‘Link Marines’ Are Making an Obscure Cryptocurrency Red Hot

(Bloomberg) -- While Bitcoin enjoys a resurgence, this year’s breakout cryptocurrency is actually something called Chainlink that has grown to become the world’s fifth-biggest coin by market value.

Chainlink token’s price has increased more than ninefold since the start of the year year to about $6.6 billion. It’s now bigger than Bitcoin Cash, Litecoin or Binance Coin.

The euphoria around Chainlink is due, in large part, to this summer’s fevered activity surrounding decentralized finance, or so-called DeFi applications, the most popular of which let users lend or borrow cryptocurrencies and to speculate via a technique called yield harvesting that often promises short-term returns of more than 100%. Chainlink claims its technology -- which essentially delivers price feeds to DeFi apps -- helps power 95% of all public blockchain derivatives.

The technology “has quickly become the de facto choice” for DeFi applications that outsource their data feeds, according to crypto researcher Messari. What’s notable, however, is that the entire amount of funds users have in all DeFi apps right now is about $6.3 billion -- less than Chainlink’s market cap.

“It makes very little sense to see a derivative of the DeFi space be worth more than the value of collateral present in the system,” said Nic Carter, co-founder of crypto researcher Coin Metrics.

Of course, cryptocurrencies (and stocks, alas) are no strangers to such disconnect: Most tokens’ market value is tied not to practical use, but to whether speculators choose to shout their names from rooftops. And Chainlink has one of the most rabid groups of roof shouters, who even have a name: LINK Marines. No one is sure how the name originated, but other coins have followers with similarly militaristic titles, such as XRP Army. However, ranks of LINK Marines may be bigger than most: They are about 50,000 strong, according to one of the members, Michael Anderson, who says his fund, Framework Ventures, is the largest private token holder of Chainlink.

“What they do is they promote it,” Anderson said. “This is one of the things that’s unique to the blockchain, where the community is very powerful.”

The Marines are flooding Twitter, Reddit, Medium and other social-media sites with messages about the coin. Since early 2019, one such member, ChainLink God, who wouldn’t disclose his real name, has tweeted more than 24,000 times, mostly about Chainlink.

“I am still buying more,” he said on the phone, soon after tweeting that Chainlink is as far ahead of rivals as Bitcoin is of other would-be digital gold coins. Chainlink God said he is a U.S.-based computer-science student who bought most of his Chainlink in 2018.

Many supporters tout hundreds of partnerships that Chainlink talks about, with companies like Alphabet Inc.’s Google.

“We work with them on a weekly and monthly basis,” Sergey Nazarov, co-founder and chief executive of San Francisco-based SmartContract, which got Chainlink off the ground, said in a phone interview. “I did a call with them this week.”

More than a year ago, Google posted a blog about how to use a service like Chainlink to make data from its data warehouse BigQuery available on a blockchain.

“There isn’t a formal partnership or any kind of agreement in place,” said Daniel Gabis, a Google spokesman.

Chainlink gets most of its data feeds from publicly available APIs, Nazarov said. Oracle Corp. blogged about the technology last year. It’s also integrated with the blockchain built by the world’s largest crypto spot exchange, Binance.

Skeptics point out that many oracle competitors are emerging, such as Band. As oracles proliferate, they could become commodities, making it hard for participants to make money, Carter said. There’s also nothing wrong with using a centralized data provider for data feed, he said, adding, “It works fine in traditional capital markets.”

Nazarov said an oracle keeps centralized data-feed providers honest. Chainlink uses a distributed network of so-called nodes to verify data it receives from sources.

Chainlink has been in development for about five years. In late 2017, it had an Initial Coin Offering, ran through a Cayman Islands entity, which raised $32 million. Nazarov declined to disclose how many tokens developers like SmartContract hold or could receive. Nazarov said SmartContract now has more than 45 employees, and is hiring for 30 positions.

In 2018, the project bought Town Cryer, which developed oracle technology, from Cornell Tech. Ari Juels, who helped develop Town Cryer, also co-authored the 2017 white paper outlining Chainlink, in which he has a financial interest. Juels is a professor at Cornell Tech and a technical adviser at SmartContract.

“Chainlink draws together a community of oracle service providers/nodes in a way that is transparent, trustworthy, and standardized,” Juels said in an email.

But that isn’t what is driving all the demand, if Dave Portnoy is an example. The brash founder of a media empire who only recently began touting stocks before buying Bitcoin, Portnoy tweeted “$link to the moon” on Saturday.

©2020 Bloomberg L.P.