This is a contribution to the Chainlink guide of the LeoFinance @crypto-guides initiative.
Before we delve deeper into the arguments regarding whether an investor should buy LINK or not, let's first present a brief introduction of the token itself.
What is LINK?
LINK is the native token of the Chainlink protocol and, since Chainlink is actually built on top of the Ethereum blockchain, LINK is actually an ERC-20 token.
Currently, the LINK token can be used for internal payments such as the node operators who maintain the network and for staking, as node operators with a higher stake stand more chance to provide data.
This was only a brief overview and if you'd like to know more about the LINK token or the Chainlink protocol make sure to check out our guide.
Marketcap and price history
LINK currently has a market cap of $11,685,957,735 ranking at #13 among all cryptocurrencies. At the moment of writing, it's trading at around $26 which is just about 50% under its ATH of $52.70 in May 2021.
Should an investor buy LINK in 2021?
Factors in favor of buying LINK
- Even though Chainlink is not alone in the decentralized oracle space, its first-mover status allowed it to build a big network that integrates many different projects and amassed over half a million non-zero active wallets, creating large trade volumes for LINK
- The new architecture for building hybrid smart contracts introduced in the Chainlink 2.0 Whitepaper is bringing a lot of developer activity to the network, which could lead to more innovation, more users and more activity.
- DeFi market is expected to soar even higher over the next few years and some people even believe that it could hit $ 1 trillion dollars by the end of 2022. Since Chainlink is looking to revolutionize DeFi with its decentralized oracle network and hybrid smart contracts, LINK could really benefit from that growth.
- Some analysts predict that the price of LINK could reach values as high as $120 in the next 3 to 5 years.
Factors against of buying LINK
- Competition. Even though Chainlink is the pioneer of decentralized oracle networks other protocols are being developed to compete for users. Some of these are Band, Decentralized Oracle Service, Decentralized Information Asset, Tellor and NEST.
- As described in the brief overview, there are not many use cases for the token yet, other than internal payments and staking.
Conclusion
There are no major red flags for LINK and as the huge potential of DeFi could help to bring a lot of trading volume and increase the token price, LINK could prove to be a solid long-term investment.
Chainlink is attempting to solve one of the main limitations of traditional smart contracts, which is the inability of interacting with "real world" (off-chain) data. If it's able to beat the competition, Chainlink might become one of the biggest names in DeFi.
Keep in mind that this article should be treated as a source of information only and you should always do your own research before deciding to invest your money.