Introducing to Linkcoin cryptocurrency
What is Linkcoin?
Introducing to Linkcoin cryptocurrency: Did you know that more than 80 percent of decentralized applications in the crypto space require an oracle?
This should not come as a surprise.
After all, if you want to build valuable dApps with real-world use cases you’re going to need valuable real world data.
Data like asset prices weather and information about the outcomes of events like sports matches and elections.
Oracles also play a critical role in DeFi protocols which now hold billions of dollars of user funds.
This oracle dependence is why many argue that oracle cryptos are some of the most valuable on the crypto market.
The current leader in the oracle space is of course Chainlink.
However, the LINK token seems to have been losing its strength against Bitcoin.
So what could be causing this lackluster price action does it mean chain link’s best days are behind it or is it a sign that link is preparing to soar to new all-time highs.
All that and more in today’s deep dive on chain link.
Chainlink was founded in June 2017 by Steve Ellis and Sergey Nazarov.
Both are also the founders of smart contract a software company based in San Francisco that develops the Chainlink ecosystem.
That said Chainlink is technically incorporated in the Cayman Islands as smart contract Chainlink limited s-e-z-c.
Chainlink aims to solve cryptocurrency’s oracle problem.
This oracle problem is actually two-fold.
First cryptocurrency blockchains are unable to access external data by default.
And Second the use of any centralized data feeds would nullify the decentralization of the smart contract or application using the data feed.
Because it would have a single centralized point of failure.
Naturally the solution to this problem is a decentralized data set provided by dozens of trusted entities that are given economic incentives to fetch their data being requested by a smart contract.
Chainlink is the middleware between real-world data and data on cryptocurrency blockchains.
As such Chainlink has both off chain and on-chain components.
Off-chain and On-chain
Off-chain chain-link is an ecosystem of oracle nodes that connect to cryptocurrency blockchains like Ethereum.
On-chain specifically on Ethereum Chainlink is a series of smart contracts that allows developers to request data for their dApps from the aforementioned oracle nodes.
The link token is used to pay oracle nodes for data feeds and will also eventually be used for staking by oracle nodes to ensure they provide consistent, high quality data feeds.
There are dozens of oracle nodes for each data feed and developers can choose to use one or multiple nodes based on their personal preferences or the competitive prices offered by nodes via their bidding process.
The Chainlink Mainnet went live in May 2019 less than two years after its September 2017 ICO, which raised a comfy 32 million dollars worth of Eth since that time chain link’s ecosystem has grown exponentially along with the valuation of the link token.
Today Chainlink provides 75 price feeds to over 300 smart contracts and decentralized applications in the cryptocurrency space.
But this is just scratching the surface of how much Chainlink has accomplished and most of these accomplishments have taken place in the last few months.
Grants & Proof of Reserves
In August 2020 Chainlink announced their community grants program.
This initiative essentially seeks to supercharge the growth of Chainlink ‘s ecosystem.
Chainlink has since funded 19 different grants related to research and development notable grants include those for the native integration of Chainlink on tezos near protocol, Solana and avalanche.
Chainlink even gave a grant to the link marine to build and manage a website for Chainlink related news.
In October 2020 is when things really started to pick up for Chainlink.
For starters BitGo the company which issues WBTC the largest wrapped bitcoin token on Ethereum partnered with Chainlink for proof of reserves.
This means that users can be confident that the WBTC in circulation on the Ethereum blockchain is actually backed one to one by the bitcoin held in custody by BitGo.
At the end of October Chainlink launched a new product called Chainlink VRF.
For those unfamiliar VRF stands for verifiable random function which is required for RNG aka random number generation something that’s frequently used in video games.
Chainlink now offers on-chain VRF and off-chain VRF provided by oracle nodes for any developers building gaming dApps on Ethereum.
Now, RNG did not exist on Ethereum prior to chain links VRF marking a huge milestone not just for Chainlink but the entire Ethereum ecosystem.
November continued Chainlink ‘s milestone momentum with the announcement, the trust token, the company, which issues the TUSD Stablecoin will be using Chainlink for proof of reserves.
Shortly afterwards it was announced that Matic had become the first cryptocurrency blockchain besides Ethereum to natively integrate Chainlink ‘s data feeds.
Chainlink & Flash Loans
By the end of November, the cryptocurrency space was begging for Chainlink but not because of its barrage of positive developments.
About half a dozen DeFi protocols including compound finance harvest finance cheese bank and acropolis were all hit with flash loan attacks in October and November.
Over 100 million dollars worth of cryptocurrency was lost.
Now as some of you will know calling these large-scale arbitrage trades attacks is not entirely accurate.
This is because it just involves exploiting price differences between various DeFi protocols.
Usually this just involves borrowing millions of dollars worth of one cryptocurrency on one DEX using a flashlight selling that cryptocurrency on another DEX for a profit paying back the flashlight and keeping the difference.
The problem is that these massive flashlight trades are not a good look for the DeFi space.
When retail investors and institutions see a headline explaining that 90 million dollars would drain from compound finance.
In the words of AVE founder Stani Kolechov it is necessary to measure and mitigate against this risk if we want to see any serious adoption of DeFi.
Now more often than not the reason why it was possible to execute these massive arbitrage trades is not that there is an issue with the protocols involved.
But because they are relying on centralized price feeds.
In short many of the DeFi protocols that get hit with flashlight attacks are relying on price data from a single DEX like UniSwap which makes it vulnerable to price manipulation exploits.
Thankfully the solution is simple.
Use an oracle like Chainlink to get price data from multiple DEXes and other sources to prevent these scary multi-million dollar arbitrage defy trades.
Dozens of DeFi protocols have since integrated Chainlink and other price oracles to protect themselves from DeFi Degens.
Zeus Capital Update & SEC Risk
In november 2020 Zeus capital issued a one hundred thousand dollar bounty payable to anyone who could provide them with information about chain link’s quote illicit and manipulative practices.
Well because they are in the process of putting together a class-action lawsuit against chain-link presumably for the damages they incurred when they shorted link earlier in 2020.
As all link marines know well Zeus capital shorted link because in their view.
Chainlink is one giant Ponzi scheme and the link token is going to zero.
One week later Zeus capital followed up with the claim that the link token will eventually be classified as a Security by the SEC in the united states.
If this is true it means that Chainlink will be given the same treatment as Ripple and the link token will consequently be delisted from US exchanges and dumped by any large institutional investors located in the united states.
Just like XRP was.
Now you could dismiss this as more nonsensical fud on the part of Zeus capital but that this is worth discussing given that the SEC is in fact on the hunt for other cryptocurrency projects beside Ripple.
To be honest there’s no way to know for sure if Chainlink will be targeted by the SEC.
This is for a number of reasons.
Even though Chainlink itself is incorporated in the Cayman Islands it is not entirely clear whether smart contract the company which develops Chainlink is incorporated in the united states.
If it is this could potentially bring the project within firing range of the SEC.
It appears that there were no restrictions on who could participate in the Chainlink ICO since all funds were collected in Eth.
If anyone in the united states is found to have participated in the Chainlink ICO this too could bring link within the jurisdiction of the SEC.
That said even if link is fair game for the SEC it does not automatically make link a security.
This is determined using something called the howie test.
The TLDR to whether or not link is a Security boils down to if the expectation of profit i.e the price action of the token is dependent on the actions of a third party in this case Chainlink.
This causality is pretty hard to establish here given that link has actual utility as a means of payment for oracle services.
Once staking goes live this will add yet further dimension of price influence on the linked token.
This is why the crypto ratings council has given Chainlink a rating of two out of five in terms of how closely it meets the criteria of the Howie test.
Considering the crypto ratings council gave XRP a rating of four out of five, we’re safe from the SEC.
However, we will start to see more lawsuits against Chainlink \from inside the cryptocurrency space in the coming months.
LINK Token Dumping
Back in September 2020 there was a coin telegraph headline that read quote Chainlink up 30 following six-week downtrend and developer sell-off.
I remember seeing it when I was doing my daily read of the crypto news.
I didn’t pay too much attention to this article at the time because the circulating supply of link was still sitting at 350 million according to coin market cap.
The circulating supply of link was suddenly over 400 million.
Since LINK is an ERC20 token you can easily track all link transactions and balances using EtherScan.
Now moving funds around is no smoking gun but an in-depth report from trust notes from august 2020 seems to be just that.
I’ll leave the report in the description so you can check it out but the short of it is that it appears as if the Chainlink team has been selling hundreds of thousands of LINK.
The report also claims that the Chainlink team is actively trying to obfuscate those transactions i.e hide them.
A news article from decrypt speculates that this selling behavior by the Chainlink team is why link lost momentum in mid-august.
So where is all this link going.
Well there are a few possibilities.
An article from early July 2020 highlights that Chainlink is planning to spend millions on development.
It explains that 500 000 link is being sent twice a month to oracle node operators.
But that this link is coming from wallet addresses belonging to the Chainlink team and not from the 350 million link war chest wallet allocated to node operator incentives.
Recall that Chainlink has given 19 grants as part of its community grants program.
It just so happens that this initiative began on the last day of July in 2020.
It is very likely that the selling of link tokens by grant recipients is part of why link’s moonshot was cut short in mid-august and why the link token continues to struggle against Bitcoin.