The paper is devoted to the description of Chainlink mechanisms and opinions on their future. More importantly, it concerns the future of cryptocurrency and its expected influence on society in the nearest future. Thus, the topic is timely in connection with the tendency of the world’s switch to informational technology usage in day-to-day life globally and on an individual level.
The topic is prevalent due to its growing usage in the world. The previous research in this field touched on such issues as out-sourcing, off-shoring, and foreign direct investment within a system view of international business (Casson & Wadeson, 2013). The researchers have also examined competition between alternative cryptocurrencies and their differences (Gandal and Halaburda 2014) and their integration with fiat-based currencies and direct use for providing citizens with central bank money (Seretakis 2017).
Regarding the system perspective, the global production system consists of international supply chains, which are the basic building blocks. An individual supply chain for a particular product is a “microcosm of the system as a whole” (Seretakis 2017). From an economics perspective, Chainlink provides some of the advantages of a centralized digital platform – the reliance of the partite ability of participants to rely on a shared network and benefit from network effects (Catalini & Gans, 2019). Additionally, Chainlink helps avoid some of the consequences the presence of an intermediary may introduce, such as increased market power, control over participants’ data, the presence of a single point of failure, and more. Consequently, relative to existing financial networks, Bitcoin or other cryptocurrencies may lower the barriers for new service providers. An alternative monetary policy for individuals that do not live in countries with trustworthy institutions may be an additional function.
As a peculiar technology for digital currencies, the blockchain is a technical solution to the double-spending problem that hitherto had defeated all endeavors to create a noncentralized peer-to-peer electronic cash system. Blockchain deals with this issue using a decentralized database with network-enforced processes based on a proof-of-work consensus mechanism for updating the database (Davidson, De Filippi & Potts, 2016). However, the worth and significance of blockchain do not depend upon the value and prospect of Bitcoin. Instead, blockchain is better understood as a new general-purpose technology in the form of a highly transparent, resilient, and efficient distributed decentralized public database. Such kind of ledger can be applied to the disruption of any centralized system that coordinates valuable information. Blockchain technology is trustless, in other words, it does not require third-party verification. Instead, it uses a consensus mechanism with crypto-economic incentives to verify transaction authenticity, making transactions entirely safe.
According to the theory and practical growing popularity of implementing blockchain technology such as Chainlink into everyday life, it will become an irreplaceable tool for safe transactions in the nearest future. The present discounted value is a stream of cash flows given a specified rate of return, which can reflect Chainlink’s popularity. To be more exact, PV implies that the lower the discount rate is, the higher the future cash flows’ present value. In connection with blockchain technology and cryptocurrencies, this discount rate is reduced to a minimum level. With the assumption of the equality of other conditions, it allows for using the total potential currency value.
Although cryptocurrencies are gaining popularity, they are not likely to become the most common replacement for fiat money. Here I reviewed graphics on the popularity of the Chainlink topic on the Internet in general, which reflect a drastic increase in the number of people becoming interested in it annually. The main reason for this increase is the speed and low cost of transactions and the absence of cross-border transfer barriers. However, according to Senner and Sornette, cryptocurrencies have almost no prospect of success due to their main disadvantage, high volatility (2018). Price stability is a significant aspect of a currency’s reliability and availability for global use, so in this case, Chainlink is not stable enough. On the other hand, there is no doubt that cryptocurrencies will affect traditional finance and change it drastically (Nova, 2021).
To conclude, the role of Chainlink is becoming more and more meaningful with the digitalization of the economy. However, it cannot be referred to as a successor of fiat money due to the number of imperfections of the technology. The primary assumption of this study, which is highly critical, is that any existing currency seems to become not functional enough soon, and thus the global economy is going to require changes.
References
Casson, M. and Wadeson, N. (2013) The economic theory of international supply chains: a systems view.International Journal of the Economics of Business, 20(2). pp. 163-186.
Catalini, C. & Gans, J. S. (2019). Some simple economics of the blockchain. National Bureau of Economic Research, Working Paper.
Davidson, S., De Filippi, P. & Potts, J. (2016). Economics of blockchain.
Gandal, N., and H. Halaburda (2014): Competition in the cryptocurrency market. NET Institute Working Paper.
Nova, A. (2021). Here’s what cryptocurrencies will look like in 50 years according to experts. CNBC.
Senner, R. & Sornette, D. (2018). The holy grail of crypto currencies: Ready to replace fiat money? ETH Zurich.
Seretakis, A. (2017). Blockchain, securities markets and central banking. Working Paper.