Investing Idea: ChainLink


Many people think that cryptocurrency would render the current financial system obsolete. Many comparisons have been made, such as what the automobiles did to horses and what email did to paper mail. In their heads, superior technology always wins the day and that it is only a matter of time before people abandon the entire legacy system and adopt cryptocurrency.

Allow us to tell you that this is not likely to happen in the foreseeable future. Big companies such as JP Morgan, Citibank, and many others will not discard their infrastructure just because something new has come along. However, they might consider implementing this new technology if it works well with their current system.

Unfortunately, most cryptocurrencies such as Ethereum (ETH/USD) cannot accept data outside of its blockchain. Sure, Ethereum has the capabilities to run smart contracts automatically but that feature is limited to information provided on-chain. This prevents many companies and financial institutions from adopting the cryptocurrency.

But what if there was a way for a blockchain system to communicate with the outside world? Wouldn’t it be easier if, let’s say, data from Amazon could be automatically fed to the blockchain so that the buyer can pay for the product only after delivery has been confirmed?

This is what ChainLink plans to accomplish. It envisions to connect cryptocurrencies that run smart contracts to the outside world or the existing infrastructure. The massive potential of making this connection is why ChainLink is a solid investment pick.

ChainLink Value Metrics

  • Current Price: $1.08
  • All-Time High: $1.47
  • All-Time Low: $0.126297
  • YTD Performance: 273.11%
  • Market Cap: $377 million
  • Market Cap Ranking: 28th
  • ROI Since Launch: 587.64%
  • Primary Markets: Binance, Hubi, Bitrue, Huobi Global, BKEX
ChainLink Chart
YTD ChainLink Chart | Source: CoinMarketCap

Investment Case

As mentioned, blockchains cannot access data outside of their network. This limitation presents a huge issue because data from the outside world cannot be used as a basis of a smart contract. For those who don’t know, a smart contract is an application that runs on its own if certain X and Y conditions are met. Xs are inputs or data that are fed to the smart contract. Ys are actions such as payments that are triggered once the Xs are satisfied.

For instance, Bob will receive 100 BTC after he delivers a sports car to Alice’s house (X). Alice confirms the delivery which triggers the smart contract to automatically send Bob the 100 BTC (Y).
The problem right now is that Alice cannot confirm the delivery because that data comes from outside the blockchain. Enter ChainLink.

ChainLink is a middleware solution. It is a decentralized oracle service that offers the capabilities to connect blockchains that run smart contracts to the outside world.

ChainLink illustration
How ChainLink can connect smart contracts to the outside world | Source: Medium

On the left side of the image above are your Xs. With the help of ChainLink, they can automatically feed data such as market data, sports data, or weather data to the blockchain. Once these Xs are satisfied, the smart contract will execute. Again with the help of ChainLink, payments can be made (via Visa, PayPal, MasterCard, etc.) to the right side of the image which are your Ys.

Betting Example Using ChainLink

To illustrate, let’s say Alice and Bob made a $10,000 bet. Before yesterday’s game, Alice said the Toronto Raptors will beat the Milwaukee Bucks at the anticipated basketball game. Bob agreed and created a smart contract on Ethereum. He then requested ChainLink nodes to connect to Yahoo! Sports to gather accurate data. He also asked the nodes to connect to PayPal so the $10,000 can be sent to the winner’s account.

Through this process, Bob payed the nodes LINK tokens for their service.

The Raptors won the game and with ChainLink’s help, Alice does not need to hunt Bob to pay up. Her $10,000 prize should be reflected on her PayPal account as soon as the results are in.

Other Applications for ChainLink

The example above is but a glimpse of how ChainLink can unleash the fullest potential of smart contracts. By giving blockchains a secure and decentralized channel to communicate with the outside world, smart contracts are now on steroids. In addition to sporting events, here are some of the many uses cases of ChainLink and smart contracts:

  • Trustless Gambling – sensors can detect which race car or racehorse finished first and send funds to people who won. This can also be applied to online gambling such as winners at a roulette table.
  • Trustless Insurance – with the use of geo-location, insurance companies can determine your driving behavior and apply insurance terms based on accumulated data.
  • Trustless Tracking – using GPS, a company can pay out vendors after the successful delivery of products.

The applications are endless. Best of all, the ChainLink mainnet is about to go live in less than a week. This means that we are still in the early stages of development. With countless use cases, we expect demand for LINK to exponentially grow in the next several months. Connecting blockchains to the outside world and putting smart contracts on steroids are our investment cases for ChainLink.


Disclaimer: The author does not own ChainLink. The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.