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For the last decade, my focus has been investing my own money in stocks. I put a little money into Bitcoin and Ethereum in 2014/2015 out of curiosity, but I had not spent much time studying cryptocurrency.
In recent months, I decided to change course and go down multiple cryptocurrency rabbit holes in an attempt to find value in an industry that is – as of this writing – drowning in nearly 19,000 different cryptocurrencies.
In this article I explain what Chainlink (LINK-USD) is, why it has value in the blockchain ecosystem, and why its token, LINK, could be a great long-term bet. I also address some risks, of which there are many.
Crypto – A Quick Overview
In 2014, Ethereum (ETH-USD) was invented to expand upon Bitcoin blockchain technology to enable the creation of smart contracts by anybody.
The creation of Ethereum spawned new markets – DeFi, NFTs, etc. – that has led to a speculative frenzy in Ethereum’s token, ETH. As of this writing, ETH trades at ~$3,000 per coin and has a market capitalization of nearly $400B, making it nearly as big as Visa.
But like Bitcoin, Ethereum has its own limitations. For example, its transaction processing time is too slow to efficiently accommodate activity on its network. Slow processing time has led to high transaction fees, which has spawned multiple competitors to Ethereum. As it stands today, Ethereum and competitors are in a battle to develop a Layer 1 blockchain that processes transactions as fast as possible.
The more I learned about Ethereum and its competitors, the less certain I became about who could win the battle long term. Smart contract blockchain technology is progressing so rapidly, today’s leader could easily be an afterthought in a few years. Or, it could be that Ethereum and its alternatives will coexist in an ecosystem of interconnected blockchains.
However, none of these battles for Layer 1 supremacy matters when it comes to Chainlink.
