Updated July 27, 2022.
Chainlink node operators are the backbone of the Chainlink Network. Chainlink node operators participate within decentralized oracle networks, allowing engineers to fetch external data in a secure and reliable manner. They operate the crucial oracle infrastructure that is responsible for ensuring smart contracts across every blockchain have access to the real-world data they need to execute properly. For example, Chainlink uses a large collection of node operators to collectively power a wide range of decentralized Price Feed oracle networks live in-production, which currently secure over $22B in value for leading DeFi applications like Synthetix, Aave, Compound, dYdX, Liquity, and more.
As previously mentioned in our Education Series, due to the security properties underpinning blockchains, all smart contracts (on-chain) have an inherent oracle problem of not being able to fetch data from external systems (off-chain). This necessitates the use of an oracle to serve as a middleware that transfers data bidirectionally between on-chain and off-chain environments. In this article, we aim to provide a broad overview to how node operators contribute to the Chainlink Network, including:
- The role node operators play in the Chainlink Network
- What are the requirements of running a Chainlink node
- How do Chainlink node operators sell data to smart contracts
- Where to find and evaluate Chainlink node operators
How Node Operators Fit Within the Chainlink Network
Chainlink node operators are the entities running the oracle infrastructure (hardware and software) that powers and secures every oracle network running on the Chainlink Network. These oracle node operators are responsible for watching the blockchain for new incoming data requests from smart contracts, fetching the requested off-chain data from specified APIs, and delivering the data on-chain where it can be consumed by a smart contract to trigger its execution. Similar to how the Internet connects computers to the outside world, oracles are the bridge between a blockchain and any piece of data or system that exists outside of it.
While contracts can choose to send their data requests directly to a single Chainlink node and receive a single response back, Chainlink nodes are most powerful when combined together into an oracle network. Decentralized oracle networks aggregate data from any number of Chainlink nodes to remove any single point of failure in the sourcing and delivery of that data to the blockchain.
The Chainlink Network is an infinitely scalable network of independent oracles and oracle networks. Although each oracle runs the Core Chainlink software, they ultimately operate without any dependencies from any other oracle, freely able to simultaneously be a part of different oracle networks and/or operate independently. The Chainlink Network is permissionless to run an oracle on, but each oracle network can restrict the individual oracles allowed to contribute, as well as customize how data is sourced and aggregated within it. Unlike a blockchain, there is no unified consensus mechanism or node network.
What a Chainlink Node Needs to Operate
To become a node operator in the Chainlink Network and begin delivering external data to smart contracts, there are a few technical requirements within the Chainlink node setup to ensure a smooth and reliable operation. The core components include:
- Chainlink Node client software – Open source infrastructure that a node operator runs, which bridges the on-chain and off-chain environments.
- On-chain oracle contract – The Chainlink node’s smart contract that monitors for data queries and forwards responses back to the requesting user’s smart contract.
- Data source subscriptions – The off-chain data source APIs a Chainlink node connects to and fetches data from on the behalf of requesting smart contracts.
- External monitoring systems – Peripheral off-chain infrastructure that monitors the performance and reliability of a Chainlink node in real-time.
Each Chainlink node operator interacts with these components on a regular basis. Together, they make up a Chainlink node and enable the secure delivery of data to any blockchain.
How Chainlink Nodes Connect to Off-chain Resources
Chainlink nodes have been designed from inception to provide the highest level of flexibility in what kinds of data can be fetched and how that data can be delivered. By default, every Chainlink node has a collection of pre-built core adapters, allowing them to connect to any open API and deliver the data on-chain. While these core adapters provide Chainlink nodes with an initial feature set, it’s external adapters that truly open up access to any off-chain resource.
External adapters are modular components that can be added to the Chainlink node to greatly expand its native capabilities, particularly the range of data it can access and the types of computation it can perform. For example, external adapters can be used to perform off-chain computations on data (producing an average of nodes’ responses) or to access authenticated APIs that require credentials.
External adapters are one of the main reasons that Chainlink nodes are able to sell any type of data to smart contracts, as well as expand beyond data delivery to include bidirectional communication, off-chain banking payments, interoperability with other blockchains, and much more. Ultimately, they ensure the Chainlink network can continually expand to support new functionalities, as new External Adapters can easily be created without putting at risk any core functions of the network.
How Nodes Sell Data to Smart Contracts
The Chainlink Network’s flexible framework supports two Chainlink node models, which supports both the existing need to rapidly onboard off-chain data providers with little-to-no integration work, as well as the long-term transformation of data/API infrastructure into delivering its own signed data directly to smart contracts.
The Standard API Model is where the node operator is a separate entity from the data source. By selling their data directly to the Chainlink Network, Chainlink Nodes can pay for that data and make it available across any blockchain without the data provider having to operate any new infrastructure or modify their existing business model. This allows for the seamless onboarding of all the world’s data and API services, as data providers don’t have to bear any of the costs or responsibility for integrating their data into blockchains.
The Origin Signed Data Model is when a data provider runs their own Chainlink node. Doing so allows the data provider to cryptographically sign their data with a unique private key and deliver it directly to smart contracts themselves. This adds Sybil resistance to the data, as the end user can definitively prove it came from a specific source. It also removes any middleman in selling data to smart contracts, increasing a data provider’s revenue and helping them establish a reputation as a reliable source of truth in the growing Chainlink ecosystem.
Both of these Chainlink node models can be mixed and matched within a single decentralized oracle network. Such flexibility lowers the barrier to entry for joining the Chainlink Network and results in more datasets available to smart contracts with none of the onus on existing data providers.
How to Find and Evaluate Chainlink Node Operators
The Chainlink Network uses a “security through transparency” approach, where each Chainlink node has a unique public address from which they submit data, and subsequently sign data from using their corresponding private key. Being publicly identifiable addresses with immutable on-chain performance histories, Chainlink nodes have their reputation on the line for all oracle services they provide.
To ensure a Chainlink node’s reputation is easily accessible to users and smart contract developers, multiple independent websites and APIs are available that provide detailed and refined data regarding the performance of the Chainlink Network as a whole, as well as each decentralized oracle network, node operator, and data provider.
Decentralized Oracle Network Visualizations
The Chainlink Labs team has made the on-chain performance data regarding the state of each decentralized oracle network available to the public in a simple, easy-to-navigate manner, with insights into the key parameters of each price feed. Data.chain.link is one resource that provides both the total collection of all price feeds, projects, and node operators in Chainlink’s DeFi ecosystem, as well as the real-time status on each of the many price feeds securing billions of dollars of value within the DeFi economy. Users are given information regarding:
- An aggregate view of all Price Feeds live on mainnet
- The current on-chain price of each Price Feed
- The update frequency and a timestamp of the previous update
- The minimum nodes needed to publish an update and the status of each node
- A list of the DeFi projects sponsoring and using each Price Feed
- A list of the security-reviewed Chainlink nodes powering the Price Feeds
Chainlink Node Operators Listings
Chainlink node operators are able to showcase themselves to potential users on marketplaces such as market.link. Node operators can list their oracle services, external data connections, certifications, and more. This provides Chainlink nodes a platform to offer their services to smart contract developers, as well as a hub for users to analyze the important features about each Chainlink node to see whether or not they are suitable to satisfy their oracle needs.
Chainlink Network Stats and Node Operator Reputation
All requests to and responses by Chainlink nodes are recorded on-chain in an immutable manner, which can be used to further analyze the reliability and accuracy of the entire Chainlink Network. Market.link is one such front-end that pulls on-chain data to give users and node operators alike a broad overview into the real-time performance of the Chainlink Network. This gives data providers and future node operators objective statistics about the Chainlink Network, and provides more details about individual node operators.
The combination of all these resources creates an unprecedented level of transparency where users, developers, and node operators alike can gain insight into the real-time functioning of the Chainlink Network at a granular level. Through this data, the Chainlink Network has grown to become the gold standard of node operator quality and reliability, ensuring high-value smart contacts today and well into the future have definitive evidence of high-quality oracle performance.
Node Operators are the lifeblood of each and every data feed supplied by the Chainlink Network and directly secure billions of USD value in the growing smart contract economy. As this ecosystem of data-driven decentralized applications continues to expand and evolve, the role of Chainlink node operators will only grow in importance and numbers. Built from the ground up with security and flexibility in mind, Chainlink nodes are now proving the strength of decentralized oracle networks as a means of creating definitive truth about the real world, greatly expanding the addressable market of smart contracts.
If you want to read additional content, check out our article on Data Quality for DeFi Smart Contracts, where we explore the extreme importance of oracles sourcing high-quality data in order to scale the amount of value DeFi secures.
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