Part 6 of my deep dive research series will be on Chainlink.
Can the OG altcoin $LINK make a resurgence in 2023??
The purpose of this deep dive series is to analyse a number of popular projects and rank them against a set framework. I outline my DYOR framework below.
As I complete each project, I will update and track scores on my google sheet. You can view for free below.
https://docs.google.com/spreadsheets/d/1mPGbrsSEqBCN4lTVIIfdu3UzhZVqGP6LWMXlJrWJ5RE/edit?usp=sharing
Let’s dive in…..
Price = $7.18
Market cap = $3.5b – Rank 24
ERC token
All time high = $52.7 (-87%)
All time low= $0.148 (+4,595%)
Chainlink is a critical part of the DeFi ecosystem as it connects real world data to blockchain networks using products such as
Price feeds
Verifiable randomness
Proof of reserve
It does this by creating a framework for building Decentralized Oracle Networks (DONs) and ensures that the external information and off-chain computations are reliable and tamper proof.
@defi_naly has a fantastic overview and update of the project to get you up to speed.
A big focus recently is the Chainlink 2.0 whitepaper was released in 2021, promising to lay the foundation for adoption of hybrid smart contracts and further grow the Chainlink ecosystem.
Revenue
The main demand drivers for LINK are related to
Node Operators Fees: Smart contracts are required to pay Chainlink nodes using LINK tokens to obtain access to real-world data and other oracle services
According to Chainlink, there are multiple Chainlink Oracle Networks that have now become profitable from the point of view of dApp fees- very positive. As more dApps adopt Chainlink services, more fees flow to oracle networks.
I can’t find much data on fees/ revenue through my usual sources (token terminal). LINKs lack of value accrual mechanisms has been one of the complaints relating to this project. However, I think Chainlink 2.0 could go a long way to improving this.
7 for Revenue.
Treasury
There is no official treasury listing I could find. However, supposedly throughout 2022 the team had been selling around 1m LINK tokens per weekend for a year to fund development. At today’s prices, that would be around $364m USD- conservative estimate.
Some put the treasury size upwards of $1b+ USD depending on the avg. sell price This sell pressure was a big criticism of the team last year. However, if used well, this treasury could bootstrap some serious growth in the Chainlink ecosystem.
8.5 for Treasury.
Tokenomics
According to coingecko & chainlink, these are the current supply stats
Circulating supply = 508m
Total supply = 1b
Market cap = $3.5b
FDV = $6.78b
Market cap/ FDV = 0.51
$LINK is an ERC-20 token and its primary purpose is to incentivise proper operation of Chainlink DONs. It has 2 main uses
Payment token- pay Chainlink node operators for providing oracle services
Work token- staked by node operators as collateral to provide oracles
The beta version of Chainlink staking (v0.1) went live in Dec 2022 and the pool has already filled (with 22.5m in community pool and 2.5m from node operators). This first staking pool is designed to support the ETH/USD Data Feed on Ethereum mainnet
Initial APYs on the first pool are approx.
7% for Node Operators
4.75% for community stakers
This is a much-needed step forward for Chainlink to help provide value accrual and incentives.
8 for tokenomics.
Locked up funds
As part of Chainlink Economics 2.0, the foundation expects that no more than 5% of the total supply (50m LINK) will be moved into circulating supply through the first quarter of 2023. You can see the current circulating supply at
https://chain.link/circulating-supply
Currently, there are around 50% of LINK tokens in circulation with a fixed supply of 1b LINK. However, the remaining non-circulating supply of LINK is liquid, but held in around 30 or so multi-sig wallets, earmarked for
Oracle rewards
Staking rewards
Expanding services
Support additional blockchains
Develop new oracle services
Other growth initiatives
There are no future unlocks and a fixed cap of 1b tokens which is good. However, I am keen to see how the team transition staking rewards to non-emission-based sources.
8 for locked up funds.
Use Case
Chainlink is the industry standard oracle network and is critical for many of the largest DeFi applications such as Aave, Synthetix, Trader Joe and many more. Impressively, it has enabled over $7 Trillion in value.
TVE is a Web3 metric that is calculated by taking the sum of the USD value associated with each transaction that it has enabled. The project has also recently surpassed 1,000 oracle networks.
Almost everyone can agree that Chainlink has one of the most compelling use cases and utility in crypto.
9 for Use Case.
Roadmap
The implementation of Chainlink economics 2.0 is currently the key focus for the team and involves 4 major initiatives
Chainlink staking
BUILD Program
SCALE Program
Technical innovations
Although no dates are included, the below is the planned roadmap for Chainlink staking. The lack of dates is a bit of a concern, but this is a well thought initiative with a detailed plan to drive long term sustainability.
8 for Roadmap.
7. Team/ funding
Chainlink labs (formerly Smart Contract Ltd.) was founded in 2014 by @SergeyNazarov and Steve Ellis.
Significant contributors include
Sergey Nazarov- CEO
Steve Ellis- CTO
Ari Juels- Chief Scientist @AriJuels
Benedict Chan- VP of Engineering @bencxr
The $LINK token was launched via ICO in 2017 with a $32m hard cap. 1b tokens were released with the following % distribution
35% - Investors
35% - Node operator rewards/ airdrops
30% - Founders and project
There is also a strong community of Link marines across the world as you can see by the strong uptrend in active devs.
9 for Team/ Funding.
Summary
TLDR summary for each category’s score out of 10.
7 - Revenue – Node operator and dApp fees
8.5 - Treasury– Undisclosed but rumoured $350m-$1b
8 - Tokenomics – LINK staking is a game changer
8 - Locked up funds – 50% circulating but no unlocks
9 - Use case – Market leader, competitive advantage
8 - Road map – Chainlink 2.0 rollout is key
9 - Team/ funding – Strong team and funding
TOTAL- 8.2 weighted avg. score
The purpose of this thread is for education and research, not investment or financial advice. The current macro conditions are still very choppy with the risk of recession in 2023 and a tightening Fed so please be cautious out there frens.
Tagging some accounts to follow for LINK alpha and good times.
Appendix- useful links
https://chain.link/circulating-supply
https://chain.link/whitepaper?_ga=2.99157982.1189440856.1674626747-1161793550.1674626747