Analysis of ChainLink ICO – Decentralized Oracle Connecting Blockchain with Outside Data

Summary

  • Project name: ChainLink
  • Token symbol: LINK
  • Website: https://smartcontract.com/link
  • Whitepaper: https://link.smartcontract.com/whitepaper
  • Hard cap: US$32 million (ICO contributors own 35% of total token supply if hard cap is reached)
  • Soft Cap: No soft cap
  • Conversion rate: 1 ETH = 2,600 LINK in the first 24 hours of crowdsale
  • Maximum market cap at ICO on a fully diluted basis: US$91 million if hard cap is reached
  • Bonus structure: 20% bonus during presale
  • Pre-sale / white list available: Presale is over
  • ERC20 token: Yes
  • Timeline: September 19, 2017 at 15:00 UTC for 1 month (please refer to ChainLink’s website for most up-to-date information)
  • Token distribution date: Immediately after the end of crowdsale
Watch our video summary (video is 7:30 long)

Project Overview

What does the company/project do?

Most smart contracts that seek to mimic/replace securities, insurance and most other financial agreements, will require access to off-chain resources such as data feeds, APIs and any other sort of resource which exists outside of a blockchain network.

Oracles are the necessary middleware that provide this access/functionality to Ethereum smart contracts. With oracles, it is possible to provide programmable contracts that do payouts between two parties once certain criteria have been met, without involving a middleman.

ChainLink has developed oracles that can allow a smart contract creator a way to interact with different data providers, payment solutions, and the traditional banking system. For example: 

  • Smart contract securities need data feeds about market prices and market reference data e.g. Interest rates. They commonly also need to pay into existing bank accounts for many of their users, which can only be done through a ChainLink that connects to the existing banking system.
  • Smart contract insurance needs data feeds about IoT data related to the insurable event in question e.g. was the warehouses magnetic door locked at the time of a breach, was the companies firewall online, did the flight you had insurance on arrive on time, etc. Insurance products also commonly want to pay out in formats that users already want to receive e.g. USD to the end-users bank account. 
  • Trade finance smart contracts commonly need GPS data about shipments, data from supply chain ERP systems, and customs data about the goods being shipped; all of this data needs to be added to the smart contract by a ChainLink. Many trade finance transactions are still currently settled in fiat currency, which they can pay in using a ChainLink.

ChainLink’s LINK Network is the first decentralized oracle network which allows anyone to securely provide smart contracts with access to key external data, off-chain payments and any other API capabilities. Anyone who has a data feed, useful off-chain service such as local payments, or any other API, can now provide them directly to smart contracts in exchange for LINK tokens.

ChainLink supports Ethereum, Bitcoin, and Hyperledger. As ChainLink is a decentralized network, users can receive the rewards of decentralization, trust, and immutability from using ChainLink oracle.

Below is an image capture of a ChainLink oracle.

ChainLink oracle sample

Source: https://create.smartcontract.com/#/contracts/cc3ea3c76b5a60f171e0eaf223146f34?tab=info

Here is a video interview of ChainLink’s CEO (video is 55:25 long): 

How advanced is the project?

ChainLink’s parent company, SmartContract, was founded in September 2014

It was selected as a "2017 Blockchain Applications Cool Vendor” by Gartner. 

SmartContract has a partnership with the interbank messaging platform, Swift. They completed a phase one proof-of-concept in June 2017 where SWIFT is a paying customer of ChainLink.

What are the tokens used for and how can token holders make money?

LINK tokens are used to pay data providers, ChainLink node operators, payment providers, and other online service providers for their services. Smart contract users will compensate the data providers that they use with LINK tokens.

The vast majority of smart contracts need external data to execute. Currently, it is very challenging to get these data, which is why ChainLink exists. The token compensation system will both guarantee accurate data in addition to increasing decentralization across the network.

As LINK tokens are used as a currency on the ChainLink platform, the more usage the ChainLink platform has, the more valuable LINK tokens should be.

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Team

ChainLink has a team of 2. Below are the bio of the team members:

Sergey Nazarov, Co-founder and CEO – Serial entrepreneur, veteran in the blockchain space. Prior to starting SmartContract, he was the founder of Secure Asset Exchange, an exchange network similar to ShapeShift, and CryptoMail, a decentralized email service.

Steve Ellis, Co-founder and CTO – Serial entrepreneur, having worked together with Sergey Nazarov on Secure Asset Exchange. Previously worked as a software engineer at Pivotal Labs.

ChainLink has a strong team of advisors, including Ari Juels, Professor of Computer Science at Cornell Tech and Director of IC3, Andrew Miller, Associate Professor of Computer Science at the University of Illinois and an advisor to Zcash and Tezos, and Hudson Jameson, one of the key members of the Ethereum Foundation

Hudson Jameson has written a blog post explaining his decision to be an advisor of ChainLink.


Opportunities

  • With oracle, blockchain technology and smart contract will become vastly more useful. People would be able to execute different kinds of contracts in a trustless manner. I believe ChainLink’s oracle will help blockchain technology reaching mass adoption. 
  • ChainLink’s partnership with SWIFT, which is used by over 11,000 banks worldwide, allows ChainLink to easily partner with other financial institutions going forward.
  • The team has been working together in the blockchain space for a few years already and came up with functioning products in their previous venture.
  • Network effect is present because the ChainLink platform is more useful when it is the go-to source for blockchain data feeds, so that users don't need to go to several sources for different types of data.

Concerns

  • The team has not been very responsive to community's questions for the past two weeks. This may drive some potential participants away as they may prefer a team with more transparency.

Conclusion

Overall, I like this ICO both for flipping and long-term potential. This is one of the projects that can push blockchain forward and allow smart contracts to be actually “smart”.

My thoughts on buying the tokens for flipping and investing for the long term are as follows:

For flipping

Good because 1) the project has a strong team and advisors, 2) the partnership with SWIFT legitimized ChainLink and provided traction, 3) tokens will be distributed immediately after the end of crowdsale, and 4) a portion (amount unspecified) of the hard cap is already sold in presale.

For long-term holding

Good because 1) ChainLink is solving a real and highly lucrative problem with tons of use cases, and 2) the project has traction already with SWIFT being a paying customer.


For more information about the ICO, please visit the following links:

Website: https://smartcontract.com/link

Sergey's presentation at EDCON in February 2017: https://www.youtube.com/watch?v=DrlL5v78FtA

TABB Forum interview with Sergey in November 2016: http://tabbforum.com/videos/powering-smart-contracts-with-oracles-sergey-nazarov-smartcontract

Sergey Nazarov's presentation on ChainLink in August 2017:

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