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ChainLink Analysis

Chainlink

Technicals (1/13/2017)

Market Cap: $417,964,650

Circulating Supply: 350,000,000 LINK

Total Supply: 1,000,000,000 LINK

ICO price: 1 ETH = 2600 LINK or .11c

Today’s price: about $1.19 USD

Last 24 hr volume: $12,071,500

ERC20: Yes

In the fast-paced world of blockchain and cryptocurrency, smart-contracts are an essential part of this ecosystem, yet the blockchains on which these systems run cannot directly communicate with external systems.

Here lies the function of the oracle, which enables external communication off of the blockchain but there remains a potential issue with existing oracles, which is centralization.

ChainLink offers a solution by implementing decentralized oracle networks.

THE PROBLEM:

Data that is readily available (external data) cannot be directly plugged into the blockchain because everybody is using proprietary software, programs, etc. LINK is an oracle that connects external data to the blockchain through API’s.

Let’s say you have a smart contract with your insurance company for your small business. One night, your business gets broken into and you lose everything. That’s ok, the insurance company has your back but they need proof your electronic magnetic door lock was engaged, your alarm system was turned on, and that your security camera was running (all stipulations for them covering you in the smart contract). Now, with Internet of Things, you can prove all of this but the problem is you can’t upload all the data (lock was engaged, alarm was on, video feed of robbery) into the smart contract unless somebody creates the bridge for this data into the blockchain. That’s what LINK is.

Real-world use cases for ChainLink

Securities smart contracts such as bonds, interest rate derivatives will require access to APIs reporting market prices and market reference data (ie. interest rates)

Trade finance smart contracts will need GPS data about shipments, data from supply chain ERP systems, and customs data about the goods being shipped in order to confirm fulfillment of contractual obligations.

Insurance smart contracts will need data feeds about Internet of Things data related to the insurable event in question

Advantages to using ChainLink vs competitors

There are a few key differences between competitors such as Oraclize, and Chainlink. Oraclize is a single entity and vulnerable to tampering and attacks. Chainlink network will exist at every single node that provides it data. You can manipulate one, maybe a dozen, but if a smartcontract relies on the consensus of 100 points of data then the true data wins out.

ChainLink also won the Innotribe Industry Challenge 2016 and are working with SWIFT to produce a Proof of Concept (PoC) that was demonstrated live at SIBOS (SWIFT’s annual conference) in October 2017.

USAGE

Bitcoin was the first decentralized currency that was trustless in nature.

Ethereum was the first decentralized smartcontract service that was trustless in nature.

Chainlink is the first “bridge” between real life data and crypto that is decentralized in nature. ChainLink can also take real time datastreams like Sensor data/non-crypto financial data such as real time interest rates and combine it with smartcontracts.

What this does is create tremendous potential wealth and make businesses possible that weren’t possible before ChainLINK.

For example: A startup called Confido wants to make a payment and delivery system where they will use real time data from the delivery service’s sensor system if a package has arrived or not. When the sensor data confirms that the package has arrived, a smart contract will automatically pay the vendor of that package automatically. This type of service would be impossible without ChainLink if you wanted to make it trustless without 3rd party meddling.

ChainLink can be used to link different currencies such as dollar, euro, and yen with all different cryptocurrencies and each other. Because you can input real data into it

you could make it so that banks could lock into things like “Bank’s A coin=$1”, and based upon how much other coins are worth in real time in the feed to ChainLINK would make it possible to buy “Bank A coin” with many different cryptocurrencies even though they only accept dollars.

Since smart contracts for ChainLink are built on the Ethereum blockchain, they are limited to the transaction speed of said chain for anything on-chain. However, the white paper states that eventually there will be off-chain aggregation, which should help with that. Ethereum is developing its own scaling solutions as well. Also, the focus right now is on Ethereum for the Link token until market is ready for cross chain transaction.

Potential Cons of ChainLink

  • The development team is small, but growing at a steady pace and is looking better and better.
  • Their website could use some updating regarding news, better to check social media/reddit for updates.
  • Not an updated roadmap on their website.
  • No working product as of right now. (Q1 2018 target for first release)

ChainLink Pros/positive signals

  • About 11,000 banks work with SWIFT and SWIFT want to integrate LINK’s oracle into their current system to connect financial information to the blockchain.
  • The token has real life use. It’s simply gas to pay the node operators for the tx. Just like Ether for Ethereum or GAS for NEO.
  • SmartContract, the parent company of ChainLink was founded in 2014 by Sergey and this is their main project for the past 3 years.
  • There are not currently many players in this space, and none that are this far along with various deals and components while being truly decentralised.