There are plenty of cryptocurrencies for traders to choose from. However, one that’s relatively unknown to some investors is Chainlink (CCC:LINK-USD). Perhaps you’ve heard of the LINK token before, but didn’t have enough information about the crypto to feel comfortable owning it.
Hopefully, today I can provide a basis for you to start doing your due diligence on Chainlink. As we’ll see, this network and crypto have the potential to make a real impact on finance and decentralized finance (DeFi) as we know it.
That being said, it’s also important to know that the LINK token tends to make sharp moves in both directions. Therefore, it’s probably not appropriate for large position sizes.
If you’re willing to proceed with caution, however, then you might find Chainlink to be an enjoyable investment — and even profitable.
A Closer Look at Chainlink
In the world of cryptocurrency, asset prices have been changing very quickly lately. So, don’t be too surprised if the LINK price as of this writing is different from the price when you read this article. In fact, you might need to constantly monitor the price from one minute to the next.
As of midday on May 24, Chainlink tokens were up by around 17% in a 24-hour period and were trading at $25 and change. That should give you an idea of how volatile this asset can be.
Just a few weeks prior to this, LINK hit a 52-week high of $52.88. Thus, there’s the potential for it to double — or to get cut in half — within a short period of time.
Suffice it to say, Chainlink tokens offer the dream of multi-bagger gains, but don’t over-leverage yourself. Moreover, don’t invest until you at least somewhat understand the underlying technology. As I’ve echoed many times, know what you own.
What’s Special About LINK?
Chainlink certainly isn’t the only network that utilizes smart contracts. Yet, this network seeks to take the technology a big step further. As its website explains, the main idea is to expand “the capabilities of smart contracts by enabling access to real-world data and off-chain computation.”
To fully understand how this is possible, we should rewind the clock to 2017. That year, some experts — including Chainlink co-founder Sergey Nazarov — published a white paper explaining the network’s main ideas.
As the paper observed at that time, the traditional blockchains on which smart contracts ran were not able to support “native communication with external systems.” The proposed solution was decentralized “oracle” networks, which could “provide connectivity with the outside world” without the risk of a “single point of failure” — something centralized systems invite.
So, Chainlink’s purpose was to furnish a decentralized oracle network which would allow smart contracts to gain external connectivity. In addition, it could facilitate this through software that powers the “nodes” of the network.
Bridging the Gap
In other words, the Chainlink network serves as a bridge between conventional blockchains and the outside world. That makes it stand out.
Investment-wise, though — as InvestorPlace contributor Mark Hake points out — Chainlink “bills itself as a ‘Defi’ (decentralized finance) application.” So, what makes it especially notable for prospective investors is its potential to disrupt traditional finance.
Analytics site DeFi Pulse estimates that nearly $58 billion is “locked up” in DeFi today, while others estimated $80 billion back in early May. Regardless, both estimates point to Chainlink’s transformative ambitions and that they could possibly prove to be exceptionally lucrative for early stakeholders.
And, as you might expect, Nazarov is strongly bullish on DeFi as well. Nazarov believes that the DeFi ecosystem could even expand to $1 trillion next year.
If he’s right, the sky’s the limit for the LINK token price — at least in theory.
The Bottom Line on Chainlink
Of course, due diligence is key. However, it’s perhaps not necessary to delve into all of the minutiae surrounding oracle networks and decentralized smart contracts in order to take an optimistic stance on Chainlink.
Rather, you only really need to consider Nazarov’s ambitious vision. This has the potential to be an extensive and lucrative network. It also could — for all we know — make an indelible imprint on the world of finance moving forward.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.