:21:47Speaker 00

  yeah and when you look at like what are the institutions themselves saying like like there was a BNY Mellon report that said like 97% of institutional investors agree that tokenization is going to revolutionize asset management itself so like basically that whole asset management industry is looking towards tokenized assets and that's hundreds of trillions of dollars sitting within BlackRock and these other asset managers the the WEF has a number of 167 trillion of traditional assets and markets that can be disrupted through tokenization itself. Like that's basically the global financial system here that we're talking about itself. Even Citi is saying like, you know, for private markets and tokenization, that's likely to grow 80 times by 2030.

• 1:22:29Speaker 00

  So like each of these institutions, like they have their own projections based on what markets that they serve themselves. But like unilaterally, you look at the existing markets, most likely those markets are going to be converted to an on-chain format or benefit from the transparency of smart contracts from specific processes happening, converting more and more of that on-chain, even if it's not the whole financial product that occurs on-chain itself. So like you could basically look at the financial products itself and you can come up with estimations like how much is that market going to grow itself? And like trying to estimate, you know, entirely new markets that we can't think of, how much will that grow? It's like trying to kind of think of internet use cases in the 90s where, you know, you know, it's kind of like thinking, you know, how much can electronic mail scale the global economy?

• 1:23:11Speaker 00

  Well, like email is like one primary use case, but obviously the use cases went way, way, way beyond that to use cases we couldn't even imagine. So like even trying to project it is a little bit difficult because we can't imagine all the possible use cases that could be on-chain. Because there'll be entirely new products that are created because you have this non-gastodial automated transparent financial system where previously agreements that involve too much risk and trust couldn't be created, but now can be created. Plus you have all the developing nations where they don't have a very robust legal system. So a lot of institutions can't operate in that environment because they have no system to fall back to. But if they can fall back to a blockchain that's automated, that's billions of people that we're talking about

• 1:23:53Speaker 00

  being introduced into a global financial system that previously they had no access to in the first place. Like this isn't just like, can we make security settlement 10 times faster and cheaper? It's also can we just bring everybody else into the financial system itself? Which is ultimately kind of what I think and correct me if wrong, is like ultimately the bankless vision of everybody should have access to financial services, no matter who you are.

• 1:24:15Speaker 02

  And David, if you want to see how hard it is to predict, just ask Noah Price or Paul Krugman about how hard it is to predict the economic impact of the internet. Who said that the internet will be no more impactful than the fax machine, right? So, you know, we're kind of, it's like, you know, I don't want to be the Paul Krugman of crypto and to throw out a number that's not going to, you know, be realistic. But I'll go on record, I personally think that tokenization of RWAs will end up being, by dollar value, obviously, the biggest use case in crypto by just the sheer fact of like two things, right? Blockchains are asset ledgers and there's just tons and tons of off-chain assets that are just ready to be tokenized. They just generate a whole slew of benefits for the efficiency of capital markets in general.

• 1:25:00Speaker 02

  So just by the sheer size of how much there is to sort of tokenize and given the fact that, you know, blockchains are best used for keeping track of who owns what stuff and facilitating the swapping of that stuff, you kind of pair those together. I think tokenization of RWAs will be the biggest use case that we'll ever see crypto. I will say that.

• 1:25:20David Hoffman?

  Maybe if I, I definitely, I definitely see that. Maybe to try to attempt to articulate my like bull case for chain link is that there's already assets out there, there's already securitization out there, there's already some trillion dollars of assets that are already like securitized, which is trad word for tokenized. And all of that can eventually through chain link, make its way on chain. And like Fishy, I like the way that you set that up. Blockchains are asset ledgers. We already have the assets out in trad world and with chain link, those can become tokenized on a blockchain because, and then they get imbued with all of the powers that a blockchain brings to the table.

• 1:26:03David Hoffman?

  And that's like the bear case because that doesn't include all of the net new economic activity that we can't even imagine yet. So merely tokenizing what already exists in trad world is like the bear case for chain link is if I'm putting on my bull case cap. How's that for an articulation?

• 1:26:23Speaker 00

  Yeah, it's pretty good. That's, that's.

• 1:26:26David Hoffman?

  Okay, guys, so like, say, say I'm a link bull. What catalyst, what short-term catalyst would I be looking forward to? Like, what's on the horizon over the next, like, six months to two years? What would I be looking towards?

• 1:26:40Speaker 00

  I mean, right now, if you look at what Changeling's doing right now, it's basically making three big bets. Right now, you have CCIP for cross-chain interoperability, and that's both DeFi interoperability, so Synthetix and Ava using it, as well as the TradFi interoperability and all the RWAs that we talked about. There's another big bet on functions, which is a self-service oracle platform for running JavaScript off-chain. So you can connect to any API, run computations, any arbitrary computation, and put the results on-chain. And then there's data with data streams, which is a poll-based low-latency oracle, which is very, very useful for DeFi perps, which I think are still very small compared to what they could be. I think all perpetrating will eventually happen on these exchanges,

• 1:27:21Speaker 00

  and that provides the price data to prevent front-running and to have these low-latency settlement of trades. So like, those are the three things of basically scaling those three components. And then, you know, I think over time, it's hard to tell the timelines with institutions, because it's really like regulatory dependent, and it'll be different environments. Thank God the US isn't the only environment looking towards tokenization. They're kind of far behind, but I think, you know, we're going to increasingly move from tokenization or these POC experiments that institutions want but haven't scaled up to actually seeing mainnet production use cases of tokenized assets flowing onto blockchains and interacting with DeFi itself, made possible by CCIP. I think that's like, we kind of touched upon this, but I think that's like, that's really the bull case

• 1:28:03Speaker 00

  of seeing that come to life itself and the realization of this decentralized computing marketplace, where ultimately it's completely self-service. Everybody can define their own oracle networks and define their collateral requirements within that environment. And just seeing how much the ecosystem can actually grow from that perspective of Changeling providing all the platform services. Like, I'm, I agree with Fishy that tokenized finance, you know, DeFi, institutional DeFi, like, whatever you call it, I like on-chain finance. That's the ultimate use case in my mind for blockchain. I think, you know, maybe, maybe gaming will take off, maybe NFTs, maybe social. Those will be use cases, but I think it's actually finance that's going to move the needle. And you know, everybody, you talk about blockchains and people ask what that means. And usually people give some technical explanation about trust minimization and freedom and whatnot.

• 1:28:48Speaker 00

  But really, it's just like, you'll have assets that are 10 times cheaper to move, 10 times faster to move. And you'll have access to 10 times more assets. And you won't even like realize that you're using a blockchain because I think that's the end state. You won't know that you're using chain link and you won't know that you're using a blockchain. You'll just be interacting with on chain finance. In fact, you won't even know you're using on chain finance. It'll just be finance and it'll be all abstracted away into the background itself. And consumers will just have access to better financial products. Like that's the end state I think will be increasingly realized over the next couple of years. It'll probably take a little while to actually scale to like the full, you know, hundreds of trillion of dollars in value itself. It'll probably start with private market equity, pre IPO stock, like things that are traded literally OTC and over the phone today. Cause they have no traditional structure for how those assets are defined.

• 1:29:32Speaker 00

  Those will probably be brought on chain first. Then we start to step into the tokenization of funds, mutual funds, money market funds, hedge funds. Like those will start to be brought on chain afterwards. And so I think like, just seeing the scope of assets tokenized on chain will continue to increase over time. Like we've been doing tokenized dollars since like 2014 with tether. And you know, we've proven that there's real demand. It's like, what other assets can we tokenize? What other assets can we create? I'm really excited to see, you know, these financial markets being brought on chain. And I think that's, that's like the ultimate bull case to look forward here.

• 1:30:02Speaker 02

  I also want to add one more point. I know here in crypto, we've always struggled, you know, with regulation and you know, what's the regulatory clarity? And you know, why aren't they doing this? And what's going with that bill? And you know, we hate the hostile language in the bills at times, right? But you know, if I was a betting man, right? And I was trying to figure out, okay, who has the power to change regulations to sort of make this happen, right? I would put my money on the institutions with all the assets and all the money. They have the means to lobby politicians, the lobbyists, they have the contacts to move stuff forward. And they have, you know, the interest, the financial interest to make that happen. So like, I know, I don't mean to be kind of like, you know, a cynic and you know, of our, you know, democratic system, but

• 1:30:46Speaker 02

  At the end of the day, the team, the DeFi team of five anonymous devs sitting in a free Discord server is not going to move the needle compared to BlackRock, you know, and all the other institutions, you know, going to Washington and say, hey, we have all these assets we want to tokenize. It has all these, you know, capital market improving efficiencies that we can generate, we can democratize access, and all these benefits make something happen. I think they are much more likely to get something done as opposed to like, you know, kind of like, you know, the stuff on the DeFi. That's still kind of, unfortunately, again, I'm saying it's justified, but unfortunately, it's kind of seen as this kind of like a parallel niche kind of system. And, you know, we have the Elizabeth Wardens of the world that are constantly just kind of demonizing crypto and all those things too.

• 1:31:28Speaker 02

  And so, um, you know, like I said, I, I think that when it's these large institutions that need laws passed or rules changed for their own self benefit, they are the ones that will make it happen.

• 1:31:39David Hoffman?

  Well, guys, I think we can leave it there. I feel sufficiently educated on to what Chainlink is trying to do and how link fits into this. If someone listening to this, some member of the Bankless Nation is interested in becoming further link build, where off they go? Where would be the top of the rabbit hole that we can show them?

• 1:31:58Speaker 00

  So I don't mean to show my own podcast or your podcast. It feels kind of weird.

• 1:32:01David Hoffman?

  No, it's well within reason.

• 1:32:03Speaker 00

  Okay. Yeah. I have the CLG podcast. I did a podcast with Sergey a little bit earlier this year and also put out a recent one. I think that's, that's one resource that people like to listen to things. If you're listening to this, you probably like to listen to podcasts. So I would recommend that. And as well as the Chainlink blog itself is like the deepest dive, not only to Chainlink, but just like general industry, crypto industry, technology concept itself, all the way from like very top of funnel. What's an oracle? What's a blockchain? All the way down to like, how does Chainlink enable the tokenization of finance itself? Like, I think that's a very good definitive resource if you're looking to get the deep dive information on, on not just Chainlink, but our industry itself.

• 1:32:40David Hoffman?

  And where can guests find you guys on Twitter?

• 1:32:44Speaker 00

  You can find me Chandler God on Twitter. You'll probably see me talking about Chainlink or DeFi or, you know, just battling misinformation.

• 1:32:51Speaker 02

  Yeah, and I am right alongside in there on Twitter as, you know, Fishy Catfish on Twitter. Shumi DM, I'm always happy to answer questions about Chainlink and or talk about whatever. Just find me and I love chiming people.

• 1:33:04David Hoffman?

  Well, guys, thank you for coming on the show today and helping me articulate the bull case for Link. It has been a long time coming, but now that, like I said at the beginning, now that we did the show with Sergey about Chainlink, I felt like it was only time to do the other half of that conversation with this episode for Link. So, thank you for coming on and helping me articulate that story. Bankless Nation, you guys know the deal risks and disclaimers. Crypto is risky. Chainlink's risky. Link is risky. Tokens are risky. You can lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.