Welcome to Crypto Corner, the video podcast and blog that brings you all the latest news, market updates, price analysis, deep dives into the best crypto projects and much more. I’m OJ - crypto investor and analyst since 2016 and today we’re talking about Chainlink and its token $LINK, to determine if this is a project that is worth your attention and more importantly, your money.
Let’s start with a brief intro into what Chainlink is. You see, blockchains have one major limitation – they are unable to access data from external systems. This is by design, like a computer without an internet connection, they maintain their isolation to guarantee security and streamline efficiency.
This is the problem that Chainlink was invented to solve.
Chainlink is a “decentralized oracle network” that allows blockchains to connect to real-world data (I’ll explain this in a second) - this means, that it acts as a tool to enable interoperability between various blockchains in regards to handling data.
But what is an oracle?
The vast majority of potential use cases for Web3 require a connection to the outside world. Exchanges need accurate price information, insurance needs data to make decisions on policy payouts, and many apps require market information to determine settlements.
The solution to this problem is known as an oracle, a separate piece of infrastructure that bridges a blockchain to real-world data. Oracles can source a variety of information including prices, weather, sports scores, election results, geodata, random numbers, and so on.
Chainlink is adopted by leading data providers such as: Coingecko, Binance, Huobi, CryptoCompare, Galaxy and many more. But Chainlink is not just digital data provider. It acts as an intermediary, linking non-blockchain businesses with blockchain networks. It facilitates the integration of smart contracts with real-world data. This is why we refer to it as an oracle network. It plays a crucial role in many decentralized finance (DeFi) protocols and services that rely on external information. It is indeed a backbone for many DeFi Protocols.
How does Chainlink work?
As any decentralized blockchain, Chainlink is a network of nodes. These are the workers that carry out the requested jobs execution. There can be any number of nodes attached to the blockchain network. Chainlink nodes with registered Job specifications can carry out Jobs execution coordinated by the on-chain Oracle contract(s), which use $LINK tokens as an incentive for the Chainlink node operators to serve clients via the Chainlink smart contracts.
Because Chainlink is designed to integrate real-world data into smart contracts, it is called a hybrid cryptocurrency and decentralized network that facilitates the integration of non-blockchain businesses with blockchain networks. Some of the reasons that make Chainlink appealing to investors are:
Established position and track record: Chainlink has an established position in the market and a track record of delivering accurate and secure data, making it a compelling choice for businesses leveraging blockchain technology. It has already secured multiple billions of dollars across top decentralized finance (DeFi) protocols, showcasing its reliability and trustworthiness. Its established position in the market and successful track record further contribute to its reputation for security and reliability. It was launched in 2017 by Sergey Nazarov and Steve Ellis and has a strong developer team and over 400 employees listed on LinkedIn.
Backbone of DeFi protocols: Chainlink plays a crucial role in many decentralized finance (DeFi) protocols and services that rely on external information.
Potential for growth: Decentralized oracle networks are only going to get bigger, and Chainlink has been trading at a massive discount so far this year, with my personal projection being that it is bound to grow by at least 100% over the next year.
Leading data oracle: Chainlink network is the leading data oracle providing an essential service to rapidly growing smart contract platforms. Within the broader crypto market, the Chainlink project is one of the least risky bets.
Secure: Chainlink utilizes a decentralized network of nodes, known as oracles, to gather data from various sources. This distributed approach reduces the risk of a single point of failure and enhances the security of the data being provided to smart contracts. The use of secure oracles ensures that the data is tamper-resistant and reliable. In addition to that, according to Token Metrics Chainlink has a Hack Cases Score of 100, which suggests a robust security posture and a low risk of being compromised.
Reliable: Chainlink's decentralized data feeds enable smart contracts to access real-time, accurate, and reliable information from various providers. The network has access to over 1 billion data points and manages over $75 billion in value through integrations with 1,000 projects across 700 oracle networks. This extensive network and integration demonstrate the reliability of Chainlink in providing data to smart contracts.
Blockchain Agnostic: Chainlink is a blockchain agnostic oracle network, meaning it can connect to any blockchain. This versatility allows it to provide secure and reliable data to smart contracts across different blockchain networks, enhancing its compatibility and usefulness.
Strong fundamentals: Chainlink has one of the best fundamentals in the whole crypto market. It is led by a reputable and ingenious team led by Sergey Nazarov, it has a clear roadmap with realistic goals, and delivers a seamless way to connect or integrate any blockchain via APIs. Token Metrics, the data aggregator and analytics website is ranking Chainlink very high, with excellent fundamentals, technology score of 90% - this is really high indeed, and these metrics matter for investors, because if you’re parking your money into an asset for longer than a few weeks, in other words, not as a speculative trade, but rather, an investment that could be medium-to-long term, you want to pick an asset with strong fundamentals. And Chainlink has that. So far so good.
Now, let’s look at the potential vulnerabilities of decentralized oracle networks and how does Chainlink address them?
Centralization: Decentralized oracle networks can be vulnerable to centralization if the oracle nodes are controlled by a single entity. This can lead to a single point of failure and increase the risk of data tampering. Chainlink addresses this issue by using a decentralized network of nodes that provide data and information from off-blockchain sources to on-blockchain smart contracts via oracles.
Data Tampering: Decentralized oracle networks can be vulnerable to data tampering if the data sources are not reliable or secure. Chainlink addresses this issue by using secure oracles that ensure the data is tamper-resistant and reliable.
Downtime: Decentralized oracle networks can be vulnerable to downtime if the oracle nodes are not available or are not functioning properly. Chainlink addresses this issue by using a decentralized network of nodes that provide data and information from off-blockchain sources to on-blockchain smart contracts via oracles. This distributed approach reduces the risk of a single point of failure and enhances the reliability of the data being provided to smart contracts.
Customization: Chainlink is an open-source framework that allows developers to customize the degree of decentralization and risk management they want for their oracle networks. This customization feature enables developers to tailor the security and reliability of their oracle networks to their specific needs.
In terms of use cases, Chainlink has many. It is in fact, the most used data oracle out there and plays a crucial role in many decentralized finance (DeFi) protocols and services that rely on external information. It goes beyond DeFi too, serving also NFTs and Gaming, Social Impact, Climate Markets, Enterprise and more. Let’s look more in-depth at some of these.
DEFI: Chainlink provides real-time prices for a variety #DeFi uses including:
• DEXes • Stablecoins • Derivatives • Insurance • Yield Farming
Notable partners include: Synthetix, Aave, Lido Finance, Breeder Dodo, Liquity Protocol and Trader Joe.
The Chainlink protocol provides enterprise-grade infrastructure to allow large corporations to access the Web3 ecosystem. Notable enterprise partners include T-Systems, Lexis Nexis, Swisscom and Accuweather - one of the most reliable weather forecast protocols out there. I use it all the time.
I mentioned NFTs & Gaming too.
Chainlink provides services for several big players in the NFT & P2E gaming space including Axie Infinity, BoredApeYC, Avegotchi and more. Notaby, it provides a random number generator (VRF) that assists with NFT creation, unpredictable gameplay & fair rewards.
Social Impact: The protocol partners with several nonprofits, NGOs and other institutions to assist with sustainability, financial inclusion and public goods projects. Notable partners in this area include Unesco and Unicef, Technalia, Lemonade and Arbol.
And I also mentioned Climate Markets: Chainlink provides enterprise-grade middleware that help power climate markets Notable partners include Hyphen, Floodlight and Correst.
And the entire ecosystem is powered by one token: $LINK token, which has three purposes:
It’s used by clients to pay for services.
Received by oracles as compensation for work performed.
Serves as collateral to ensure that oracles behave properly.
For example: Let’s say that a DEX wants to show the price of Ethereum or another token on its website. They would:
1. Create a request for data from the Chainlink network to obtain the price of $ETH or the relevant token.
2. Submit this request along with payment in the form of Chainlink’s native token, $LINK
3. Chainlink selects the best oracles based on: their reputation and their ability to find the necessary data.
4. Oracles will find the requested data and send it back to Chainlink. Oracles must stake $LINK tokens as collateral to ensure proper behaviour.
5. Chainlink aggregates the results, chooses the most accurate answers and discards outliers. Oracles that are deemed to be negligent and / or malicious may face penalties and lose some or all of their collateral
6. The information is routed through Chainlink to the DEX.
This is a very practical utility for the token and as more and more service providers partner with Chainlink to use their data oracle services, the more demand this creates for the LINK token.
On top of that, Chainlink occupies a unique position as the dominant “middleware” layer transferring data between blockchains and the real world Since it’s already transferring data, it’s not a huge leap to perform computations on that data, store or even transmit it
This is exactly what the protocol plans to do with the release of Chainlink 2.0 It’s utilizing “hybrid smart contracts” – computer programs that that combine ON-chain data with OFF-chain data – to create a new layer that can perform computations off-chain. In this context, Chainlink 2.0 could serve as a de facto “Layer 2” network. Traditional Layer2 solutions like roll-ups, are designed to perform calculations off-chain and plug the results back into the native chain, which is what this 2.0 upgrade aims to achieve. And it would theoretically be able to use its system of hybrid smart contracts to connect different blockchains. Its network of oracles could securely route messages between one another and transfer tokens between chains.
Chainlink has achieved significant traction to date. It has enabled over $6 trillion in transaction volume; Delivered 5 billion data points on-chain and it supports 14+ blockchains and L2s. The protocol has also partnered with a variety of players in Web 2.0, such as Google Cloud and Oracle and dozens of projects across the Web3 ecosystem.
It’s also worth mentioning that there are other oracles, like :
Band Protocol
API3
Nest Protocol
Berry
DIA
But compared to these, Chainlink is by far the most popular with nearly 1,500 connections. In comparison, BRY, the next biggest player in this sector is with around 180 connections, not even a quarter of what Chainlink has achieved. It’s practically so much ahead of the competition, that I don’t see any threat to its top spot in this sector and this is another viable reason to remain bullish on it and to add it to my crypto portfolio.
When it comes to tokenomics and market performance of the native $LINK token, here are some numbers:
The token’s current marketcap is $4,2 billion dollars with a circulating supply of 517 million tokens. That’s just above half of its total supply, which is 1bln. At launch, 35% of these were allocated to the public, 35% to the ecosystem and 30% to the company. While 30% may seem high, it’s important to note that these funds aren’t simply going into the founder’s pockets. This capital is used to fund development in lieu of VCs (notice there is no “private investor” allocation).
The initial price of the token at launch was around $0.09 to the dollar, which at current price makes about 9,089% ROI to date. This is as of right now. If you look at its ATH though, this was back in 2021 and it reached $52, so at that point we were looking at 56,000% gain. Those who sold at the peak surely locked some astounding profits on this token. If you’re not in that group, just remember that in every next bull cycle, tokens with strong fundamentals, like this one, tend to greatly surpass their previous ATHs, so this could serve as a measure for potential price appreciation if you were to buy $LINK today.
On top of that, the chart is looking bullish too. This is the weekly chart of LINK Vs USDT on Binance, I use this pair simply due to the high trading volume, and you can trade this token on pretty much every exchange. I can’t think of any exchange that doesn’t support the token.
We can clearly see that we are in the beginning of a trend reversal, there’s a breakout from this falling wedge pattern that was formed during the bear cycle and a clear indication of a breakout on the upside here on the weekly timeframe, indicating that the macro is turning bullish. It’s really a good time to jump in if you ask me, but this is by no means a financial advice.
This is my personal opinion.