Chainlink Analysis: Past, Present, Future

  • Chainlink (LINK) in a nutshell
  • The way Chainlink works
  • The problems Chainlink resolves
  • The reasons that make Chainlink unique
  • The road Chainlink paved last year
  • Chainlink 2022 moves and future projects
  • Chainlink strengths and weaknesses
  • Chainlink tokenomics and financial analysis
Chainlink Analysis: Past, Present, Future
Chainlink Analysis: Past, Present, Future
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Chainlink (LINK) In A Nutshell

Chainlink is a decentralised blockchain oracle network built on Ethereum. The Oracles give real-world data from third-party sources to smart contracts on the blockchain. You can learn all you need to know about Oracles in the complementary post. It increases smart contract interconnectivity by providing access to reliable data feeds, payments, APIs, and other resources to smart contracts. 

◼ The Core of Chainlink

Chainlink is a middleware that connects on-chain and off-chain systems that we’ll discuss later in this article. Chainlink enables smart contracts to react to real-world events and execute agreements that require external proof of performance by giving access to off-chain resources. The LINK network and LINK token are at the core of the Chainlink ecosystem. Although Chainlink's solutions are based on the Ethereum blockchain, the company plans to support other major smart contract chains in the future.

Chainlink, unlike Ethereum, works on many blockchains at the same time. It allows external blockchain integration in return for data feeds. Chainlink can access not only real-world data but also payments and events, all while maintaining security.

How Is Chainlink Working?

ChainLink works by connecting the blockchain ecosystem to external applications. The core functions of ChainLink depend on two processes – On-chain and off-chain.

◻ On-Chain Function

The on-chain component of Chainlink is made up of Ethereum's blockchain Oracle contracts. They keep track of and respond to data requests from users. When someone requests off-chain data, they send the request (contract) to the Chainlink network, converting it into a native blockchain contract. The Chainlink contracts then match the request to an appropriate Oracle service. The Chainlink's on-chain unit follows a three-step process when these contracts are in use: 1) Choose an Oracle; 2) Report the data, and 3) Combine the results.

◼ Off-Chain Functions

Off-chain Oracle nodes that connect to the Ethereum network make up the second key component of Chainlink architecture. External requests are gathered by nodes, and individual responses are summed up via numerous consensus mechanisms, then converted to a single, reliable global response and a contract. Chainlink Core, the critical component that connects the blockchain and off-chain data resources, processes the gathered data. The Chainlink Core is the device that converts off-chain data into information that can be used by an on-chain oracle.

What Problems Does Chainlink Aim to Resolve?

The inability of decentralised applications to interact with data outside of the blockchain is one of the main barriers to widespread adoption. For example, Ethereum smart contracts have no native mechanism of accessing data outside the ecosystem. With the help of innovative technology, Chainlink attempts to tackle this problem. Chainlink has created a platform for blockchain Oracles, which are network nodes that serve as bridges between on-chain and off-chain data. Simply put, smart contracts utilise Chainlink to obtain data from the outside world.

What Makes Chainlink Unique?

Chainlink's off-chain architecture is one of its unique features. This architecture includes the ChainLink network, which connects all the nodes in a network. The Chainlink service connects each of these nodes to reserves via APIs to collect responses for each contract. The ChainLink core software is used to translate all off-chain data, and it can read on-chain without the need for translation. The sub-tasks of the service level agreement are also processed by this program, indicating that the complete procedure can take place on-chain or off-chain. Chainlink offers a series of Oracles to off-chain data and also prevents off-chain data from manipulation.

The Road Chainlink Paved Thorough Last Year

Chainlink is the undisputed leader in the oracle crypto niche, and now the project is looking to go beyond basic data delivery. Chainlink's purpose is to provide off-chain data to blockchains. Without this off-chain data, most decentralised applications wouldn't work. Let’s check out the road Chainlink paved over the last year. 

◼ January 29, 2021

To raise global knowledge and understanding of smart contracts, blockchains, and Oracle technology, Chainlink has joined the UNESCO Global Education Coalition. People and institutions worldwide will be able to access educational resources and development programs through Chainlink. (Full article)

◻ February 1, 2021

Kraken announced that it brings spot prices to DeFi with a new Chainlink node. It will be making Kraken’s spot prices available to Decentralized Finance applications and developers on Ethereum and other leading blockchains by running their own Chainlink node. (Full report)

◼ February 24, 2021

Chainlink also introduced its off-chain reporting or OCR protocol, making it possible for Oracles to securely aggregate their data off-chain before submitting it to the blockchain, as reported by Cointelegraph. The OCR upgrade reduces the cost of Chainlink data feeds tenfold due to the Ethereum gas fees it saves. (Full report)

◻ April 6, 2021

Grayscale announced that it added Chainlink to its large-cap digital fund and currently accounts for just over 0.5 per cent of the fund's 540 million dollar allocation. The native coin of Chainlink, a decentralised Oracle network, fills the hole left in the fund once XRP is removed. (Full report)

◼ April 15, 2021

Chainlink released the 2.0 whitepaper, in which it redefines Oracle networks as a “general-purpose, bidirectional, compute-enabled interface between and among on-chain and off-chain systems.” The foundation for achieving this goal takes the form of Decentralized Oracle Networks (DONs), a new type of Oracle network purpose-built to meet the connectivity, scalability, and privacy needs of existing and future smart contract applications. (Full report)

◻ April 30, 2021

Chainlink partnered with UNICEF to fund blockchain-based startups and initiatives in developing countries. The Chainlink Community Grant Program provided financial resources to the many d researchers and development teams, building a more accessible, functional, and socially impactful Chainlink Network. (Full report)

◼ June 4, 2021

Chainlink and the IEEE Computer Society's Blockchain and Distributed Ledger Standards Committee (IEEE BDL) are working together to develop global standards for adopting decentralised Oracle networks. Their primary goal is to provide a common framework that establishes best practices for building dApps with Oracle networks and hybrid smart contracts. (Full report)

◻ August 5, 2021

Swisscom joined Chainlink as part of a pilot initiative, and Oracle nodes serve as a link to off-chain data, which is primarily price data at the moment. The Chainlink network compiles price data from all Oracle nodes into a reliable consensus value. Decentralised financial applications can then use this value to settle financial contracts. Many other technological businesses, like telecom giant T-Systems, already run similar oracle nodes, in addition to Swisscom. (Full report)

◼ September 25, 2021

IOHK announced that Cardano would be using Chainlink Oracles for its off-chain data, which took many people by surprise. It is because IOHK had initially planned to create its own in-house Oracles for Cardano, and Cardano founder Charles Hoskinson had noted significant friction between Link’s marines and the Cardano community during one of his many AMAs. (Full report)

◻ November 26, 2021

Chainlink supports Ethereum infrastructure development through the upcoming Gitcoin Grant. Chainlink is joining the Gitcoin Grants round 12 to support infrastructure development for the Ethereum network. The Oracles of Chainlink have driven the total value locked (TVL) in various DeFi projects. Using Chainlink's Oracles, the TVL of the Avalanche protocol has increased by almost 88 times since July 2021. (Full report)

Now, What Is The Next Step In Chainlink?

The long-term success of Chainlink is ultimately determined by its future goals, which are stated in the Chainlink 2.0 whitepaper and all revolve around decentralised Oracle networks (DONs). DONs, according to Chainlink, are similar to layer 2 scaling solutions in that they allow secure off-chain computation. DONs will enable the implementation of hybrid smart contracts that mix on-chain and off-chain computation and off-chain data for cryptocurrency blockchains.

Moreover, Chainlink recently announced another service called Keepers. Chainlink Keepers provide users with a decentralised network of nodes incentivised to perform all registered jobs without competing. It allows developers to automate certain smart contract tasks and functions that involve off-chain input or data.

◼ Chainlink 2022 Moves

This year, Chainlink will lunch staking, which will allow LINK holders to receive rewards by locking up part of their LINK in the protocol. It also aims to scale at an “insane vertical rate,” says Sergey Nazarov. The development of the cross-chain communication protocol (CCIP), which was first announced in August, is another milestone chainlink hopes to achieve in the coming months. CCIP provides a universal, open standard for developers to build secure services and applications that can transfer tokens, send messages, and initiate actions across multiple networks. Interestingly, the CCIP will feature an anti-fraud network. Read more about CCIP here.

◻ Chainlink Grants Program

Chainllink's explicit goal, which was announced in a February blog post, is that it will be expanding its community grants program. In June, Chainlink announced that it would be accelerating its social impact investing with the Chainlink grants program and looking to partner with more non-profits and NGOs.

◼ What Is Chainlink Focusing On These Days?

Currently, chainlink co-founder Sergey Nazarov has been hyper-focused on DeFi 2.0, which involves using non-crypto assets, such as real estate and corporate debt. Obviously, the DeFi generation protocols will need Oracles, too, and Chainlink is likely looking to be the Oracle of choice in this new crypto niche. The last point of focus for Chainlink going forward seems to be the Metaverse. In a blog post from November, Chainlink explained that Oracles would be needed for Metaverse worlds to reach mainstream adoption, especially those built on cryptocurrency blockchains. It seems to hint that Chainlink is looking to partner with tech giants like Meta and Microsoft to help them with their metaverse endeavours. Meta's CTO recently mentioned that they’d be looking to become interoperable with cryptocurrency blockchains. So, it’s not highly unlikely to expect future cooperation.

Chainlink Strengths

✅ The Chainlink provides novel solutions to the Oracle problem by creating a trustless bridge between blockchain, like Ethereum, and off-chain data sources.

✅ Chainlink is built to work with any blockchain, allowing for a wide range of integration possibilities.

✅ Chainlink was a pioneer in the decentralised Oracle network, partnering with various institutions, including SWIFT, other blockchains like Binance and Polkadot, and giant corporations like Oracle.

✅ Chainlink may profit from growing use and the potential expansion of the crypto sector as a whole, as smart contracting technology penetrates legacy systems.

Chainlink Weaknesses 

⛔ Still, 60% of the supply is not freely traded on the market and is under the control of the Chainlink, and there are no restrictions about the distribution of node operations’ rewards.

⛔ Chainlink’s Oracle network is still limited and could be further decentralised. Here is the report of Chainlink nodes.

⛔ Since Chainlink is built on Ethereum, issues with Ethereum could also impact LINK.

Chainlink In The Coming Years

The future of Chainlink is predicted to be quite bright. ْْThe coin's economic potential is huge, given the wide range of applications for the technology behind it. Incorporating real-world data into smart contracts is necessary for any sphere: transport, telecommunications, governance, healthcare and more.

◼ Chainlink Upcoming Projects

Although Chainlink competes with projects like Band Protocol, it remains the market leader. By the end of 2022, Chainlink could boast up to 44 integrations. As of now, the list of Chainlink partnerships, collaboration, and integration is above 1100. Chainlink is now integrated with “Revolve Games”, which redefines blockchain gaming, with a robust gaming ecosystem plugged into the heart of DeFi.

On Jan 20, 2022, Diatom DAO integrated Chainlink Keepers for reliable token supply rebases and Chainlink Price Feeds to help calculate bond discounts. Also, on the same date, Etherisc has launched a decentralised flight insurance product that uses Chainlink Data Feeds to autonomously issue policies and execute payouts for travellers experiencing flight delays. You can find more detail about the latest integration here.

All and all, as a leading project in the Decentralised Oracle network, the Chainlinks’s active team members are looking to put a step on DiFi, Metaverse, and NFT projects.

Chainlink Financial Analysis

To learn how Chainlink has performed financially, we will check out its token distribution, supply schedule, and price analysis.

◼ LINK Token Distrbution

The launch date of LINK token was Sep 19, 2017, with a hard cap of $32 million. LINK was sold at $0.09 per token during the pre-sale, with a 20% bonus depending on when the investor participated in the ICO. Later, LINK was sold at $0.11 per token in a public sale. Both sales totalled 350 million LINK tokens. A total of 1 billion LINK tokens were issued at the start, which were distributed as follows:

  • 35% of the tokens went to incentivise the Node Operators.
  • The other 35% were sold in the pre-sale and public sale.
  • The company reserves the remaining 30% LINK tokens.

◻ Supply Schedule

The outstanding supply of LINK has been fixed. Although the Node operators' awards (35 per cent of the total supply) have yet to be distributed, they are still liquid because of the lack of any indication that they are bound by any contract. Nodes get rewarded to retrieve and provide data, and the rewards are determined by the contract creator.

◼ Chainlink Price Analysis

Between mid-2019 to mid-2020, Chainlink experienced significant price growth, and this bull run became a well-known meme and referred to as "LINK Marines". On May 9, 2021, Chainlink reached the all-time high on the back of an overall crypto market rally and developments in the Chainlink ecosystem. Currently, on Jan 25, 2021, the Chainlink rank is #22 of all crypto projects by market cap, with a market cap of USD 7,111,844,196. The number of LINK tokens circulating in the market and public hands is about 467,009,549.52 LINK, which amounts to %47.

The number of transactions is 10,762,408, and the number of wallets created for the LINK token is 646,941. The visual analysis of Chainlink and its exclusive graph in Cryptologi.com represents the fair distribution of liquidity, performance, popularity, ATH Delta, and Overdue ATH indexes, and the LINK token's acceptable performance in the market.  

◻ Chainlink Technical Analysis

Based on the quick snapshot of ROI (Return On Investment) over different periods in Cryptologi.st, it is indicated that the annual ROI for the LINK token is -%38. It means that if you had invested about $100 in Chainlink, you would have only $62 now! However, the ROI growth of similar projects was above 300% at the same time frame. 

Based on Chainlink’s Github, the number of current contributors is over 90, and we all know it's best to invest in projects with multiple contributors. Moreover, the number of commits in Chainlink is about 180. Over the last six months, Chainlink attracted a lot of attention on social media, and the growth of Twitter followers in the mentioned time frame is almost 80%! Moreover, the number of the Telegram channel and Reddit account users of this project is increasing.

Final Remarks

No one can argue that the crypto space has a lot of projects that are all hype and no substance. Chainlink can have significant potential but there are downsides you need to keep your eyes open. It all depends on you to do your research and find a promising project to enjoy the on-time profit. Keep following Cryptologi.st for further information and updates but remember that we are no financial advisors. Keep an eye out!

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