Presentation of #13: Chainlink

General presentation:

• Name & symbol: Chainlink (LINK)
• Market capitalisation: $8.83 billion
• Ranking on CoinMarketCap: 13th

Technology and infrastructure:

• Chainlink is neither a layer 1, nor a layer 2 solution. It is a decentralised oracle network that operates on multiple blockchains. However, Chainlink operates primarily on Ethereum.
• It is a non-native token, specifically an ERC-677 token which is an extension of the ERC-20 token.
• Chainlink does not use traditional Proof-of-Work or Proof-of-Stake. Istead, it relies on a reputation-based system and economic incentives to ensure data reliability.

Use Case and Functionality

• Chainlinks main purpose is providing decentralised oracles to connect smart contracts with real-world data thus enabling use cases in:
  1. Decentralised finance 
  2. Insurance
  3. Gaming
  4. Enterprise blockchain solutions
• Its main competitors are Band Protocol, API3, and other decentralised oracle networks.

Strengths and Weaknesses

Chainlinks main advantages are:

1. High security as the token provides a proven track record of reliable data delivery;
2. Interoperability because it works across multiple blockchains;
3. Strong developer support thanks to its extensive documentation and grant programmes.

However, Chainlink also shows some disadvantages:

1. Since it runs mainly on Ethereum, Chainlink can suffer from network congestion and high gas fees raising scalability concerns;
2. Certain aspects of Chainlink’s operations are controlled by a “core team” which questions the degree of decentralisation.

Finally, in order to address the Blockchain Trilemma (Scalability, Security, Decentralisation), Chainlink enables off-chain data processing, allowing for parallel computation across multiple oracle networks, reducing the congestion.

Adoption and Ecosystem

Chainlink’s main users are: 

1. Developers integrating real-world data into smart contracts
2. Businesses and institutions using smart contracts for automation.

It collaborates with Aave, Syntheticx, Compound and various other enterprises.

Developer community activity is high with ongoing development, extensive documentation, and grants for innovation.

Tokenomics and Supply

Chainlinks supply maximum is 1 billion LINKs. Those are distributed initially through public sale and are allocated to the team and project reserves. Chainlink does not dispose of any built-in burning mechanisms or deflationary models insofar.

Risks and Future Outlook

Chainlink can face regulatory uncertainty regarding decentralised oracles, but also security risks related to smart contracts and increasing competition in the oracle space.

An important upcoming development of Chainlink is the so-called Chainlink 2.0 that aims to introduce hybrid smart contracts with more powerful off-chain computation.