Zenith Chain and the Transition to Becoming a Chainlink Node Operator
Welcome to the Zenith Chain newsletter, a place for people who are interested in blockchain engineering, smart contract development, and the web 3.0.
Zenith Chain - the new name of my Substack newsletter, the name of my business that I recently started, and the name of my Chainlink node! In today’s newsletter, you’ll find out why I’m shifting gears and focusing all of my efforts on spinning up a Chainlink node.
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Good morning, and hopefully happy Monday to my subscribers! To briefly explain the name change from Smartcon Tech to Zenith Chain, it is due to the fact that I’m taking a shot at starting my own business, which is entirely based around running a Chainlink node.
I’ll get into what all that entails shortly, but the name of the business, which is essentially the name of the Chainlink node, is Zenith Chain. In order to simplify my various content creation platforms and blockchain projects, I’m moving it all under one banner.
Now that we have that out of the way, some of you may have noticed that I like to write about Chainlink frequently, and you may be wondering what the heck a Chainlink node actually is at this point. If you have not read my Hackernoon article yet, I’ll have to once again point you in that direction first, as wrapping your head around what the heck Chainlink is and why it is desperately needed is no simple thing to do.
But to give you the SparkNotes version and a simple image below, Chainlink is the internet connection for blockchains. Blockchains can’t natively communicate with the outside world, and Chainlink is a decentralized oracle framework that opens up a two-way bridge from the blockchain to any external data input out there in the world, and vice-versa.
The reason I harp on Chainlink so frequently is because whether you are an investor, a blockchain engineer/developer, or someone simply interested in learning about the technology, you will want to know about Chainlink. I firmly believe that it one will day take that coveted number one spot where Bitcoin currently lies.
Chainlink isn’t actually a blockchain like Bitcoin or Ethereum at all. It is known as blockchain middleware. It creates decentralized oracle frameworks that will be needed by all blockchains, and they have an absolute monopoly on the decentralized oracle space. While the other blockchain projects fight it out over market share, Chainlink is quietly watching from the stands, enjoying the show.
Unless the Chainlink network fails and some other decentralized oracle network magically pops up to take it’s place, all of the world’s value that wants to leverage blockchain and smart contract technologies will have to first flow through the Chainlink network. I don’t know about you, but this gets me very excited, and that’s why I’m taking steps to run my own Chainlink node.
Chainlink Node Operators
Node operators are the backbone of the Chainlink network. Due to the fact that Chainlink is just a framework for creating decentralized oracle networks, it relies on community node operators outside of the Chainlink team to run Chainlink nodes. These node operators are the crucial infrastructure that are responsible for ensuring smart contracts across every blockchain have access to real world data needed for them to execute properly.
To illustrate how this works, see the image below. Community led nodes such as myself or any of the others form together to create an oracle network that determine a single source of truth for a given input or data source.
An example of what this data source might be would be a price feed, such as the price of Ethereum at any given time. Each of the nodes in a given oracle network determine what the Ethereum price is from different premium APIs and data feeds. From there, each individual node response is aggregated into one single source of truth in a reliable, secure, and tamper-proof way.
It takes an entire article just to explain the dynamics of how these Chainlink nodes work, but they are already in high demand and are currently securing billions of dollars in value for many of the leading Decentralized Finance applications on Ethereum such as Synthetix and Aave. If you are interested, you can find out more here.
Why Run a Node?
You may be wondering why anyone would want to run a Chainlink node? In short, each Chainlink node is paid in the form of the Chainlink token for fetching data and writing it to the blockchain. These nodes aren’t just fetching a price feed once and calling it good, they are fetching it on a continuous basis. Once a node plugs into a data feed like the one above, you can think of it as a continuous stream of mostly passive income for as long as that data feed is needed.
Sounds pretty great doesn’t it? After getting past the initial hurdle of securely and reliably setting up your own Chainlink node, finding clients that need your data, and plugging your node in to whatever data source that is, your node will be generating potentially endless passive income. If you want to take a look at what some of these node operators are making, head on over to Market.link. You can see various metrics such as how much each node made in profits on a given day. Many of these nodes are making tens of thousands a dollars each and every day in profits. That’s no small number.
As with anything, however, there is a catch. Right now due to congestion on the Ethereum network, transaction fees are insanely high. These node operators are responsible for paying those fees in order to write a given data input back onto the blockchain. For most if not all of these nodes, they are paying more in transaction fees then they are making in profits on any given day.
Fortunately for the node operators, one of the functions of the Chainlink token itself is to subsidize the node operators so that they aren’t hemorrhaging money on a daily basis. This will be needed until layer two scaling technologies are released that could 100x the number of transactions per second that Ethereum can handle. Vitalik Buterin, the creator of Ethereum, recently stated on the Tim Ferris podcast that layer two scaling solutions will be fully deployed within the next couple of months.
Trying to bootstrap a decentralized network like this that has never been done before is no easy task. In order to run even your own node, it takes fairly significant knowledge in infrastructure, blockchain technologies, engineering, networking, cybersecurity, and even a little bit of coding. But for these node operators and even myself, we are looking into the future and playing the long term strategy.
I think that entire industries will be swallowed whole by blockchain and smart contract technologies, with all of the value flowing through the Chainlink network. Those institutions and industries that don’t make the transition to these technologies and networks will likely cease to exist. I also think that over the next decade or two, it will be hard to imagine how the world functioned without such a network like Chainlink, just as it is hard to imagine a world without the internet right now.
Thanks for reading this edition of the Zenith Chain newsletter. If you enjoyed this article and want to learn more, I’ll be releasing similar articles like this every Monday. If you would like to stay tuned for more content like this and haven’t subscribed already, feel free to sign up below!