Summary
LlamaRisk supports adding wstLINK to the Aave V3 Core. wstLINK is a liquid-staking token that represents staked LINK on Chainlink’s network, with stake.link serving as the delegated staking provider. By staking LINK, the protocol strengthens the cryptoeconomic security of Chainlink’s oracle infrastructure.
The primary risk for Aave lies in potential slashing penalties on delegated LINK. Since slashing rules remain in beta, they may evolve, and any slashing event would drive net-negative rewards (i.e. a negative rebase on the underlying stLINK).
On the market side, liquidity for stLINK is concentrated in two Curve pools, offering roughly $5M–$5.4M of swap capacity at up to 7% slippage. The largest pool counts about 40 LPs, over 95% of whose funds sit in a Curve Gauge. Stake.link’s contracts have been audited by four independent firms and are now covered by a bug-bounty program. Governance runs through a 6-of-8 multisig, whose signers include core contributors, node operators, community members. Chainlink itself operates uniquely as a DAO participant.
In summary, onboarding of wstLINK would not alter Aave’s risk profile and poses minimal incremental risk, though it’s wise to monitor developments in the Chainlink Staking environment.
Collateral Risk Assessment
1. Asset Fundamental Characteristics
1.1 Asset
wstLINK (Wrapped staked LINK) is a liquid staking ERC20 token that represents a receipt of staked LINK utilised to secure the Chainlink Network through stake.link. LINK, the network’s native token, allows users to provide cryptoeconomic security to oracle networks in return for staking rewards. Stake.link is the issuer of wstLINK and the sole third-party delegated staking provider for Chainlink.
Source: Chainlink Staking, Chainlink Economics 2.0
Chainlink staking was initially launched with v0.1 in December 2022 as a capped staking pool for the ETH/USD Data Feed on mainnet, with Community and Node Operator native staking allotments. Users can stake as Community Stakers to participate in maintaining the network (see section 1.2), with LINK auto-delegated evenly to all nodes currently.
The most recent beta update, v.02 (November 2023), expanded the pool from 25M to 45M LINK and introduced upgrades such as a withdrawal mechanism, variable reward rates, and the use of modular architecture. As a part of Chainlink’s Economics 2.0, staking forms part of a set of initiatives to increase oracle network utilization and adoption.
Source: Chainlink Staking roadmap, Chainlink Blog
At the time of writing, it has been ~1.5 years since the last Chainlink Staking update, and no new announcements or expansions (including pools and feeds) have been made. The stake.link team indicated a lack of insight into the project’s roadmap progress.
1.2 Architecture
stLINK is wstLINK’s sole underlying asset, LINK is deposited into both the Node Operator and Community Staking Pools. Key contracts that enable wstLINK include:
StakingPool: Controls deposits and withdrawals of underlying LINK. The pool deposits assets into strategy contracts and mints stLINK, which represent a share of the pool.PriorityPool: Queues deposits and acts as a liquidity buffer for withdrawals.WithdrawalPool: Queues withdrawals if there is insufficient liquidity in the PriorityPool.WrappedSDToken: Wraps stLINK into wstLINK.RewardsInitiator: Handles reward accounting and updates the StakingPool. In the event of slashing, the contract also handles rebasing within the StakingPool.RewardsPool: Manages the distribution of a single reward token to a parent pool.- Vaults:
CommunityVaultsandOperatorsVaultsthat are used to stake LINK. - VCS: Staking strategies that manage many Community and Operator vaults.
OperatorStakingPool: Tracks node operator LST balances.
Slashing
Reward penalties for node operators found to have excessive downtimes were introduced in v0.1, with up to 3 months of accrued staking rewards at risk of being slashed.
Slashing on committed LINK is currently active for v.02, and is expected to evolve as a part of the staking implementation roadmap. The slashing mechanism is based on oracle networks failing to meet their performance standard, e.g., not submitting a new oracle report for more than three hours. Node operators staked LINK are at risk of slashing should an alert be validated, with node operators slashing currently set to 700 LINK. Each stake.link node operator is max staked 75K LINK, slashing therefore represents a 0.9% penalty on the total stake per node operator. The delegated Community staked LINK is currently not at risk of slashing, but this is subject to change.
As a third-party delegation system, underlying LINK in wstLINK is subject to slashing risk, as it forms part of the Node Operator pools.
Rewards
Native LINK emissions support staking rewards and alerting rewards in Beta versions of staking, with oracle network user fees being introduced from V1 onwards. Current Community rewards have a 4.5% base annualized rewards rate of the maximum staking pool size. Additionally, node operators are entitled to a 4% Delegation reward from auto-delegated Community rewards. The Community pool has an effective base rate of 4.32%. The Node Operator pool generates a base effective rate of 6.28% currently (of a maximum pool size).
Post v0.1 updates, annualized rewards will vary based on user fees and staker commitment, reducing reliance on LINK emissions.
Withdrawals
A Priority pool allows users to deposit LINK in the event of unavailable deposit space into the Staking pool, queuing deposits until space becomes available. The Priority pool also acts as a liquidity buffer, allowing users to withdraw wstLINK provided there is sufficient liquidity in the pool.
Source: Priority Pool Balance, Dune, May 30th, 2025
As of May 31st, the Priority pool balance stood at 242K LINK (~$3.4M). Historically, the pool saw its largest balance in December 2023 (~1M/$15.8M LINK). This peak and prior growth coincided with the v0.2 update and is likely explained by the start of Early Access and General Access (December 7 and December 11). The pool’s balance declined thereafter and saw its lowest levels between August and November 2024. Liquidity has since improved and fluctuated periodically.
Unstaking
Staked LINK can be withdrawn from Chainlink by initiating a request and undergoing a 28-day cooldown window. After this window, users are given 7 days to claim their LINK; unclaimed LINK thereafter are restaked. Version 0.2’s unbonding mechanism reserves potential penalties on accrued rewards depending on the length of staking. Rewards are made up of Claimable and Locked rewards. Claimable rewards can be withdrawn at any time, but Locked rewards go through a 90-day lockup period before they become Claimable. Lock-up periods, called ‘ramp-up’ periods, are tracked linearly from 0% to 100% of days’ completed. Should a staker withdraw before the complete 90-day window, they will earn the percentage completed and forfeit the rest.
In the event the protocol withdrawal buffer described above is insufficient, stake.link withdrawals will depend on secondary markets and Chainlink’s unbonding delay. In reality, if the withdrawal buffer is depleted, in most cases the withdrawal delay will be around 7 days instead of 28 days in native Chainlink Staking, as claimed by stake.link’s team. If the amount of withdrawal requests exceeded 20% of the pool, the withdrawals will then fall back to the next unbonding cycle, incurring up to 28 days of delay.
Node Operators
Source: stake.link Node Operators, Mirror
Currently, stake.link delegates LINK to 15 node operators.
1.3 Tokenomics
Users receive stLINK by staking LINK with stake.link, and wrapping to receive wstLINK via the wrapper contract. wstLINK is denominated in LINK and is a value-accruing non-rebasing token representing a user’s stake in the underlying assets + staking rewards. Supply is capped by Chainlink Staking pool size (currently 45M LINK)and the number of node operators that stake.link utilizes.
Source: stLINK pool info, stake.link, May 28th, 2025.
At the time of writing, the available pool capacity has been reached and can only expand with a Chainlink update to the pool size and/or the onboarding of additional node operators with spare capacity. Holders receive a blended reward rate from the Community and Node Operator Staking Pools, less protocol fees.
1.3.1 Token Holder Concentration
Source: Top 100 wstLINK Holders, Etherscan, May 28th, 2025.
wstLINK is concentrated in a few holders, with only 68 addresses holding the token. The top 10 holders collectively own 84.66%, and consist of 9 EOAs and the RewardsPoolWSD contract.
Source: Top 100 stLINK Holders, Etherscan, May 28th, 2025
The top 10 holders of stLINK own 63.52% of the total supply. The top 5 accounts and their holdings include:
- LINK Priority Pool contract: 25.02%
- wstLINK contract: 17.07%
- EOA 1: 4.20%
- EOA 2: 3.92%
- EOA 3: 3.51%
The largest DEX holding is a Curve stLINK/LINK stablepool, which holds 2.95% of the current stLINK supply.
2. Market Risk
2.1 Liquidity
Liquidity for wstLINK is low, with liquidations requiring an unwrap step to stLINK for greater liquidity availability.
Source: stLINK/LINK swap, DeFiLlama Liquidity, May 29th, 2025
~$5.4M worth of stLINK (~338K) can be swapped for LINK within a ~7% slippage. A less correlated swap involving WETH allows for ~$5M worth of stLINK (~315K) to be swapped within a ~7% slippage.
2.1.1 Liquidity Venue Concentration
Source: stLINK Liquidity Pools on Ethereum, Geckoterminal, May 29th, 2025
As mentioned in section 1.3.1, a Curve stLINK/LINK stablepool represents the largest source of DEX liquidity on Ethereum with $1.9M stLINK and $4.5M LINK. An older Curve stLINK/LINK pool is also available with $632K and $637K worth of stLINK and LINK, respectively.
2.1.2 DEX LP Concentration
Curve stLINK/LINK LP distribution is concentrated in a LiquidityGaugeV6 contract (95% of stLINK/LINK-ng LP token), with 33 deposits in the contract. Of the 33 deposit token holders, the top 10 holders collectively own 74.4%. The top 5 accounts and their holdings include:
- EOA 1: 10.6%
- EOA 2: 10.3%
- EOA 3: 10.3%
- EOA 4: 9.2%
- 2/2 Multisig: 7.4%
While the number of liquidity providers is low, no single account holds a majority of the available liquidity that would be of concern in the event they decided to pull liquidity from the pool.
2.2 Volatility
Source: Llamarisk, data sourced from Coingecko, February 28th to May 29th, 2025
Relative volatility between stLINK and underlying LINK, as measured by daily returns over the last 90 days, was similar, with stLINK and LINK averaging 5.4% and 5.3%, respectively.
Source: stLINK/USD, Geckoterminal, May 29th, 2025
2.3 Exchanges
wstLINK is currently not listed on centralized exchanges.
2.4 Growth
Source: Dune, May 29th, 2025
stLINK retains strong user interest, as shown in section 1.3, pool capacity has been reached, with queued deposits from the Priority Pool still pending. Growth in rewards over time has remained upward since January 2024, indicating strong deposit retention and overall growth. Over the last 3 months, the rewards rate has averaged 5.41%.
3. Technological Risk
3.1 Smart Contract Risk
13 audits have been performed on stake.link by 4 independent auditors. The most recent audits from each auditor include:
- Cyfrin (February 2025): 1 informational and 1 gas-related issue found, both acknowledged
- Trust Security (February 2025): 1 high, 3 medium, and 3 low severity issues found, the high issue was fixed and all others were either acknowledged or fixed.
- Codehawks (November 2024): 1 high, 7 medium, 17 low severity findings. The sole high issue, along with 5 medium and 8 low issues were fixed.
- Sigma Prime: (January 2023): 1 high, 1 medium, and 17 low severity issues were found. 1 high and 6 low issues were resolved, 5 low were closed, and the rest remained open at the time.
These audits reflect a history of regular and diverse risk assessments over time.
3.2 Bug Bounty Program
An Immunefi bug bounty with a max payout of $100K is live. Additionally, the most recent Chainlink Staking bug bounty program for v0.2 consisted of a Code4arena contest, which lasted for 18 days in 2023, and had a total prize pool of $250K.
3.3 Price Feed Risk
1 stLINK is minted for every 1 LINK staked, this 1:1 basis is translated in a varying exchange rate for wstLINK. In the event of slashing, rebases to stLINK generate net negative rewards and therefore affect the wstLINK/stLINK exchange rate negatively. stLINK rebases occur on a weekly basis.
Chainlink LINK/USD market price feed is available, with a 1% deviation threshold and 1 hour heartbeat. Using the internal exchange rate along with a CAPO adapter and LINK/USD market price feed would help reflect slashing penalties more accurately than a wstLINK/USD market price feed, therefore this approach is preferred.
3.4 Dependency Risk
Node operators and Chainlink Staking represent the main dependencies for wstLINK. Node operators are vulnerable to slashing penalties should they not meet performance standards set out in the SLA for an oracle network. As stake.link stakes LINK in Node Operator pools, user funds are exposed to losses should the operators stake.link selects underperform.
Chainlink Staking is still in the early phases of its roadmap and will introduce more features that may affect rewards. LINK emissions are expected to taper as the main rewards asset as, oracle user fees are introduced. A reputational system will also influence the selection of nodes in an oracle network and therefore rewards.
Slashing represents the main dependency risk, which could potentially expand to Community Staker pools, however, operator selection based on the reputational system could be a mitigating factor.
4. Counterparty Risk
4.1 Governance and Regulatory Risk
Stake.link continues to operate through a bifurcated architecture. The protocol was incubated by LinkPool, a veteran Chainlink node operator whose UK vehicle, LinkPool UK Ltd., remains on the Companies House register. Following the December 2024 community proposal SLURP-30, the ecosystem incorporated stakedotlink Limited in the British Virgin Islands as a company limited by guarantee—a not-for-profit form without share capital—tasked with “representing the DAO” in off-chain matters. This wrapper affords the project limited liability, capacity to execute service agreements (e.g. with auditors and market-makers), and an identifiable tax domicile, while token-holder supremacy is preserved through the guarantee-member structure.
The platform’s Terms dated 21 September 2023 underline its corporate independence by stating that “the Platform is separate from, and not a corporate affiliate of, Chainlink.” Accordingly, ownership of the front-end, branding and ancillary intellectual property lies with stake.link rather than Chainlink Labs.
Those Terms further describe stake.link as a “strictly technology provider” operating on a “non-custodial” basis, then proceed to disclaim liability for virtually every foreseeable contingency—from smart-contract exploits and price volatility to erroneous artificial-intelligence outputs (e.g. SergAI clause). Users must indemnify the platform for defence costs, and while access is barred to Office of Foreign Assets Control–sanctioned jurisdictions, it is otherwise left open to U.S. persons, subject to unilateral suspension rights. New York law governs; all disputes must be submitted to three-member ICDR arbitration seated in New York; fiduciary, professional, custody and suitability duties are expressly disavowed; class actions, VPN circumvention and sanctioned-country access are contractually prohibited.
When a user mints wstLINK pursuant to these Terms, the resulting receipt token entitles its holder to a pro-rata economic interest in a professionally managed staking pool. Contractual waivers, however, cannot forestall a regulator from categorizing that interest as a security or collective-investment unit if the underlying functional tests are satisfied.
wstLINK itself embodies a transferable, yield-bearing claim on an aggregated asset base, with smart-contract logic and DAO governance compounding rewards autonomously. These additional layers—pooling, tokenization, secondary liquidity—mirror the characteristics that U.S. courts and the Securities and Exchange Commission have previously cited when treating Lido’s stETH and Coinbase’s staking program as investment contracts. In its 29 May 2025 statement, the SEC’s Division of Corporation Finance drew a bright line: “protocol staking” does not constitute a securities offering, but “liquid-staking tokens” such as wstLINK were conspicuously excluded from that safe harbour. Validator-level staking therefore enjoys a clearer regulatory pathway in the United States, yet the transferable receipt token minted atop Stake.link remains in limbo—and may draw increased scrutiny. A footnote in the statement explicitly declines to address “liquid staking, restaking or liquid restaking,” and contemporaneous commentary emphasizes that the guidance lacks binding legal effect, postponing a view on more complex receipt-token models.
Notwithstanding the foregoing, a canvass of SEC, CFTC, FCA, BaFin, MAS and public-court dockets reveals no enforcement proceedings or civil claims against Stake.link, stakedotlink Limited or LinkPool as of 2 June 2025.
Beyond that, we have formally requested that stake.link produce documentary evidence of any legal analysis previously conducted on wstLINK. If such an opinion exists—whether as an external counsel memorandum or an internal regulatory assessment—it would supply contemporaneous support capable of addressing several of the concerns outlined above.
4.2 Access Control Risk
4.2.1 Contract Modification Options
All stake.link contracts and Treasury wallet are controlled by a 6/8 multisig, which is managed by the Node Operator Council (see section 1.2 for key contracts).
Privileged functions in the stLINK contract that are exposed include:
| Function | Impact |
|---|---|
addStrategy() / removeStrategy() |
Add/remove staking strategies. Could redirect funds to malicious contracts if compromised. |
setRebaseController() |
Grants reward distribution control. |
addFee() / updateFee() |
Configure fee. Modifies or removes an existing fee. |
setPriorityPool() |
Restricts who can stake/withdraw. |
burn() |
Burns liquid staking tokens. |
Deployed contracts are well documented along with their functions in stake.link docs.
4.2.2 Timelock Duration and Function
stLINK is owned by a Governance Timelock contract, which has a 24-hour delay. This delay may potentially be too short for users to make assessments of any parameter changes and opt out.
4.2.3 Multisig Threshold / Signer identity
The Node Operator Council is made up of 8 council members. Current signers to the governance multisig include:
- 2 Core Contributors from LinkPool.io
- Matrixed.Link
- LinkForest.io
- Chainlayer.io
- Galaxy Digital
- The SDL DAO
- Harris and Trotter.
Note: This assessment follows the LLR-Aave Framework, a comprehensive methodology for asset onboarding and parameterization in Aave V3. This framework is continuously updated and available here.
Aave V3 Specific Parameters
The wstLINK deployment parameters have been decided jointly with @ChaosLabs and will be published in their follow-up shortly. The asset is to be onboarded with a similar setup as ETH LSTs, enabling a LINK Correlated E-Mode designed for efficient wstLINK yield looping.
Price feed Recommendation
We recommend to price wstLINK employing the internal exchange rate, in combination with CAPO and Chainlink’s LINK/USD market price feed. This will lessen the dependence on secondary market fluctuations while covering the asset’s slashing risk.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.