Chainlink’s LINK Token Outpaces Bitcoin in Late 2023: Here’s Why

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In late 2023, the cryptocurrency market experienced a sharp increase in Bitcoin’s price, returning it to levels last seen in the spring of 2022. During this time, several major cryptocurrencies outperformed the market leader in terms of growth. Among them was the LINK token from Chainlink, which doubled in value since the start of October and surged by 50% in just one week.

Chainlink – Bridging Blockchain and Real-World Data: Chainlink is a service that acts as a bridge between blockchain and real-world data through a network of decentralized oracles. Oracles are essentially lines of code that provide information from external sources to smart contracts, which dictate the logic of blockchain services.

These oracles enable smart contracts to access real-time data that cannot be stored directly within transaction blocks. This data could include cryptocurrency prices, interest rates, or even weather information. Chainlink serves as a provider of this data for other projects, ensuring its authenticity and timeliness.

Chainlink’s Dominance in the Oracle Space: The popular cryptocurrency aggregator, CoinGecko, categorizes over 30 crypto projects with their native tokens as oracles, with a total market capitalization exceeding $7 billion. Chainlink, by far, stands out as the largest, surpassing its competitors. As of October 25th, the LINK token is valued at $11 with a market capitalization of over $6 billion.

Lucrative Investments: Sergey Nazarov, the founder of Chainlink, was born in Moscow in 1986 and moved to New York with his family in the 1990s. Before delving into blockchain technology, he taught a course on technology entrepreneurship, which was led by Professor Lawrence Lenihan, the CEO of the venture fund FirstMark Capital. Later, Nazarov worked at Lenihan’s company as part of a team of seven investment managers that managed capital totaling $2 billion and allocated over $90 million in venture financing to promising startups, including Pinterest and game developer Riot Games.

Nazarov’s journey into cryptocurrency began in 2011, and before creating Chainlink, he had already participated in profitable projects involving cryptography. He also invested in Bitcoin at an early stage when it was trading at around $30. He founded his venture company, QED Capital, which financed young tech entrepreneurs from Russia and Eastern Europe.

In 2014, alongside Steve Ellis and Ari Juels, Nazarov founded the project. Its goal was to ensure the secure interaction of smart contracts with various data sources and external interfaces. The idea of connecting external data to blockchain-based smart contracts eventually led to the creation of Chainlink, Nazarov’s most successful project to date.

Chainlink’s Development and Achievements: Chainlink Labs, an evolution of the project, is responsible for the development of Chainlink. In July 2017, the project conducted an initial coin offering (ICO) to sell LINK tokens, where participants could purchase LINK at a price of approximately $0.09 per token. By the end of October 2023, with LINK trading at $11, the return on this investment exceeds 1000%.

Chainlink Protocol – Bridging the Gap: The Chainlink protocol acts as a bridge between the blockchain and external data. Over the past few years, Chainlink has established itself in the crypto industry through high-profile partnerships and integrations into various networks and organizations. Partnerships include Google Cloud, the National Basketball Association (NBA), Coinbase, and China’s State Information Center blockchain platform, among others.

Chainlink, in collaboration with SWIFT, is exploring the use of its protocol for transferring tokens within the interbank network through various blockchain ecosystems. This collaboration is of interest to SWIFT because it enables the system to conduct payments, not directly, but through blockchain. SWIFT typically delivers information, such as from banks, and banks themselves handle payments.

The Demand for LINK: Smart contracts, by themselves, cannot access external data. Chainlink helps smart contracts by collecting data from multiple external sources (oracles) and feeding it back into the blockchain. This approach is considered more reliable than relying on a single oracle, which could be manipulated. If, for example, a smart contract requires an accurate cryptocurrency price, Chainlink’s decentralized network of price oracles finds a consensus on the current rate and conveys the data upon request.

To synchronize the data from these oracles, Chainlink requires network nodes operated by individuals or companies to verify data accuracy before making it available to smart contracts. Node operators, who provide and validate data for smart contracts, are rewarded with LINK tokens.

The native asset of the Chainlink network exists in the form of an ERC-20 token on the Ethereum blockchain. To earn tokens, node operators must also stake a specific amount of LINK tokens. Nodes with higher stakes have a better chance of receiving rewards.

Chainlink does not have its own blockchain. The protocol works with blockchains based on the Ethereum Virtual Machine (EVM), capable of executing smart contracts, such as Ethereum, Binance Smart Chain, Polygon, Avalanche, or Fantom, and supports other networks as well, such as Solana.

LINK’s Utility and Growing Demand: The LINK token has experienced a surge in demand due to its critical role in bridging smart contracts with real-world data. As decentralized finance (DeFi) and other blockchain applications continue to evolve, the utility of Chainlink’s LINK token becomes more apparent. Sergey Nazarov envisions a secure and reliable system capable of processing transactions worth “tens of trillions of dollars” as Chainlink gains greater adoption.

Sergey Nazarov highlights that a network of decentralized oracles is not the same as a blockchain, and many are yet to fully comprehend the potential of his project. He aims for people to understand that his team is working on creating a secure and trustworthy system capable of handling transactions on a massive scale, and as it becomes increasingly integrated, everyone will grasp its significance.

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