Welcome to the world of crypto oracles. As you may know by now, oracles play an important role in crypto. That’s because blockchains can’t communicate with the ‘real world’. They need oracles to provide this real world or off-chain information to them. Think, for example, of crypto, gold, or stock prices. Crypto betting sites need sport results. RWA is another good sample. What’s the real-world price of the tokenized asset.
So, Chainlink is the market leader in this sector. Its market cap is 6 x bigger than the next oracle project, Pyth. Its market cap is even bigger than the combined market cap of the 3 oracles I recently discussed. Still, there are also plenty of people with questions about Chainlink and its $LINK token. The token is not performing that great now. So, let’s take a look if $LINK is dead, still alive, or in a coma.
What Is Chainlink?
Chainlink ($LINK) is the #1 oracle in crypto. Sergey Nazarov and Steve Ellis created the protocol in 2017. They saw the need for oracles and have a first mover advantage. Oracles serve all kinds of different sectors. However, DeFi is a major sector that relies on oracles. So, this makes Chainlink an infrastructure project.
It provides off-chain computations and information to on-chain smart contracts. For instance, a supply chain management app can follow the whereabouts of goods in real time. Or for DeFi, DEXes can get cryptocurrency prices.
Since 2017, Chainlink has been building and sits comfortably at the top of the oracle pile. Well, at least for the time being. So, here are some of the features that Chainlink offers. For example,
- Data feeds — They are the bread and butter for any oracle. These feeds provide real world data in real time.
- CCIP or the Cross-Chain Interoperability Protocol — This is their flagship feature. It allows blockchains to communicate with each other. You can see it as a bridge between chains. It allows for transferring assets and other information. More on this later.
- Data streams — These are like data feeds. However, they target low latency streaming of data. For instance, payment fee feeds or high-frequency asset prices.
So, time to take a closer look at the CCIP feature.
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https://t.co/FiQbTSX2cr pic.twitter.com/5uJVm0nZuk
— Chainlink (@chainlink) August 16, 2024
CCIP or the Cross-Chain Interoperability Protocol
The CCIP is the Cross-Chain Interoperability Protocol. Now, oracles connect blockchains with external data feeds. CCIP connects blockchains with each other.
For example, it allows bridging tokens between chains. That is its main use case. You can also send messages or other data on CCIP. This component has various components. Here are some of them,
- Router contract — Each supported chain has its own router contract.
- OnRamp and OffRamp contracts — They receive router messages that are on the same chain. They verify size and gas limits or make sure that it only executes transactions once.
- Risk Management Network — This oversees validation.
So, CCIP looks like a cool feature. I would also like to point out that CCIP is still in an early version. V1.0, as we speak. So, in other words, lots of functionality is still under construction. It currently runs on seven L1 and L2 chains.
- Ethereum
- Optimism
- Arbitrum
- Polygon
- Avalanche
- BNB Chain
- Blast
It supports a total of 14 networks.
Nonetheless, there’s also some trouble in CCIP paradise. For example, CCIP has now been live for over a year. But in cumulative fees, it hasn’t even generated over $1 million in fees yet. No wonder if you know that daily fees only range between $300 and $500. Total cumulative fees are currently just over $842.000.
So, we can conclude that CCIP is not doing that great. It was an expensive project to build. This led to accusations that Nazarov dumped tokens to finance it. Either way, there’s more to look into, So, time to look at the $LINK token. The picture below shows how CCIP works.
Source: Chainlink docs
$LINK
The $LINK token price is currently at $10.45. It has a market cap of $6.3 million. There’s a max and total supply of 1 billion tokens. However, only 608 million tokens circulate. For a project that launched its token in 2017, that’s not great.
There’s also quite a bit of discussion between Mariners about the $LINK price. Let’s look back at its ATH of $52.70 in May 2021. $LINK went parabolic from $11 in late December 2020 to its ATH. However, it dumped even faster. It was back at $13.88 on 21st July. In only two months’ time, it lost almost 75% of its value.
After that we saw a long shuffle around $6 from May 2022 to September 2023. From it here onwards it went up again, to $21 in early March this year. However, it lost traction and finds itself back at around $10.
Any chart. Any timeframe.
It looks horrendous pic.twitter.com/Xbjrci16KU
— Apeyieldgod (@apeyieldgod) August 18, 2024
There’s no clear unlock schedule. But in June this year, Chainlink sent 21 million $LINK to Binance. That was worth around $295. The price was at $14-$15, but soon after, it was around the current $10 range. So, fears of a crash to $10 materialized and are real as of today. There’s a potential for a further dump to $8 if $LINK doesn’t stabilize at the current price.
So, understandably, the Link community has many concerns about this price development. Still, Chainlink is a good project. It has good fundamentals, although they might start to shake a bit. The team needs to find a way to increase revenue.
The oracle market is also competitive. There are plenty of other oracle protocols out there. They are more than happy to take over Chainlink’s top position. So, what do you think of Chainlink’s current status? Is the chain doomed, or do you still see hope?
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