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What Is Chainlink Crypto & Is It A Good Investment? (2021)

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With the vital goal of connecting real-world data with smart contracts on the blockchain, Chainlink develops a decentralized platform fueled by the token LINK, which has managed to stay afloat even during the darkest days of crypto winter. This article will review this project and identify whether it is a good option for investing in Chainlink crypto.

Chainlink crypto (LINK) is a digital asset (Ethereum-based token) powering the network of decentralized oracles. The Chainlink is a decentralized network of nodes that allows the uploading and downloading of information to the blockchain from any third-party services. And it all powered by smart contracts via oracles. It ensures the functioning of smart contracts that rely on external data.

What Problems Does Chainlink Aim to Resolve?

One of the biggest problems preventing the mass adoption of decentralized applications is their inability to interact with data outside of the blockchain itself. Smart contracts running on Ethereum, for instance, don’t have a native way of accessing data outside of the Ethereum ecosystem.

Chainlink tries to solve this problem with the help of its breakthrough technology. It has developed a platform for Blockchain Oracles, which are nodes on the network acting as a bridge that connects on-chain and off-chain data and enables smart contracts to retrieve data from the outside world. 

Is Chainlink a Good Investment?

Chainlink (LINK) is showing tremendous growth and it’s one of the most prominent cryptocurrencies. Not only it presents the ideal combination of a project with the right technology behind it, but it also has enough resources for further development. The best part? Chainlink possesses an excellent community. So far, the project has received numerous awards and status including recognition from the World’s Economic Forum as a Technology Pioneer in 2020.

How Does The Crypto Chainlink Work?

To fully comprehend what is chainlink crypto, first, we need to understand how does it work. The Chainlink platform has become a link that connects cryptocurrencies and the banking segment. So, with Chainlink’s help, it is now possible to use smart contracts in the traditional financial system. From the technical point of view, Chainlink presents software using an API for cryptocurrency contracts.  

With a decentralized network of oracles, Chainlink connects DApps with the data from the real world. Oracles help to upload data to the blockchain, allowing smart contracts to interact with the external environment.

Chainlink’s goal is to create reliable oracles with access to the data that can be used by different blockchains, ensuring the connection between the digital and real worlds. The platform’s team tries to develop a decentralized network of oracles, which is more reliable in comparison with centralized services that provide similar services. 

The LINK tokens are used to pay node operators for their services when delivering data from external sources. While the operators define the fee depending on the demand for external resources. 

A Quick Rundown on Chainlink’s History 

The key milestones in Chainlink’s history are as follows:

  • September 2017: Chainlink raised $32 million during the ICO, having issued a billion LINK tokens.
  • November 2018: Chainlink acquired Towncrier, an authenticated data feed for smart contracts. 
  • May 2019: In the subsequent year, Chainlink officially launched its platform on Euthereum mainnet

Who Invented Chainlink?

The project was launched by a 32-year-old programmer Sergei Nazarov. Chainlink’s co-founder is programmer Steve Ellis, who headed the development team at Pivotal Labs, a California-based consulting firm.

Nazarov studied management at New York University. In 2009, he founded the peer-to-peer marketplace ExistLocal. After that, he worked for three years as a partner at QED Capital, a venture capital investor in Eastern European tech startups, and founded the decentralized mail service CryptaMail.

In 2014, Nazarov created the Secure Asset Exchange (SAE) project, which was engaged in the decentralized clearing. The service existed for less than two years, as in January 2016, one of its co-founders announced its closure after the claims of American regulators. As a result, Nazarov and Ellis, who participated in the creation of SAE, focused on developing another project called SmartContract. As a result, the Chainlink network was created.

What Is Chainlink’s All-Time High?

Source: CoinGecko

Launched in 2017, Chainlink has shown tremendous growth with an average of $0.50 to its all-time high of $36.95 on Feb 20, 2021. Chainlink possesses a consistent 14% transparent volume and has been trading on 965 active markets. When analyzing its highest volume trading pairs, it reaches an all-time high of $2.22B for USDT, $406.35M for USD, and $193.80M for BTC trading pair.

How Does Chainlink Interact with Oracles?

There are two ways for smart contracts to obtain off-chain data using Chainlink: 

To employ reference data.

Reference data contracts represent on-chain reference points for accessing off-chain data, which are often updated. The retrieval of supported data is performed fast and efficiently from them within a single transaction.  

To request and receive the data. 

The second way enables retrieving data from any external API. Still, for its availability in a single transaction, the data should be requested first by a smart contract from the oracle to initiate a callback function to respond to the request. 

Here’s what the process looks like under the hood from the technical perspective. The Client Contract makes an initial request call to the LINK token contract. With the help of a callback function, it ensures that the client contract has sufficient tokens to fulfill the request. Then it connects with Oracle, which makes an external API request and sends the retrieved data back to the Client Contract.

The Chainlink architecture consists of three types of smart contracts: Chainlink Reputation Contract, Chainlink Order Matching Contract, and Chainlink Aggregating Contract.

Reputation Contract

Chainlink reputation contract verifies oracle integrity, checking the track record of the oracle. It includes such parameters as the total number of completed requests, average response time, and LINK amount staked by the Oracles. 

Order Matching Contract

It is to match a smart contract’s service level agreement (SLA) with the best bidding oracles. 

Aggregating Contract

Mainly to collect data from oracles to match the most accurate results with the smart contract, which requires them. 

Chainlink vs. Bitcoin vs. Ethereum: The Differences

Compared to Bitcoin and Ethereum, two key blockchain projects that are undisputable leaders of the market, Chainlink has a few additional perks contributing to its long-term success.

Bitcoin, being the first cryptocurrency that has ever been created, offers nothing more but the transfer of value. Ethereum’s value lies in its platform, Ethereum Virtual Machine (EVM), which allows creating smart contracts to automate transactions on the blockchain.

Chainlink combines these two ideas and adds a possibility for the blockchain to interact with the real-world data. With its help, smart contracts can operate with the data available on the blockchain and manage the information from the external reality enhancing the use cases of the underlying technology.

Factors Affecting The Chainlink’s Price

Public-Relations Projects

In 2019, LINK tokens became one of the most successful crypto assets as the project’s capitalization grew more than six times.

A large share in the project’s success belonged to its successful PR: the media wrote that Chainlink managed to become an official partner of such companies as SWIFT and Google. 

Coindesk

This information was actively used in many publications related to Chainlink. SWIFT said that they were working on their blockchain projects with the involvement of various third-party services. While the news about the partnership with Google appeared after the publication in one of the corporate blogs, Google Cloud, which described Chainlink’s functionality.

At the same time, one cannot blame Chainlink for deliberate deception as there was no mention of partnerships with these companies on the project’s official website. However, the team representatives do not interfere with the replication of this information, which has such a positive effect on their business’s capitalization.

Partnerships

On the other hand, Chainlink’s list of partners includes more than 150 reputable companies, such as Hashgraph, Polkadot, and Matic Network. On the other hand, Chainlink’s announcement to be the data provider for the infrastructure Blockchain Platform (BSN) of the State Information Center of China may also contribute to the price surge. A week after the publication of this information, LINK began to explode in value.

However, no matter how the story with the explosive growth in the value of tokens ends, the Chainlink team has chosen the right time to promote their digital asset. At the beginning of 2021, it started growing against the background of the lowest volatility in the bitcoin price over three years. Analysts are sure: this is why the attention of many members of the crypto community has switched from bitcoin to altcoins, which makes it possible to quickly make money on the purchase and sale of assets LINK.

LINK tokens have practically no large holders as according to Etherscan, out of 167 thousand addresses, only 350 contain more than 100 thousand tokens. At the same time, most of the operations with this cryptocurrency are performed by retail investors with small assets.

There are four addresses on which more than 50 million tokens have been accumulated. The first one belongs to the Chainlink team, the second one belongs to the Aave credit pool, and two more are cold wallets on Binance whose owners are unknown.

The Pros and Cons of Chainlink

The development of Chainlink technology can revolutionize many sectors of the economy. While linking digital contracts to the outside world will increase the scope of smart contracts’ capabilities. Using Chainlink, traditional retail VISA, MasterCard, PayPal payments can cause Ethereum smart contracts to execute. The same refers to conventional bank payments as the data about money transfer can be sent to smart contracts.

The main problem of different blockchains is the lack of interoperability between them. Chainlink can make the interaction of different blockchains possible. Its technology opens significant perspectives in the IoT sphere, such as food supply management, and other spheres.

Besides, Chainlink is the creation of a market that has never existed before. So, the project critics are displeased that only 35% of tokens were sold to the public.

Where to Buy Chainlink Crypto?

Chainlink is available on major exchanges, including Coinbase, Binance, Bybit, and can be purchased via any verified account. Link miners can mine tokens by selling off-chain services and data via an API connected to the Chainlink Network.

The Chainlink cryptocurrency grew considerably in 2020 and into 2021. It may seem to newbie traders that the cryptocurrency has significantly increased in price; therefore, it can be late to invest in it.

However, many experts believe that Chainlink’s growth potential is still immense. The point is that Chainlink differs from purely speculative projects and is much safer as it can bring substantial returns. The cryptocurrency is equally suitable for long-term and short-term investments. It’s a must-have for any crypto investor.  

The Future of Crypto Chainlink

There are some insane predictions for the rise of chainlink’s future. However, considering the vast area of application of the technology behind the coin, the cryptocurrency potential is enormous. Incorporating real-world data into smart contracts is necessary for any sphere: telecommunications, transport, governance, healthcare, and more. 

Chainlink Upcoming Projects

Though Chainlink competes with such projects as Band Protocol, JustLink launched by Justin Sun, and MakerDAO relying on its oracle, Chainlink remains the leader in the sphere. By November 2020, Chainlink could boast of 315 integrations. As of now, the list includes 74 blockchains, 98 DeFi projects, 44 nodes, and 23 data providers.

Most recently, Chainlink is now integrated as a ‘pallet’, which allows Polkadot ecosystem to access accurate, up-to-date and tamper-proof price reference data for powering new products and markets. The Chainlink pallet can be added through relay-chain prior connection or parachain upon community voting after connection.

As a result of the standardised and simplified integration process, developers can accelerate DeFi development within the Polkadot ecosystem, while achieving high standard of data security and quality.

external data being accessed by polkadot ecosystem

Bottomline

Incredible technology behind the Chainlink gives possibilities to the tech companies to integrate blockchain into their technology stack. Of course, Oracles can play an essential role in the evolution of blockchain technology. Connecting real-world data with blockchain technology, Chainlink can create a self-sufficient, well-protected global ecosystem.

However, it’s worth understanding what is crypto chainlink all about. And given the chances to resolve the problems of connecting blockchain with real-world data. But, what Chainlink can contribute to its further adoption in our daily lives is still early to tell.

Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.

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