TL;DR- If it’s a yes or no then yes, Chainlink has competitors. Those competitors have a lot of ground to make up before they’ll be able to catch Chainlink. By ‘catch’ Chainlink, I mean in market capitalization- which is the (price of each coin*number of all coins). It’s how much money the project is worth. Still, oracle cryptos aren’t rocket science and any competitor could come along and steal market share from Chainlink. This wouldn’t stop the growth of LINK’s price- but it would slow that growth down.
I’m a huge fan of real world use cases with crypto. The reason for this is that we’re living in the golden age of crypto shit coins that have very little use case but loads of investment. It’s a lot like the Dotcom boom of the late 1990s- lots of phonies and a few true gladiators in the mix that will stand the test of time. Remember- in 1996, Amazon was just an online bookstore. Now the company’s worth exceeds the GDP of Germany.
Chainlink is one of those OGs. It’s been around since 2017 and has only shown strong growth since.
Have you heard of Chainlink?
Since starting this blog, I’ve spoken to scores of friends and family about cryptocurrency. I’m at the stage where I’m past trying to change people’s minds about the subject. It’s a fools errand- they’ve already made up their minds. But one question I always ask is which coins they’ve invested in or which coins they’ve heard of if they haven’t invested. I usually get the same few answers:
- Bitcoin (obviously)
- Shiba Inu
Despite only being the 14th largest crypto project, Chainlink seems to show up a lot in my conversations. What about Google search? Which cryptos do you think are the most searched for?
It’s incredible how Dogecoin and Shiba Inu have taken over pop culture despite having limited use. Their mere existence goes to show that most of valuation in cryptocurrency today is still speculative.
WTF is Chainlink?
Chainlink is an Oracle Cryptocurrency. Think of oracle cryptos as the Google search engines of the blockchain space. Chainlink fetches real-world data (like exchange rates of USD-EURO, or temperatures) in a decentralized manner.
The premise with cryptocurrency is that everything needs decentralization to avoid manipulation and corruption. Cryptos like Ethereum and Cardano make sure that smart contract and transactions are decentralized. Chainlink makes sure that data gathering is also decentralized.
This means if Euros need to be converted to dollars for a smart contract to execute, Chainlink could query tens or hundreds of different entities and average the price. The result, whatever it is, would be damn accurate. Isn’t that awesome?
Chainlink’s native utility token is LINK, an ERC677 token, which is an extension of an ERC-20 tokens. In case you didn’t know, there are a metric shit ton of ERC-20 token cryptos. The ecosystem of Ethereum is impressive. It’s a reason why I’m still bullish on ETH even after its impressive growth in recent years.
Does Chainlink have competitors?
Yes, but in the same way that Google has ‘competitors’ with online search advertising. There’s Bing, there’s DuckDuckGo and others, but they own such a small marketshare that it’s a near monopoly for Google. The similarity here is that Google owns around 95% of the search advertising market, while Chainlink’s market cap is around 95% of all oracle crypto market cap.
Chainklink’s competitors are going to be those cryptos that you see underneath it in terms of market cap: WinkLink (WIN) and BAND Protocol (BAND). These two have 1/30th and 1/50th of Chainlink’s market cap, respectively.
Here’s the TL;DR of the two biggest competitors to Chainlink:
WinkLink is a gaming and social platform that is blockchain-based. Since gaming and social are not things that Chainlink specifically does, this is an advantage that WinkLink has over Chainlink. WinkLink has been criticized as no more than a blockchain-based gambling app with its casino games. WIN comes in the form of TRC-20 (Tron) tokens or BEP2 (Binance) tokens. WinkLink is technically an oracle crypto, but honestly I don’t see it posing any threat to Chainlink’s dominance.
I would put WinkLink in the category of gaming cryptocurrencies like the PLA token.
BAND protocol was built on the Cosmos (ATOM) network. Conversely, Chainlink is built on top of the Ethereum network. This is valuable because Cosmos is the ‘internet of blockchain’- the project aims to be interoperable with all cryptocurrency networks. This is a good play because oracle cryptocurrencies will experience demand from all cryptocurrency networks with smart contracts, because they will need this decentralized ability to get information. Cosmos and BAND together are far quicker than Chainlink. Picture two search engines- Google today and your Netscape browser in 2003. You’re going to want to use Google, right? Because it’s fast. Cosmos and BAND are fast. This is its competitive advantage.
I see BAND as a serious contender to Chainlink. Even if BAND is only a little successful in stealing some of Chainlink’s market share, it stands to see a big price increase in the long run.
As my B-school profs always said- given enough time and money, any competitor can reproduce what you’re doing.
As always, Guy at the Coin Bureau has a great video review of BAND.
This doesn’t necessarily mean that these projects aren’t more valuable. In fact, since crypto is so speculative right now, it’s likely that they’re undervalued. So why does Chainlink have so much more investment?
Chainlink has at least 1,000 partnerships either in place or pending, with that figure growing everyday. WinkLink has roughly 5-10% the number of partnerships that Chainlink has- it’s a similar story for BAND protocol.
But what the fuck is a ‘partnership’, exactly? In terms of Oracle cryptos, it means that either other cryptocurrencies or private enterprises have agreed to incorporate Chainlink’s technology to solve whatever problems they might have. For cryptos, it’s mainly information for smart contract execution. For private enterprise, it could be a fast, egalitarian and unhackable way to get accurate, uncorrupted data.
Oracle cryptos need to fetch information for smart contract cryptocurrencies. Chainlink cannot survive unless it has a ‘parent’ blockchain to get information for. It needs a customer to perform its services for. WinkLink currently runs on top of the TRON blockchain. The Tron project had a very good run in the previous bull market (2017-2018), but has since dwindled in adoption. For ‘adoption’- think decentralized finance and NFTs. For DeFi- thinking about traditional banking services like borrowing and lending but doing so through a trustless, online, decentralized platform that’s not going to ask you for your ID or any personal information other than your blockchain transaction history.
Conversely, Chainlink runs on the Ethereum blockchain. With every win that Ethereum experiences, Chainlink also experiences a win, since the two are complimentary just like soda and popcorn at the movies. Chainlink has also built itself on Aave and Compound, two huge DeFi oriented projects with market caps a bit smaller than TRON.
What does this mean for Chainlink?
Chainlink’s short and medium-term future are bright. We could see LINK go as high as $100 or more in the current bull run and $1,000 or more in the next. Chainlink has hitched itself to the right blockchains and projects. As John D. Rockefeller learned centuries ago, being a monopoly really pays off.
However, there’s so much more to an investment than its prospects- there’s competition, tokenomics, and network effects. Imagine if Ethereum hits big stumbling blocks- this would throw Chainlink for a loop since its success is tied to Ethereum’s success.
I do hold Chainlink as a small bit of my portfolio because I love the use case. I understand it and it makes sense to me, which definitely isn’t true for a lot of crypto projects.