Chainlink
LINK to USD
Project history
The early insight of Chainlink’s founders was that building the infrastructure of the decentralised web also requires a decentralised mechanism to interact with real world data.
The Chainlink project started in 2014, and it was originally designed to be a centralised system for verifying and providing data. In 2017, the project pivoted to designing a decentralised network that provides real world data to smart contracts on the blockchain. The whitepaper was published in 2017, and USD 32 million was raised through an ICO.
The network launched in May 2019 on the Ethereum blockchain.
Technology
If the trustworthiness of real world data feeds can be ensured, it improves the security of smart contracts as the possibility of incorrect data feeds is a significant vulnerability.
Chainlink aims to provide reliable real world data to smart contracts through creating a decentralised network of data providers. The veracity of the data is ensured by using multiple data providers, data validation, removing outliers, and applying the most appropriate data aggregation method for the data type (median, average, etc).
The nodes providing data feeds are tracked over time for downtime and accuracy, and the reputation of the nodes influences the likelihood of them being selected.
Version 2.0 will introduce staking where nodes that fail to perform or provide incorrect information will lose part or all of their stake. It is proposed that the users of the network will act as arbiters.
Chainlink have been adding additional features such as verifiable random data and improvements such as a scalability solution that allowed for a 10 times increase in network efficiency. Version 2.0 will extend this to include a cross chain interoperability protocol where smart contracts on different blockchains can interact with each other.
Chainlink was initially launched on the Ethereum blockchain but its technology is compatible with any platform. Chainlink is integrated currently with close to 100 blockchains.
Key people
Chainlink founder Sergey Nazarov has been involved in the crypto space from very early on. Due to his apparent purchase of the smartcontact.com domain which preceded the publication of the Bitcoin whitepaper in 2008, some suspect that he was in some way involved with the creation of Bitcoin and “Satoshi Nakamoto”.
He cofounded the Chainlink project with Steve Ellis, and they coauthored the whitepaper with Cornell professor, Ari Juels. With the 2020 acquisition of data security project DECO from Cornell, Ari Juels formally joined Chainlink.
The original for profit company was founded on 1 January 2014, domiciled in the Cayman Islands.
The project has a very significant development budget in the form of treasury tokens.
Supply model/Tokenomics
1 billion Chainlink tokens were minted, and 35 percent of these were sold through their 2017 ICO.
Another 35 percent of tokens were reserved as incentives for node operators to provide a minimum level of profitability until the user base grows to a point where the nodes are profitable without subsidies.
The remaining 30 percent of the tokens were granted to the project’s treasury for future development of the platform.
The token is used for all payments on the platform. Data node operators earn their fees in LINK tokens. For now, staking LINK tokens may optionally be requested by customers where the staked security deposit can be lost if the data provider fails to deliver.
Version 2.0 of the network will introduce staking for all node operators where a combination of the size of the stake and the node’s track record in terms of accuracy and latency will drive the node’s profitability. LINK token holders will be able to delegate their tokens to be staked by node operators.
Key value drivers
Chainlink’s user growth trends remain very strong. Targeting metaverse projects and enterprise use cases such as supply chain related applications and helping traditional financial institutions engage with DeFi is likely to continue to fuel and accelerate their growth.
As the leader in their market, Chainlink is the primary beneficiary of the growth in blockchain applications and their user bases. Their competitors haven’t been able to make a dent in Chainlink’s overwhelming dominance.
The staking module and the interoperability protocol launching in the near future are likely to catalyse further growth.
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