Recently, both Contelegraph and Venturebeat reported that the Chainlink cryptocurrency projects shows signs of “pump and dump scam”. This conclusion was based on a comprehensive research done by blockchain research company AnChain.ai. This allegation took a lot of people by surprise because people basically assumed that Chainlink had an accelerated increase in price because of its listing on Coinbase. 

According to Victor Fang, CEO of AnChain.ai,

“We are confident that our research is illustrative of artificial market manipulation as it involves a small number of addresses accounting for a hugely disproportionate transaction volume over a short period of time, and that these transactions were subject to various forms of obfuscation and concealment atypical of legitimate market activity.”

What Is “Pump and Dump”?

According to Cointelegraph, 

“Pump and dump is the name given to a type of microcap fraud, in which the price of an asset — frequently one with low market capitalization and share volume — is manipulated by a coordinated rush of high-volume purchases by a group of actors working in complicity. 

The surge in purchases artificially inflates the asset’s demand, pushing up its price and reeling in unwitting investors: the high-volume purchase strategy is often accompanied by circulating positive “expert” or official statements and/or recommendations online in a bid to further lure in casual traders.”

What is Chainlink?

Chainlink is not your typical blockchain project, nor is it an out-of-chain project. It can be understood as a machine to fix big bugs, that is, to open up data on and off the chain and connect the blockchain to the real world.

What Chainlink does is decentralise the prognosticator:

Connecting the data on and off the chain and connecting the blockchain with the real world, this vision must be connected by smart contract.

To predict a team in a match, the result is losing or winning on the chain, some kind of logic is generally of the project, all the cash to vote, the results of the vote as real data, so as for cash, honest will be rewarded, but if you lie, the data is easily is considered to be very unreliable, there is no letter, scrip value will gradually decline.

However, this application scenario is difficult to implement because:

1. Smart contract cannot determine whether the data sent to the chain is right or wrong;
2. Blockchain cannot obtain a large range of external data presently, in a stable manner.

Chainlink’s Solution

The solution to this problem was to introduce a new feature called oracle, which was designed primarily to provide connectivity to the outside world, but was too centralized.

Chainlink was developed to fill the gap, becoming the first distributed oracle to provide external data for smart contracts.

Chainlink’s objects are transformed from holders of COINS into blockchain data providers that can provide large amounts of in-chain and off-chain data for smart contract execution. It allows any node operator with data feedback and other APIs to offer these to smart contracts in exchange for LINK tokens, and allows these data providers (such as payment providers or service providers) to sell their apic-based services directly to smart contracts in exchange for LINK tokens.

Many people know that star project poca and Chainlink have teamed up to provide a large number of offline data sources and traditional payment services for all the smart contracts on the poca network.

ChainLink x DeFi: Match Made In Heaven?

It is against this context that Chainlink has a natural fit with DeFi. 

A truly fair and self-sustaining DeFi world requires a price predictor that is accurate, fast, unbiased, and resistant to price manipulation

Predictive machine, as the block chain middleware, helps the smart contract connect the data and system under the external chain, and realize the data interaction between the block chain world and the real world. It can be applied in gambling, stable currency, lending, financial derivatives, insurance and prediction markets.

For example, in DeFi lending, Chainlink predictive machine needs to provide price data at the time of loan generation, monitor the margin ratio of encrypted collateral, and alert and trigger liquidation procedures when insufficient margin is detected.

Lending platforms can also use prediction machines to import borrowers’ social and credit and identity information to determine different loan rates.

It is worth mentioning that it is also the official partner of Google cloud. At the beginning of Coinbase pro, LINK ushered in a surge, breaking the curse of “currency price will fall when the main network goes online”.

Chainlink: More Than Mere Hype?

So personally, as this article has illustrated, Chainlink is actually a pretty legit project in spite of the recent allegations of pump and dump. When all kinds of altcoins on the market collapsed after their popularity, it went the other way.

Perhaps, pump and dump syndicates are eying projects with a sound business fundamentals! Watch this space.