On exclusivity deals and their implications for Ethereum
Chainlink is invited to provide the date, parties and terms of the hackathon exclusivity agreement, and information about exclusivity agreements they seek with projects in general (or deny that these exist).
We have recently announced that API3 was barred from providing bounties for the EtherPunk 2021 hackathon organized by ETHIndia. Reportedly, this was because Chainlink bought exclusivity rights to the event as the sole oracle project. We specifically put this into the spotlight because this is objectively unsavory behavior, and has rightfully sparked outrage. In this post, I’d like to point out that this is not a one-off event, but rather a systematic business model that has wide implications for Ethereum.
So what does an exclusivity agreement mean? We have encountered a number of projects that have agreed to these deals and the information was mostly given out with a precursor of “please don’t tell anyone, but…”, so I will honor that in this post, yet we don’t know if these reservations are required by actual NDAs, confidentiality provisions in the exclusivity agreements at issue, or if people are simply concerned about the backlash. You can Google the Orwellian phrases “go-to oracle solution”, “recommended oracle solution” and “preferred oracle solution”, which will return some of the platforms that we know to have agreed to these deals.
From my understanding, these agreements ban representatives of, or organizations affiliated with, certain smart contract platforms (and possibly dApps) from carrying out any sort of marketing activity with any other oracle solution, including tweeting about an integration to organizing a hackathon together. These agreements don’t ban the integration or usage of other oracle solutions on the platform, which can’t feasibly be enforced anyway.
Exclusivity to dodge competition
The main product of some projects is their marketing machine fueled by their token, rather than their tech. It’s not my place to tell if this is acceptable or not, and as we have seen, there are actual regulatory authorities that swoop in when certain lines are crossed. However, there is a significant distinction here. Unlike Ripple, Chainlink relates their narrative to an attractive problem that other projects legitimately want to solve. Among these, API3 appears uniquely perceived as an existential threat, and Chainlink is displaying increasingly clumsy reactions towards it. In this case, this recent urge to pursue exclusivity deals has only displayed their lack of confidence in their own solution.
What this means for API3 and the space in general
API3 depends on three things to succeed: A superior solution, means to execute it, and non-negotiating decentralization. Since these qualities are inherent, other projects should not expect to be able to hinder API3, but aim to compete with it. As can be seen from this debacle, the alternative is public humiliation and a waste of everybody’s time.
About buying out an entire hackathon to exclude competitors from contributing, I doubt anyone will find this monopolistic strategy to be attractive again. However, the issue here is much greater. We did not raise our voice when side-chains (or their affiliated entities or developers) were coerced into exclusivity agreements (considering it “business”, despite finding it distasteful), but it looks like this was seen as an invitation to try to pull off the same thing on Ethereum through different means. Therefore, the greater Ethereum community should decide on what its stance will be against these backroom exclusivity deals that can be used to hijack an entire space, as this will only become more prevalent if not checked.
