Is Chainlink a Good Investment?

Contributor, Benzinga

Is Chainlink a good investment for you? You can buy LINK on eToro.

Chainlink
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As demand for decentralized products and services continues to skyrocket, Chainlink has positioned itself as the go-to decentralized oracle network (DON) for integrating real world data into smart contracts efficiently and securely.

Chainlink is one of the hottest cryptos on the market right now, with a market cap over $9.5 billion as of April 2022. But, what is a DON, and is Chainlink a good investment? Let’s find out.

Decentralized oracle networks allow smart contracts on Ethereum, Cardano and Polkadot to act upon real-world information. Because blockchain transactions are irreversible, they need to be sure they are acting upon accurate data. This is where an “oracle” comes in.

An “oracle” is any source of reliable data. For example, The Weather Channel can be viewed as an Oracle for historical weather information. But users of blockchain are trying to remove the need for a trusted third party, this is where Chainlink comes in.

Let’s say a farmer purchases drought insurance. Should the yearly rainfall not exceed a specified level, the farmer will receive a payout. You can automate this with a smart contract. However, Ethereum’s network cannot measure rainfall, so a trusted source must ensure accuracy. Many companies aggregate weather data, but using 1 of them as an oracle requires trusting a centralized party, defeating the purpose of decentralization entirely. 

Decentralized oracle networks provide the solution by offering a network of decentralized parties paid for their service. The “truth” gets determined by consensus (a majority vote) on the Chainlink network. Should parties attempt to provide fraudulent information, they risk losing their authority on the network and their source of revenue. Decentralized networks of properly incentivized individuals can provide effectively “trustless” sources of truth.  

Another example of valuable real world data that could be integrated by Chainlink are fiat prices. Once again, the Ethereum network cannot be required to report the value of government-based currencies, but they’re incredibly useful for trading. Chainlink may ask the network, “What is the price of 1 US dollar?”. The network will submit their answers, and so long as the majority is not compromised, the price of 1 US dollar is returned by the network.

Smart contract sports betting, options trading, shipping confirmation, supply chain management and countless other applications lie ahead. Chainlink’s core product involves integrating real-world data within smart contracts through DONs. 

Chainlink will charge insurance companies, exchanges and other applications for providing this valuable Oracle data.

Chainlink doubled its active developer count between Q3 of 2019 and 2020, according to the Electric Capital Developer Report, making it one of the fastest-growing projects in the blockchain space. 

Chainlink had its initial coin offering (ICO) at the end of 2017 for $0.11. In 2018, it briefly surpassed $1 before falling back down until 2019. During the summer of 2020, Chainlink had an early start to the bull run. It reached $17 at a time when the rest of the crypto market was just beginning to wake up from a deep slumber. On May 10, Chainlink set an all-time high of $51.46.

Chainlink
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The Chainlink 2.0 whitepaper was released in April 2021, detailing the future plans of the project. 

The 2.0 upgrade will build off-chain networks on top of the oracles to handle some of the heavy computational lifting for the Ethereum mainnet. This benefits Ethereum, where large demand for computing power on the network has driven gas prices to unsustainable levels. Moving some transactions off the mainnet will reduce gas fees.

By handling some of the computing off-chain, running smart contracts will become cheaper and faster, without losing any of the security of the layer 1 base chain (where the DON is rooted). After the work is handled off-chain and the oracle is consulted, the contracts are placed back on the Ethereum layer 1 chain for safekeeping. 

Chainlink’s continued innovation and solid growth signals good things to come for the DeFi project and the industry as a whole. 

Chainlink’s promise to integrate real world data onto Ethereum opens up a new world of possible applications for Ethereum’s smart contracts. As these networks continue to scale and make access more affordable, more and more potential applications will become economically viable. 

Decentralized finance is even younger than the still-young blockchain technologies. There is no inherent limit on the value that Chainlink could provide the world in the future. As long as new data and a desire for growth in technology exists, Chainlink will continue to add value. 

As you may have imagined, Chainlink isn’t the only oracle provider in the blockchain space. Its main competitor, the Band Protocol, originally launched as an ERC-20 token. It now lives on the Cosmos network. Band also offers oracle services and has received funding from Sequoia Capital. 

Chainlink made headlines after adding to China’s Blockchain-based Service Network (BSN). This state-backed BSN includes a variety of partnerships with blockchain projects that the state believes can push its entrepreneurial network. This will more than likely lead to Chainlink use for a variety of Chinese DeFi products and services. 

Chainlink’s token LINK gets supported by the vast majority of exchanges including (but not limited to) Coinbase and Gemini. Setting up an account on one of these centralized exchanges takes about 5 minutes and will require your Social Security number, drivers license and photo verification. For more information on how to buy Chainlink specifically, see our guide on How to Buy Chainlink.

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1 Minute Review

Gemini is a cryptocurrency exchange and custodian that offers investors access to over 100 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.

Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader. 

In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.

Best For
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Cons
  • Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app
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Coinbase Learn
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1 Minute Review

Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs. 

You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.

Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.

Best For
  • New cryptocurrency traders
  • Cryptocurrency traders interested in major pairs
  • Cryptocurrency traders interested in a simple platform
Pros
  • Simple platform is easy to operate
  • Comprehensive mobile app mirrors desktop functionality
  • Coinbase Earn feature rewards you with crypto for learning about available coins
Cons
  • Higher fees than competitors
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Maybe you think cryptocurrency is the future, or perhaps you were swept up in the initial waves of Bitcoin. BlockFi may be your next step if you’re ready to evolve as a crypto investor.

Whether you’re a native crypto user or curious enough to start investing, BlockFi seeks to bring institutional-grade financial products to crypto markets that often face restricted access. It strives to bring clients low-cost, simple applications designed to maximize the potential of crypto assets. Learn more in our BlockFi review.

Best For
  • Crypto native clients
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Pros
  • Mostly fee-free platform
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Cons
  • Mostly restricted to those with a base knowledge of cryptocurrency
  • No dedicated relationship with an investment advisor, so best for those who have a solid handle on crypto trading

Once you purchase Chainlink, you’ll want to make sure you store it securely in a wallet. While you can keep it in your Coinbase or Binance exchange wallet, it’s a good idea to transfer it to a wallet, like the Ledger Nano X (a hardware wallet) or MetaMask or Coinbase Wallet (software wallets). 

buy now securely through Ledger Hardware Wallet’s website
Best For
ERC-20 tokens
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1 Minute Review

Launched in 2014, Ledger has transformed into a fast-paced, growing company developing infrastructure and security solutions for cryptocurrencies as well as blockchain applications for companies and individuals. Born in Paris, the company has since expanded to more than 130 employees in France and San Francisco.

With 1,500,000 Ledger wallets already sold in 165 countries, the company aims at securing the new disruptive class of crypto assets. Ledger has developed a distinctive operating system called BOLOS, which it integrates to a secure chip for its line of wallets. So far, Ledger takes pride in being the only market player to provide this technology.

Best For
  • ERC-20 tokens
  • All experience levels
Pros
  • Easy to set up and use
  • Supports more than 1,500 different digital assets
  • Tamper proof
  • Portable
  • Long-lasting battery
  • Bluetooth connectivity features
Cons
  • Can be quite pricey
earn free crypto securely through Coinbase’s website
Best For
Coinbase Learn
N/A
1 Minute Review

Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs. 

You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.

Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.

Best For
  • New cryptocurrency traders
  • Cryptocurrency traders interested in major pairs
  • Cryptocurrency traders interested in a simple platform
Pros
  • Simple platform is easy to operate
  • Comprehensive mobile app mirrors desktop functionality
  • Coinbase Earn feature rewards you with crypto for learning about available coins
Cons
  • Higher fees than competitors
Q

What is an Oracle?

1
What is an Oracle?
asked
A
1

An oracle is a service that provides data on specific events where a market exists for it. 

answered
Q

Is Chainlink Decentralized?

1
Is Chainlink Decentralized?
asked
A
1

Chainlink’s decentralized oracles means that no one central person or authority could tamper with the oracle data. This allows for fully decentralized products to access real world information without relying on a central source or point of weakness. 

answered

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