Why I believe chainlink (LINK) is the most undervalued coin in the top 100

in #cryptocurrency3 years ago

What is Chainlink?

Chainlink is a project that aims to be a decentralized oracle provider for Ethereum, Bitcoin, Hyperledger and other blockchains. It might sound complicated but hang with me. Smart contracts are amazing and without a doubt will change the internet in ways we can't even imagine right now and smart contracts even have potential far beyond the internet, in the real world. The issue right now is that smart contracts (like the ones Ethereum has) cannot communicate with real world APIs and services. What is an API? An API is a set of commands that one program can send to another program, effectively they allow different programs to communicate between each other. APIs power the entire internet and vast majority of today's internet could not function without APIs.

Now how does Chainlink come into play? As I said Chainlink is a decentralized oracle provider. An oracle is a software that allows smart contracts on the blockchain to communicate with off-chain APIs and services. Without an oracle this isn't possible and blockchains with smart contracts can only use data on their own blockchain, which makes them useless for responding to or using anything in the real world or elsewhere on the internet. Currently there are several oracle providers for blockchains, however their major issue is that they are all centralized. Smart contracts are all about decentralization and using data fed from a centralized oracle is a major point of attack.

Say you have a bet with a friend made on a smart contract. The smart contract uses centralized oracle to check the latest ethereum's price. If it goes above $1000 before a certain date, you win the bet and get your friend's $50, if it doesn't then he gets your $50 that is deposited on the contract. The issue with a centralized oracle is that in this case, your friend could just hack into the centralized oracle, make it send false data about Ethereum's price to the smart contract and get your money without actually winning the bet. Not that big of a deal if you made a bet with a friend, but much bigger of a deal if you're a massive company that relies on millions of dollars being handled through smart contracts using oracles.

What chainlink does is that it provides decentralized oracles (effectively hundreds, even thousands of sources of the same data) combined, making it nearly impossible to hack, similarly to a blockchain. In this case, there would be no way for your friend to hack the oracle because the oracle is hundreds of different computers sending the same data.

What partnerships do they have?

The main reason why I think chainlink is so undervalued is due to the amount of partnerships it has and the rumors surrounding its potential partnerships.

On the smartcontract.com website (yes, chainlink owns that domain) they state that their partners are SWIFT (yes, the SWIFT that works with 11,000+ banks worldwide), Gartner, Cornell and World Economic Forum. These are all impressive partnerships, but those are just outside of the blockchain world.

The most recent partnership of chainlink is with ZeppelinOS. ZeppelinOS is an open-source, distributed platform of tools and services on top of the EVM to develop and manage smart contract applications securely. ZeppelinOS is used by projects like OmiseGO, CIVIC, Aragon, STORJ, Tierion, Augur, District0x, Ripio Credit Network, Decentraland and others. And guess what? They partnered with chainlink to use them as their oracle provider once chainlink's main net is up. This is huge, it means that projects that will use ZeppelinOS can easily use a secure, decentralized oracle for their projects if they need one (and many of them do).

This alone is a huge deal for chainlink, but far from end. Request network, which is an amazing project that was recently soaring in price will need to use an oracle for their FIAT gateways and in an update a while back they mentioned that they are in regular contact with chainlink and in an another update recently they mentioned it again as their #1 solution.

These are already huge use cases for chainlink, but it's still not over. There have been numerous speculations of chainlink's partnerships, such as ones with Microsoft, banks and other crypto projects. If you search on chainlink's subreddit for partnerships, you will see a lot of speculation on that, some with convincing proof.

Why is it valuable?

Last but not least, why is the LINK token valuable? Well, apart from naturally increasing in value as the project gains more use and partnerships, the LINK token is used by smart contract owners to pay chainlink nodes for getting data from them and the more LINKs an oracle node has, the more reputable it is. So oracle node providers are incentivized to hold as much LINKs in their chainlink nodes to appear more reputable to the chainlink network, gaining more usage and profit.

LINK can (and will be) used for data request penalty payments to ensure that node operators provide the requested data. Penalty payments are LINK tokens that are required to be held in escrow by the smart contract. They are paid to the smart contract creator in the event any of the node operators do not meet the required data requests as stated in the smart contract. This provides an incentive for smart contract creators to trust node operators, knowing that they have a form of financial insurance (the penalty payment) in the event a node (or nodes) submit bad data.

LINK staking is another big thing that will do wonders for Chainlink's valuation. Turns out Chainlink oracles can be made into pools, similar to mining pools on bitcoin and ethereum where multiple people come and put their LINKs together to run a more secure oracle node and distribute the profits fairly between each other. This will be huge as it will effectively allow you to stake your LINK tokens and earn more of them passively without doing anything. One such pool in development is LinkPool.

/u/smartcontractsfortax provided a great in-depth explanation of chainlink's value in his comment.

Summary

There are excellent videos from Sergey Nazarov (creator of Chainlink) explaining oracles and Chainlink on youtube, the best probably being from last year's DEVCON. Sergey is also a respected member in the blockchain community, where he created projects like Secure Asset Exchange for NXT and Smartcontract.com.

Chainlink has been in the works for over 3 years and if Chainlink succeeds in creating their decentralized oracle (which I have full faith they do based on the team's previous projects, how close they are and the fact that smartcontract.com currently provides functional centralized oracles) and they successfully provide oracles for majority of cryptocurrency projects, the valuation of the LINK token will be insane. We are talking valuation in tens of billions of dollars, if not more if chainlink actually ends up working with SWIFT and will be partnered with them. Not many people have a chance to get in on a project like this in its infancy that has such a potential for price increase. The current market cap of chainlink is extremely undervalued for the potential the project has and I think we will soon see chainlink come closer to its true valuation as the main net release (Q1-Q2 2018) approaches.

TL;DR: Chainlink is the only project focusing on being a decentralized oracle provider that has a MASSIVE use case, partnerships like Request Network, ZeppelinOS, SWIFT? and the LINK token can be staked in pools in the future to provide passive income.

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