ICO Analysis: Chainlink

Chainlink believes that part of the problem with today’s smart contract is a lack of outside connectivity. They believe that a secure network of oracles can solve this problem, and this is the product they aim to present. In looking it over, we noted that it would have very specialized uses, first and foremost, and that recognition of this fact would be crucial to the investor.

Today, the lion’s share of traditional contractual agreements that have been digitally automated use external data to prove contractual performance, and require dataoutputs to be pushed to external systems. When smart contracts replace these oldercontractual mechanisms, they will require high-assurance versions of the same typesof data inputs and outputs.

In essence, the overview of Chainlink is that they want to improve the usability of smart contracts for certain types of applications. This means their market will be smart contract providers and smart contract users. As I said earlier, it’s relatively niche, but that doesn’t mean it can’t carry a great deal of potential value. We’re going to try to remember that while everything to do with the blockchain is still, in essence, very niche, everything in that category is also expanding exponentially, at a rapid pace, including a market that would need smart contract services. They list a few types of smart contracts they will help immediately: securities, insurance, and trade finance.

Chainlink’s actual system will consist of two separate parts: on-chain and off-chain. These will have to interact in order to deliver the service. The system has to keep the results from oracles correct as well as allow oracles to make them independently. This is where the interesting part presents itself: an oracle could be someone like the New York Stock exchange providing accurate trade information, or the Visa network settling a transaction. The Chainlink technology aims to on-board them all in one fell swoop, itself acting as a (and low cost barrier to entry.)

Chainlink Token

In order to compensate the off-chain needs of the Chainlink system, the LINK token is established to pay them. The token is required to perform this function, so its demand is therefore in relation to the number of other people doing the same thing. As with most of these token schemes, the real means test is when the system goes live and whether or not a lot of people join the network or not. If the answer is not, then the token has no inherent value since no one actually wants it – even if it remains having speculative value, enough demand must ultimately be generated for a token in order for it to have legs.

The LINK token is an ERC20 token, with the additional ERC223 “transfer and call” functionality of transfer (address, uint256, bytes), allowing tokens to be received and processed by contracts within a single transaction.

Distribution

There will be a total supply of 1,000,000,000 tokens. Further details on the actual token are yet unavailable, which is unfortunate, as details such as how many tokens are actually released to the public are important.

The whitepaper gives the least detail about the token itself, which is problematic. Here is the thing: the idea behind the system is sound, the technology being used to implement it is sold. But does it actually need an ICO to successfully launch? Why does it require its own token? It would seem obvious that the oracles themselves would have incentive to keep their network and access to their own data constant. This is just a question, it doesn’t mean it can’t work this way. The author only means to raise the question of whether or not more generic, protocol-level solutions may supercede Chainlink’s efforts in the natural flow of disruption.

Team

The actual current team of Chainlink is just the pair Sergey Nazarov and Steve Ellis. One assumes they’ll hire the rest of the talent they need, but it is disconcerting to see just two people actually involved up to date.

Ellis previously worked at Pivotal Labs.

Nazarov’s qualifications seem to be that he was early to cryptocurrency.

This one can get an okay rating without a high team score, in any case.

Verdict

We’re forced to make a verdict mostly based on the concept of the token – that it will be in demand because the service itself will be in demand. We’ll lend some credibility to the argument that smart contract as it were are not totally flexible enough for the market as it is, and presume that Chainlink, with the hype surrounding it, will be one of the early companies to market in servicing smart contracts with external data solutions.

Risk

  • We think there could be a long period in which these tokens are in low demand, and during this time, people will be forced to hold the bag. -1.5
  • We think the legacy oracle networks that are being sought out to join the revolution will need some real incentives to do so. The value of the token will have to be there for them, as well as the value in disrupting their own existing business models. -1.5

Growth Potential

  • Extending the power and usability of smart contracts by default and extension extends the value and demand for the tokens on t 1,000,000,000hose networks. We think that if this project succeeds, it will be one of many tokens which sees an increase in value as a result. +3
  • Hype has built significantly around this ICO despite some crucial details regarding the token. We think that if you can get yourself a small basket of them and prepare to dump, there will be a window to do that. We say this with caution, since as we noted elsewhere in the article, there will likely be a period where the token will have a low value, by nature of the network establishing itself and demand for the token doing the same. +3
  • Tokens which do not have to fundamentally reshape some area of society to have an actual value at market are great. Let’s give another 2 points on these grounds.

Disposition

We arrive at a 5, or lukewarm for Chainlink. We fear that the lack of details may be attributable to the lack of a dedicated team, not just a desire to build hype. We wouldn’t put too much into it, but wouldn’t write it off or be surprised if it does extremely well, either.

Investment Details

On September 18th there will be more details at https://link.smartcontract.com/crowdsale

Author:

Website: http://phm.link

P. H. Madore has covered the cryptocurrency beat over the course of hundreds of articles for Hacked's sister site, CryptoCoinsNews, as well as some of her competitors. He is a major contributing developer to the Woodcoin project, and has made technical contributions on a number of other cryptocurrency projects. In spare time, he recently began a more personalized, weekly newsletter at http://ico.phm.link