Chainlink’s LINK tokens have quadrupled in price this season to become one of their greatest success stories this season in cryptocurrency markets.
The project’s market capitalization, today the 12th highest one of all electronic assets at $2.7 billion, based on CoinGecko, reflects investor perceptions of Chainlink since the top crypto “oracle” supplier. That means it provides data and prices flows to semi-automated trading and lending systems assembled atop blockchains.
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The purpose is a must in the fast-growing landscape of property fund, or DeFi, that has generated this type of speculative fervor in recent months which assumed money-of-the-future bitcoin has nearly begun to seem passé.
But today Chainlink’s early lead because the dominant DeFi oracle is beginning to draw competitions, and cryptocurrency investors are wondering whether the market industry may be expected for a shakeup. Given the essential role played with oracles in DeFi, users of these decentralized systems stand to profit.
Potential competitions could consist of dedicated oracle upstarts such as Tellor in addition to major DeFi jobs like MakerDAO which are creating their own options. Another information oracle, Band Protocol, established a new variant of its own network around the Cosmos blockchain a month, to prevent congestion on the popular Ethereum system, where Chainlink runs. Others in the area comprise Augur and Nest, according to the industry-tracking site DeFi Pulse.
“I think it’s good that there are different projects that are offering this, obviously,” Niklas Kunkel, mind of backend providers for MakerDAO, stated in a telephone interview.
Chainlink has taken a commanding lead among DeFi oracles, a perch that’s been strengthened with frequent announcements of new partnerships and node operators. Just last week, Deutsche Telekom’s IT subsidiary, T-Systems, announced plans to join Chainlink as a node operator. This past Friday, Korean banks IBK Bank, Shinhan Bank, KEB Bank, NH Bank and CenterPrime announced they plan to provide oracle data for Chainlink.
The project even has galvanized a community around it, and its most ardent supporters are known as Chainlink Marines on social media.
DeFi applications are built using “smart contracts” – strings of computer programming that are embedded into blockchain networks and designed to automate specific functions like lending or cryptocurrency swaps, based on incoming data inputs. There’s no human middlemen as the case of centralized banks and Wall Street trading firms to monitor pricing, so the smart contracts rely on distributed input sources, known as oracles.
Under Chainlink’s protocol, data is aggregated from third parties and then batched into oracle feeds that are streamed out to DeFi systems. Various information providers, mostly from the cryptocurrency ecosystem, give the information as “node operators” and are rewarded with payments in LINK. Many of Chainlink’s oracles have over a dozen participants.
Chainlink’s most popular product is pricing for cryptocurrencies like bitcoin; the platform lists 36 trading pairs on its website.
“If you don’t have data on-chain, you can’t build a contract for a certain market,” Sergey Nazarov, co-founder of Chainlink, told First Mover in a phone interview. “We don’t make contracts. We don’t secure blocks. We don’t secure transactions. We just feed data into various systems.”
But in the fast-moving DeFi industry, where anything resembling an establishment could be years or decades in the making, few competitors are ready to concede.
MakerDAO, the decentralized-lending project behind the dollar-linked stablecoin dai, has provided its own distributed oracles since 2017 and now lists seven price feeds on its website.
DeFi projects including 0x, Gnosis and Kyber Network are using MakerDAO’s oracle feeds as well as contributing to them as third-party data sources, according to Kunkel. Node operators in MakerDAO oracles are chosen and paid in the project’s cryptocurrency, dai.
“When we started building dai, there weren’t any existing oracles that we could utilize,” Niklas Kunkel, head of backend services for MakerDAO, told First Mover in a phone interview.
A newer entrant is Tellor, which uses a complex algorithm, based on the SHA-256 hash function that’s used in bitcoin mining, to assure the integrity of its data.
“Miners compete for the right to submit the data,” Tellor CEO Michael Zemrose said in a Telegram chat.
The rewards for providing data are paid out in Tellor’s native token, TRB. Its price has nearly quadrupled this year, but off of a smaller base: The token’s market capitalization stands at just $16 million according to CoinGecko, a tiny fraction of LINK’s.
At this point, the DeFi oracle market is Chainlink’s to lose.
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BTC: price: $11,196 (BPI) | 24-Hr High: $11,214 | 24-Hr Low: $10,847
Trend: Bitcoin has been struggling to maintain momentum since a quick rush of volatility and a price surge to multi-month highs above $11,300 on Monday.
Since then, the price action has been largely centered about $11,000, with both lower highs and also higher lows setting up a contracting triangle on the hourly chart. Such a pattern atop a prior bullish run ($9,000 to $11,300) is referred to as a bull pennant.
Chart analysts consider a bull pennant as a continuation pattern – one that recharges the bulls’ engines for an extension of the preceding rally. As such, we may see a bullish breakout and a rally toward the resistance at $12,000. A move above the upper end of the pennant, currently at $11,317, is needed to confirm the breakout.
That said, the possibility of the breakout failing to accelerate the uptrend cannot be ruled out, as the 14-day relative strength index is reporting overbought conditions with an above-70 print. In addition, Thursday’s doji candle is signaling buyer exhaustion.
If prices drop below the pennant support, currently at $10,920, a deeper decline toward the former hurdle-turned-support at $10,500 (February 2018 high) may be seen.
At press time, though bitcoin had risen to near $11,200, representing a 0.66% gain on the day.
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