Chainlink is the single most dominant oracle in the entire smart contract space. Below is a quick explanation of the protocol and 5 examples on why investors are potentially considering investing in Chainlink (LINK).
Chainlink is the world’s first and most widely used oracle services. It forms the backbone of smart contracts, specifically relying on real world external data to perform their tasks, specially the subfield of decentralized finance (DeFi). It primarily functions on the world’s largest smart contract platform Ethereum, but is designed to support other blockchains too.
On April 15 2021, Chainlink 2.0 was revealed, promising major enhancements and fixes to commonly faced issues with oracles. It aims to fix scalability and cost issues by introducing an off-chain processing blockchain called Decentralized Oracles Networks (DONs), which relieves congestion on the primary blockchain and only interacts with it for final results.
These DONs still derive their security from the primary blockchain, but enable complex design and rapid processing, which wasn’t possible or feasible before. Chainlink 2.0 will enable a new generation of smart contracts, particularly those related to DeFi. It is a multi-year plan, which represents the forward looking vision of the team and the persistent efforts to keep the oracle system updated.
Importance of Oracles
Contrary to popular belief, smart contracts aren’t “smart” by default. They are excellent as a self executing code, which can run trustlessly and without intervention. However, they need “data” about the real world events too, such as asset prices, volumes, polls, results, etc to make them useful.
This data is supplied by the oracles. These oracles allow the smart contract to come to a conclusion or make a decision. Chainlink is the current industry standard oracle.
Because they serve a vital purpose, it’s essential that the oracles are decentralized, take in data from multiple unbiased sources and remain secure. As has been the case with many smart contract exploits, low quality oracles were exploited to give false information to steal funds or subvert the functioning of the smart contract. Hence, reliable oracles are an absolute necessity.
5 Reasons to Invest
1. Network Effects / Ecosystem
Since Chainlink was the first oracle system and features a robust design, it is the preferred oracle provider for nearly all projects and thus the most integrated service in the crypto ecosystem. Therefore, it’s network effect can’t be overstated and has tremendous implications. Chainlink boasts a tally of 512+ projects and ventures, both inside and outside the native crypto industry. These include entities related to blockchain, compliance, data providers, infrastructure, enterprises, DeFi, gaming, NFTs, payments, storage, real estate, developer tools, marketing etc.
For that reason, Chainlink benefits from access to multiple kinds of data and experience with different blockchains and ecosystems. Having a diversified profile of clients, Chainlink delivers all sorts of data to different applications which creates a synergistic effect between Chainlink and all other parties in the ecosystem.
Chainlink is known to integrate with a new partner almost every single day, as can be seen by their constant updates on Twitter.
Chainlink team members are experienced professionals, who come from different backgrounds to work on this multi-disciplinary project. The consensus among many analysts, investors and leaders in the blockchain technology and cryptography industry believe that Chainlink has one of the most impressive teams around.
Chief amongst them is Sergey Nazarov – the founder of Chainlink. He has been active in the crypto space since 2011 and formerly created the smartcontracts.com platform, for easy creation of programmable contracts for novice users. Born to Russian immigrants, Sergey studied in New York University and acquired a BA in Philosophy and Management.
Other significant team members are Ari Juels – who is a professor and faculty member at the Cornell University, a co-director of smart contracts company IC3 and previous RSA chief scientist. Alex Coventry – a Chainlink researcher excelling in optimization, who holds PhD in Applied Mathematics from Massachusetts Institute of Technology (MIT). Lorenz Breidenback – a security researcher who has worked with both Ethereum, Google and IC3.
3. Explicit Staking
In Chainlink 2.0, the LINK digital asset token will be transitioning from a utility token only into a full collateral staking token as well. This is known as “Explicit Staking” and means that Node Operators will need to put LINK up as collateral to insure the oracle data they are feeding into the network is correct. If the node operators feed bad data, their LINK stake will be slashed.
This economic incentive means that they will likely provide accurate data to avoid being slashed. This also makes the argument that LINK tokens could eventually be valued nearly the same as the data they are securing. Currently the Chainlink network secures more than $30 billion dollars in oracle data and that number is growing rapidly.
4. Blockchain Agnostic
There are seemingly unlimited blockchain networks, blockchain projects and decentralized networks out there, but the truth of the matter is they all require real world data if they want to be useful. While LINK is built on Ethereum, the Chainlink network itself is flexible and designed to provide data to any blockchain and/or smart contract network. Chainlink already is integrated with popular blockchains like Polkadot, Cosmos, Binance Smart Chain, NEAR and many more. This means that investing in Chainlink likely provides upside if we end up in a multi-chain future.
5. Tax Advantages
One reason to invest in Chainlink is the tax advantages. Now while this only applies to Chainlink invested in Crypto IRA’s, the benefits cannot be understated. If an investor buys $10,000 worth of Chainlink inside of their Roth IRA and that portfolio grows to $100,000 over the coming years; they profits are completely tax free! For investors buying Chainlink and focusing on the long term, a Crypto IRA might be the key to their success.
We believe that Chainlink plays a powerful role in the future of finance. If you want to learn about how easy it is to get Chainlink in your IRA / 401k, check us out at www.iTrustCapital.com
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