As we have seen in recent months, Bitcoin (BTC) and other cryptocurrencies are moving higher at very fast rates. This shows there is a growing interest in virtual currencies, including altcoins. This can be called an altcoin season.
When altcoins grow faster than BTC (or at least follow its growth), we are not in a Bitcoin bull run only, but also in an altcoin season. An altcoin season can be created due to different reasons, including BTC investors moving their funds to altcoins or retail investors searching for higher returns.
Chainlink (LINK) is one of the altcoins with the largest potential to continue moving higher in the coming months. The main question remains whether Chainlink will be able to outperform Ethereum in the first altcoin season in 2021.
What is Chainlink?
Chainlink is one of the most innovative blockchain and cryptocurrency networks in the market. Chainlink works as a decentralized oracle network that offers tamper-proof and reliable inputs and outputs related to complex smart contracts on blockchain networks.
By using decentralized and trusted nodes, it is possible to provide highly accurate data or APIs to smart contracts. Blockchain networks cannot get the necessary information from the outside to execute smart contracts. This is why Chainlink is so important.
Using a flexible framework, Chainlink collects and retrieves data from APIs. This information is then connected with blockchain systems in the market and helps smart contracts execute with high accuracy.
The LINK cryptocurrency is used to pay for the different services offered by the Chainlink network. As Ethereum works with Ether (ETH), Chainlink uses LINK. Most platforms in the market have their own digital asset. In recent years, LINK became one of the most useful and popular virtual currencies in the world.
What Problem Does Chainlink Solve?
Chainlink aims at solving a wide range of issues faced by blockchain networks. First of all, Chainlink allows smart contract networks to receive information from outside sources. This increases the number of use cases of different distributed ledger networks. While before they were only able to rely on a few datasets, with Chainlink the opportunities are much larger.
Secondly, by using Chainlink’s decentralized oracles, blockchain networks can solve reliability issues offered by using centralized solutions. Blockchain networks then use the information provided by the oracles and automatically execute the smart contracts.
Thirdly, blockchain networks were much simpler in the past. They were only able to rely on a few efficient and secure data points. With Chainlink’s oracles, the opportunities for smart contracts are much larger.
Smart contracts can receive very complex and valuable data to be executed. Once they get the information they will be able to automatically execute. Developers have now the possibility to create new smart contracts connected to Chainlink Oracles.
If we talk about investments, LINK could be a great cryptocurrency to help investors add more value to their portfolios. Thus, Chainlink helps the problem of diversification for some investors that want to add more risk to their investments.
How Are Ethereum and Chainlink Connected?
Smart contracts are agreements created through coding that get automatically executed once certain conditions are met. These conditions must be accurate. If a smart contract follows misleading data, it could end up triggering a set of other smart contracts and harming users.
The smart contracts on the Ethereum network are deployed using the Ethereum Virtual Machine (EVM). The EVM allows developers to run their smart contracts on top of the Ethereum blockchain. Once the smart contracts are deployed they can start gathering information from outside sources using blockchain oracles.
Let’s use a clear example. A company has deployed a set of smart contracts on top of the Ethereum network. They rely on outside information to verify external events. For example, they may need data about prices, shipping information, or the temperature of an object.
By using reliable channels, Chainlink provides smart contracts with the necessary information they need in order to be executed. In this way, they receive secure and accurate data.
Does it Make Sense to Invest in Chainlink?
Chainlink could be a great investment to those that want to diversify their portfolios in the cryptocurrency market. If you are an investor that has Bitcoin, Ethereum and Litecoin, you could expand your portfolio and add LINK to it.
However, I’m not a financial advisor or investor. This is just for educational purposes only. Never invest more than what you are able to lose.
That being said, LINK has become one of the largest cryptocurrencies in the world. This altcoin is expected to continue expanding in the future. As smart contract networks, including Ethereum, continue growing, LINK could be one of the leading altcoins in the market.
Ethereum is currently the second-largest blockchain network in the world. With a more mature market and new companies deploying their solutions on it, Chainlink will certainly become a key player offering accurate and reliable smart contracts. In addition to it, having a digital asset that has a lot of upsize potential is essential if you consider to invest in Chainlink.
How high can Chainlink (LINK) go in 2021?
Chainlink all-time high was registered a few months ago in August 2020. The virtual currency surged to almost $20 per coin. A few years ago, Chainlink was traded below $1. 2019 was a very positive year for the virtual currency. Chainlink surpassed $3.6 per coin and the bull market continued until now.
In BTC terms, LINK has also been growing over the last years. However, in recent months, BTC outperformed LINK. The future is open and LINK could surpass its previous all-time high close to $20.
Especially in an altcoin season, the virtual currency could move higher and outperform other coins. Nevertheless, we are not sure what can happen to it or to the entire cryptocurrency market.
Virtual currencies are very volatile and tend to experience times in which their value moves downwards for long periods of time. This is what happened to Bitcoin between the end of 2017 and the beginning of 2019. If you invest in LINK you should take that into consideration.