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 has developed 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 Chainlink’s project and evaluate the option of investing in Chainlink crypto.

What Problems Chainlink Aims 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 bridges to connect on-chain and off-chain data. This protocol enables smart contracts to retrieve data from the outside world.

What Is Chainlink?

Chainlink is a decentralized network of nodes launched on the Ethereum blockchain that power the network through decentralized data providers called oracles. It provides real-world data from third-party sources to on-blockchain smart contracts through the oracles. Its native ERC-20 token (LINK) is rewarded to oracles who provide accurate data.

Smart contracts play a vital role on Chainlink’s platform, as it relies on system automation to evaluate and execute the data when predetermined agreements are fulfilled. The development of a marketplace that connects buyers and sellers is a good example. The use of a smart contract eliminates the use of an intermediary. As long as the agreement is fulfilled, the exchange will be executed automatically. Since smart contracts run on a blockchain, the parameters are “set in stone,” i.e., immutable. That means smart contracts are transparent, and the agreed-upon terms must be met for the exchange to be executed.

Chainlink is built to be platform agnostic. Unlike Ethereum, Chainlink runs on different blockchains simultaneously. In this way, it enables external blockchain, such as API integration, in exchange for data feeds. The use of smart contracts allows Chainlink to access not only real-world data but also payments and events, all without sacrificing security.

How Does Chainlink Work?

The Chainlink platform is able to connect cryptocurrencies and the banking segment. 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 real-world data. 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 data that can be used by different blockchains. The platform’s team is developing a decentralized network of oracles, more reliable than centralized networks which provide similar services. 

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

Are LINK and Chainlink Synonymous?

Just as with Ether (ETH) and Ethereum, they are not the same. Chainlink is a network, whereas LINK is the native token used to incentivize nodes to complete a request. The token used depends upon the ERC-20 protocol to facilitate seamless interaction with one another.

Like Ethereum 2.0, Chainlink uses a similar Proof-of-Stake (PoS) concept. Validator nodes stake LINK to earn data contracts. The more LINKs a node has, the greater its chances to access larger, more rewarding data contracts. However, should there be any breach of contract, nodes run the risk of having their LINK tokens revoked.

LINK’s value is largely derived from the use cases of the decentralized oracle network. The higher the number of nodes that secure the network, the higher the demand for LINK tokens.

As of now, Chainlink’s (LINK) is ranked #15 by market capitalization. There is a maximum supply of 1 billion LINK tokens and a circulating supply of over 432 million tokens. However, there are no future plans for LINK to increase its total supply yet.

Is Chainlink a Good Investment?

Chainlink (LINK) is showing tremendous growth and it’s one of the most prominent cryptocurrencies. Not only does it present 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 garnered status including recognition from the World Economic Forum as a Technology Pioneer in 2020.

A Quick Rundown on Chainlink’s History 

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

  • September 2017: Chainlink raised $32 million during its ICO, having issued 1 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 Ethereum’s mainnet

Who Invented Chainlink?

Chainlink  was founded in 2017 by then-28-year-old programmer Sergey Nazarov. Chainlink’s cofounder 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 decentralized clearing. The service had existed for less than two years when, in January 2016, one of its co-founders announced its closure after claims by American regulators.

As a result, Nazarov and Ellis, who had participated in the creation of SAE, focused on developing another project called SmartContract. Subsequently, the Chainlink network was created.

What Is Chainlink’s All-Time High?

Chainlink's LINK token Price
Image CC: CoinMarketCap

Since its launch in 2017, Chainlink has shown tremendous growth, rising from an average of $0.50 to its all-time high of $52.88 on May 10, 2021. Chainlink possesses a consistent 14% transparent volume, and has been trading on 965 active markets. A portion of its LINK tokens was allocated for future development, and was sent to the network’s nodes to incentivize the oracles.

Analyzing its highest volume trading pairs, it reached an all-time high of $2.22B for USDT, $406.35M for USD, and $193.80M for BTC trading pairs. Currently, LINK is trading at around the $15 to $18 range, accompanied by the dip of BTC.

How Does Chainlink Interact with Oracles?

There are two main processes involved which allow blockchain-based smart contracts to interact with one another.

To Employ Reference Data

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

To Request and Receive Data

This involves retrieving data from any external API. To enable its availability in a single transaction, data should first be requested by a smart contract from the oracle to initiate a callback function that responds 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 the client contract has sufficient tokens to fulfill the request. Then it connects with the 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

A 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.

Chainlink Order Matching Contract

This contract matches a smart contract’s service level agreement (SLA) with the best-bidding oracles.

Chainlink Aggregating Contract

The purpose of this type of contract is primarily to collect data from oracles, in order to match the most accurate results with the smart contract that requires them.

Analyzing the Results

An aggregator contract finds the most accurate results. Then, users can pay a fee using LINK to access the data.

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, as the first cryptocurrency ever created, offers nothing more than the transfer of value. Ethereum’s value lies in its platform, Ethereum Virtual Machine (EVM), which allows the creation of smart contracts to automate transactions on the blockchain.

Chainlink combines these two ideas and adds the possibility of the blockchain interacting with real-world data. With Chainlink’s help, smart contracts can operate with data available on the blockchain, managing information from external reality and thus enhancing the use cases of the underlying technology.

Factors Affecting The Chainlink’s Price

There are plenty of factors which can heighten the demand for LINK — or cause a dump, as well. Below is some of the information we’ve found.

Chainlink 2.0

This upgrade aims to resolve blockchain security issues through the super-liner staking mechanism. Translation: it’s even tougher to attempt manipulation. Chainlink 2.0 will replace its existing smart contract with a hybrid that allows easy access to off-chain resources. Ultimately, this is done in order to lower the potentially increased higher throughput of the decentralized oracles. This project upgrade also means that Chainlink’s smart contracts will be more adaptive in the decentralized ecosystem. This will accelerate DApp development as a result of the enabled cross-chain functionality.

As of now, the Chainlink 2.0 release date is still unknown. But according to the white paper published on April 15, 2021, Chainlink’s team has a tremendous vision for its evolution beyond its first conception.

“We foresee an increasingly expansive role for oracle networks, one in which they complement and enhance existing and new blockchains by providing fast, reliable, and confidentiality-preserving universal connectivity and off-chain computation for smart contracts.” —Authors of Chainlink’s April 2021 white paper.

Public-Relations Projects

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

“A large share of 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 relating to Chainlink was actively used in many publications. SWIFT said that they were working on their blockchain projects with the involvement of various third-party services. News about the partnership with Google appeared after the publication of an article in a corporate blog, 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 ultimately has a positive effect on their business’s capitalization.

Partnerships

Chainlink’s list of partners includes more than 150 reputable companies such as Hashgraph, Polkadot and Polygon (formerly Matic Network). On the other hand, Chainlink’s announcement that it will 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’s value began to surge.

But no matter how the story of 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, Chainlink started growing against the background of the lowest volatility in Bitcoin’s price over the past three years. Analysts are sure this is why the attention of many members of the crypto community have switched from Bitcoin to altcoins, with the possibility of quickly making money on the purchase and sale of assets such as LINK.

LINK tokens have practically no large holders, according to Etherscan. Out of 167,000 addresses, only 350 contain more than 100,000 tokens. At the same time, most of the operations with this cryptocurrency are performed by retail investors with small assets.

There are four addresses which have accumulated more than 50 million tokens. The first one belongs to the Chainlink team, the second to the Aave credit pool, and two are cold wallets 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 and PayPal payments can cause Ethereum smart contracts to execute. The same refers to conventional bank payments, as the data from money transfers can be sent to smart contracts.

The main problem with having 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 in food supply management and other areas.

Finally, Chainlink is the creator of a market that has never existed before. Therefore, the project’s 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 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.

Chainlink’s cryptocurrency grew considerably in 2020 and into 2021. It may seem to newbie traders that the cryptocurrency has significantly increased in price and that, therefore, it may be late in the game 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 actually much safer since it can bring substantial returns. The cryptocurrency is equally suitable for long- and short-term investments. It’s a must-have for any crypto investor. 

The Future of Crypto Chainlink

There are some insanely optimistic predictions for Chainlink’s future. However, considering the vast areas of application for the technology behind the coin, its 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, Chainlink remains the leader in the sphere. By November 2020, Chainlink could boast up 315 integrations. As of now, the list includes 74 blockchains, 98 DeFi 98 DeFi projects, 44 nodes, and 23 data providers.

Most recently, Chainlink is now integrated as a “pallet”, which allows Polkadot’s ecosystem to access accurate, up-to-date and tamperproof 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 standardized and simplified integration process, developers can accelerate DeFi development within the Polkadot ecosystem, while achieving high standards of data security and quality.

external data being accessed by polkadot ecosystem

Closing Thoughts

Incredible technology behind Chainlink gives tech companies the possibility of integrating 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 crypto chainlink is all about, as well as its potential to resolve the problems of connecting blockchains with real-world data. Regardless, it’s still too early to estimate Chainlink’s formidable potential to contribute to its further adoption in our everyday lives.

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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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