The Chainlink Drama

Introduction

After the recent Wirecard fraud of $2 billion, many people in the crypto world are trying to dig deeper to find out the reality of Chainlink, the operator of the LINK token. The year 2020 so far has been about the altcoins that are related to the booming DeFi market. A recent report published by Zeus Capital however, suggests that Chainlink is crypto’s Wirecard. This article gives a brief overview of the recent performance of the LINK token, the report that was published by Zeus Capital and what other people think about the report and the token. We will begin by understanding what Chainlink is and what it does. 

What Is Chainlink?

Chainlink is a decentralized network of nodes that allows smart contracts on Ethereum to securely connect to external data sources, APIs, and payment systems through oracles (DeFi instrument). Oracles are third party blockchain data sources. Blockchains cannot access information outside of their network and this is where oracles come into the picture. They help provide outside information to the smart contracts for their execution. While inclusion of third parties to provide information related to the real world nullifies the purpose of decentralization, the oracles in the Chainlink network are connected to the network of Ethereum. This ensures decentralization and security of the network. The cryptocurrency for Chainlink’s network is LINK which is traded on multiple trading platforms including CoinDCX’s.

Chainlink uses reputation and validation systems to incentivize oracles to provide smart contracts with outside world data. Users on the Chainlink network can ask for off-chain data by submitting a requesting contract to the network. These contracts match the requesting contract with the appropriate oracles. The process involves the data providers to stake LINK to bid on information requests made by purchasers.

Once a request has been made, the Chainlink protocol registers it as an ‘event’ and creates a Service Level Agreement (SLA). This SLA consists of three smart contracts namely a reputation contract, an order-matching contract and an aggregating contract.

The reputation contract tracks oracle metrics and the order-matching contract examines the bids from participant nodes based on the parameters defined by the user. Once this is over, the aggregation contract combines all the information provided by the nodes to determine which is best suited to satisfy the event. Once this is done, data is provided to its purchaser. The data from the aggregation contract also provides updated oracle metrics for future queries.

LINK so far

At the time of writing (20th July, 2020, 15:15 IST), LINK is trading at $8.01 and with a circulating supply of 350 million LINKs it is ranked 9th in terms of its global market capitalization. Despite COVID-19 and the halving  event, Bitcoin has been consolidating for a long time now. In fact, the recent Twitter attack was unable to cause a break in the cryptocurrency in any direction. 

LINK, on the other hand, was trading at $4.08 on the 20th of June, 2020 which shows an almost 100% increase in price over the last month and 370% year-to-date. It even broke it’s all time high at $8.60 recently.

While the price is still rising, recent reports have started surfacing which indicate that LINK is probably going to be another example of a Pump and Dump or the price surge could simply be a speculative bubble caused by FOMO.

The growth of the DeFi market also means that there is a greater need for oracles to provide data from off-chain data sources to on-chain blockchain like the one offered by Chainlink. Several DeFi protocols have started developing their own oracles which means bad news for the Chainlink community.

Despite increasing competition, Chainlink has managed to outshine over the last month. In fact, the daily active addresses hit an all time high of 14,253 on 13th July, 2020. Users today have also grown by 100% over the last month. 

Considering its uses, Chainlink is believed to outperform various other cryptos. (Please note – We do not provide any financial advice. Traders must do their own research before taking any actions.)

Report Summary and People’s Views

At the time the report was written, price of LINK was $7.95 with a target downside of -99.1% and a target price of $0.07. Thus, recommending all readers to sell the token. 

The authors of the report believe that Chainlink is just another example of a classic Pump and Dump technique based on inside information that is going to impact the innocent investors. It made claims that the SmartContract, the company behind Chainlink, affects the decentralization and security of the network by interfering with the onboarding process of new nodes. Along with a broken tokenomics model, Chainlink still runs on its Ethereum based testnet which may result in increased cost for nodes and various bugs in the network. 

They even claimed that the founders and creators of Chainlink themselves were shorting the coins and selling them from their own reserves that too at a price lower than the market price. Selling below the market price means instant gains for whoever purchases them as buyers can immediately sell the coins to register profits. Among many other things that was mentioned in the report one of the most important things that was highlighted was the inexperience of the team and the cosmetic changes that are made to the codes. 

While there are people on both sides of this argument, we would like to present an overview of what’s happening in the markets so that you have additional information that will help you make a call. 

A tweet by TheLinkMarine — a Chainlink proponent suggested that the Zeus Capital report allegedly leads to an executive at lending protocol Nexo. Nexo recently borrowed 350,000 LINK from DeFi lending market Aave only two days before the document was published. People have been trying to find out links between Zeus Capital and Nexo. Moreover, Cointelegraph attempted to contact Zeus Capital’s London and Hong Kong Office but they were either disconnected or diverted to the voice mail.

 

People on various social media channels, including Telegram, have even suggested that the Zeus Capital that published the report is not a real company and is pretending to be another reputed organization by the same name in the UK.

Not everything in the 66 page report can be considered to be true or false. In this situation where nothing is clear, it is important for all users and crypto enthusiasts to conduct proper analysis before taking any steps. #TryCrypto and learn the power of decentralization. 

 

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