📜Litepaper

Abstract

The advent of explicit staking, as introduced by Chainlink 2.0, establishes a new paradigm of cryptoeconomic security, where the integrity of oracle networks is explicitly backed by staked LINK. However, this security model introduces inherent challenges of capital inefficiency and illiquidity, creating a significant barrier to widespread participation. This litepaper introduces stake.link, a decentralized protocol designed to resolve these challenges through a Liquid Staking Model. stake.link provides a foundational second-layer protocol that enhances the capital efficiency of staked assets via Liquid Staking Tokens (LSTs), introduces a meritocratic access-control layer for staking participation, and implements a novel Reward Escrow (reSDL) governance model to ensure long-term cryptoeconomic alignment. We further outline the long-term vision for stake.link to evolve into a first-of-its-kind on-chain LST Index, a meta-governance and value accrual layer for a diverse basket of high-quality LSTs, beginning with stLINK and extending across multi-chain ecosystems.

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Introduction

Decentralized Oracle Networks (DONs) form the bedrock of a verifiable, interconnected Web3. The Chainlink 2.0 framework defines explicit staking as the primary mechanism for securing these networks, whereby node operators and community members commit LINK to provide explicit security guarantees. While this model provides robust, skin-in-the-game security, it natively renders the staked capital illiquid. This illiquidity presents a fundamental economic dilemma: participants are forced to choose between securing the network and deploying their capital within the burgeoning DeFi ecosystem. This opportunity cost suppresses staking participation, limits the total cryptoeconomic security of the network, and centralizes participation among a smaller set of highly capitalized actors.

To resolve this dilemma, we propose a Hybrid Staking Model, which combines the on-chain security guarantees of native staking with a highly efficient off-chain liquidity and governance layer. This model leverages Liquid Staking Tokens (LSTs) to transform illiquid, staked assets into composable, yield-bearing derivatives that can be utilized across the DeFi landscape. This second-layer protocol does not replace native staking but rather augments it, creating a positive-sum flywheel where increased capital efficiency drives greater staking participation, which in turn enhances the underlying security of the oracle network.

stake.link is a canonical implementation of the Hybrid Staking Model, designed specifically for the Chainlink ecosystem and its expansive, multi-chain future. It is a decentralized protocol engineered to maximize the utility of staked LINK and other high-quality digital assets through a suite of robust smart contracts and cryptoeconomic incentives, while relying on the Chainlink tech stack.

The stake.link protocol is architected as a multi-layered system designed for security, fairness, and composability. At its core, stake.link interfaces directly with Chainlink’s native staking contracts. All assets deposited into stake.link are programmatically staked within the official on-chain pools, ensuring that all yield is generated from the underlying protocol and that all staked capital directly contributes to Chainlink’s cryptoeconomic security.

Upon staking LINK, the protocol mints stLINK, a rebasing LST that maintains a 1:1 relationship with the underlying LINK. The rebasing model provides a clear and consistent unit of account while rewards are distributed through an increase in the holder's token balance. For maximum DeFi compatibility, the protocol also facilitates the wrapping of stLINK into wstLINK, a non-rebasing, value-accruing token ideal for use as collateral in lending markets and to secure other hybrid smart contracts.

Given the capped nature of Chainlink’s staking pools, stake.link implements the Priority Pool, a deterministic and meritocratic access-control mechanism. It functions as an intelligent on-chain queue that allocates newly available staking capacity. Access is not determined on a first-come, first-served basis, which is susceptible to front-running, but is instead prioritized based on a user's stake-weighted governance power within the protocol, represented by their reSDL holdings. This ensures that long-term, committed participants are rewarded with preferential access.

Cryptoeconomic Security and Incentives

stake.link was founded and is operated by a consortium of 15 top-tier Chainlink Node Operators. This collective functions as a specialized Decentralized Oracle Network (DON) focused on the hyper-reliable management of staking infrastructure. Their deep technical expertise and established on-chain reputation provide an unparalleled layer of operational security and alignment with the core Chainlink network.

The native protocol token, SDL, serves as the instrument for governance and value accrual. To ensure long-term alignment and deter mercenary capital, stake.link utilizes a Reward Escrow (reSDL) model, inspired by the vote-escrow systems of DeFi primitives.

• Staking and Locking: Users stake SDL to receive reSDL in the form of an NFT. They can optionally lock their position for up to four years.

• Boost Mechanism: Locking provides a non-linear boost to their reSDL balance, increasing their share of protocol rewards and their weight in governance votes. This mechanism ensures that the participants with the most significant long-term commitment exert the greatest influence over the protocol.

• Incentive Alignment: The reSDL model aligns incentives across three vectors: protocol rewards, staking access priority, and governance power.

Decentralized Governance

The protocol is governed by the stake.link DAO. Proposals (SLURPs) can be submitted by any community member and are ratified by an elected Governance Council. This council is a representative body composed of core contributors, elected node operators, and elected community members, ensuring a balanced distribution of power.

To bridge the gap between decentralized, on-chain governance and the requirements of the off-chain world, the stake.link DAO operates through the stakedotlink legal entity. This BVI-based legal wrapper provides limited liability for DAO participants and enables the protocol to engage in off-chain activities such as signing contracts and managing operational expenses. This creates a Hybrid Governance Model that combines the trust-minimization of a DAO with the operational efficacy of a recognized legal structure.

The Long-Term Vision: The On-Chain LST Index

The ultimate vision for stake.link extends beyond being the premier liquid staking solution for Chainlink. It is to become the first-of-its-kind on-chain Liquid Staking Token (LST) Index.

The protocol architecture is designed to be modular and chain-agnostic. The introduction of stPOL for the Polygon network marks the first step in this expansion. The DAO will continue to onboard high-quality LSTs for other networks, with a focus on those deeply integrated with the Chainlink ecosystem.

In this mature state, the SDL token transcends its role in a single protocol to become a meta-governance and value accrual token for a diversified basket of LSTs. All fees generated from the expanding ecosystem of LSTs (stLINK, stPOL, and all future additions) are distributed to SDL stakers. This transforms SDL into a singular asset that allows holders to gain exposure to the growth and success of the entire liquid staking market across multiple networks, governed by a single, decentralized protocol.

stake.link presents a comprehensive, second-layer solution to the capital efficiency challenges of native staking. By introducing an LST framework for composable assets, a meritocratic access layer, and a robust, long-term-aligned governance framework, stake.link significantly enhances the cryptoeconomic security and utility of the Chainlink ecosystem. The long-term evolution into an on-chain LST Index positions stake.link as a foundational piece of DeFi infrastructure, designed to scale with the multi-chain future being built and secured by Chainlink.