Introduction
Chainlink is one of the most up-to-date technologies that are likely to change the world in the future. Blockchain is a “shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network” (“What is Blockchain Technology?”). Moreover, according to IBM, each object with measurable value can be sold and traced via a blockchain network (“What is Blockchain Technology?”). The paper is devoted to the discussion 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 and Wadeson 165). The researchers have also examined competition between alternative cryptocurrencies and their differences (Gandal and Halaburda 8) and their integration with fiat-based currencies and direct use for providing citizens with central bank money (Seretakis). Summarized, the results of these and other studies on the topic reflect the condition of the modern economy, the role of blockchain technology in it, and the potential ways of its development. Some of the aspects of Chainlink’s processes and principles, reasons for its importance, and future forecasts are described below.
Blockchain Algorithm Explanation
Analyzing Chainlink and blockchain technology, in general, requires having a deep and thorough understanding of what they are. Therefore, I would provide a description of the Chainlink scheme and explain its processes, emphasizing the difference from traditional transactions (Nova). Blockchain is a tool that ensures the maximum speed and quality of the information flows, which are especially important for business and governmental processes (Nova). What is more, blockchain technology provides visible transactions without any chance to hide information or interpret it so that it loses the initial meaning. All the details of transactions made via blockchain are unremovable and perfectly traceable, so falsification is not possible. Therefore, its potential implementation on the level of countries and international transactions can be characterized by clarity and consequent trustworthiness of transactions and, as a result, international relations.
One more important detail about blockchain and Chainlink is its technology, or to be more exact, algorithm. Among the blockchain’s key elements, a distributed ledger technology provides the foundation for all the network participants with access to the records of transactions (“What is Blockchain Technology?”). This technology is peculiar for avoiding duplication of the information about transactions, meaning that the performance of the blockchain is faster and more optimized than the transactions mechanisms commonly used now. Consequently, the contracts’ completeness would grow drastically up to one hundred percent because no interferences or obstructions would be faced by the system’s participants in their intention to make a transaction.
Meanwhile, these records done by the system of blockchains have to follow some rules to have the potential to bring benefit. The second feature of blockchain that makes it unique and valuable is the immutability of these records, meaning that no network participants can avoid them (“What is Blockchain Technology?”). Hence, the level of fairness of all the interactions in a blockchain system is growing, and the risks related to the asymmetry of information are minimized.
Furthermore, the requirements of the modern world with its growing use of information and spreading of digitalization are even more comprehensive and include some detailed ones. For example, blockchain uses a so-called “smart contract” to automatically fasten transactions (“What is Blockchain Technology?”). This means that the participants do not have to think about the speed of their transactions and following the conditions is checked by the system, which makes all the transactions much more accessible and pleasant.
Blockchain technology does not require the participation of a third party in the transaction. Davidson et al. claim that blockchain is “trustless” because of this (3). Instead of using the verification of a third party, blockchain provides consensus mechanisms that allow to “verify the authenticity of a transaction” (Davidson et al. 3). Consequently, the safety of a transaction increases, even if obstacles for participation are introduces by third parties. Therefore, Chainlink contributes drastically to providing the opportunity to make transactions in any conditions, even those that are not suitable for such processes.
Types of Blockchain Networks
The types of blockchain networks depend on the way they are built. At the moment, there are available types of blockchain aimed at reaching different goals. The first one is a public blockchain network, implying unlimited access for anyone. An example of this type of network is the most popular cryptocurrency, Bitcoin. This network type has s negative side reflected, for instance, in need for “substantial computational power,” as well as the absence of privacy and a comparatively weak security system (“What is Blockchain Technology?”). The second type is a private blockchain network, which is quite similar to the first one. However, there are some restrictions, such as the fact that the organization controls the network participants (“What is Blockchain Technology?”). Therefore, the positive effects for the business increase – there is more trust between the personnel, and it contributes to creating a solid corporate culture.
The third type is permission blockchain, which also has a lot in common with a public blockchain, which can be a permission one. Organizations with a private blockchain usually accompany it with a permissioned one (“Chainlink: Overview”). This type implies that an invitation is required to access the network and participate, while the types of transactions for each member are controlled (“What is Blockchain Technology?”). The fourth and most large-scale type is consortium blockchain, which multiple businesses can use. Consortium blockchain provides the same restrictions as the third type. However, it is more suitable for use in a group of organizations as they meet the needs of companies with personnel’s shared responsibility (“What is Blockchain Technology?”). Therefore, different types of blockchain seem to cover the need for any transactions, security level, and freedom of permission that various types of business may have.
System Perspective of Chainlink
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 25). 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 and Gans 20). 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.
Opinions on Blockchain Future Role
People’s opinions have never been the most reliable and trustworthy source of information. However, the views of economists and people who work in finance are essential for understanding the real potential of blockchain to enter most spheres of life. Ivory Johnson, a certified financial planner, states that cryptocurrencies will replace fiat money because they provide the opportunity to “efficiently transfer payment across borders with little to no cost, delay or foreign currency fluctuations” (Nova). Dragan Boscovic, founder and director of the Blockchain Research Lab, says that the Central bank authorities understand that blockchain and cryptocurrency are going to become mainstream in the next decade (Nova). Frederick Kaufman, an author of a famous book on currency history, reckons that currencies we are used to would have more in common with crypto than with precious metals, as initially was (Nova). People who work with technology, experts in currencies and finance, and the state consider cryptocurrency a notable feature of the nearest future. That is why humanity has a reason to treat it with the understanding of its potential to alter traditional structures and relations.
Consequences of Chainlink Implementation
Blockchain technology has a wide variety of consequences beneficial for the system’s participants. For example, IBM suggests that one can be sure that the received data is reliable and the blockchain networks can be shared only with the members of the blockchain (“What is Blockchain Technology?”). Moreover, recorded transactions cannot be deleted to ensure the system’s clarity (“What is Blockchain Technology?”). Finally, blockchain allows eliminating “time-wasting record reconciliations” due to the automatization and high speed of transactions (“What is Blockchain Technology?”). Undoubtedly, there are more benefits that are consequent for the mentioned above, but these are the strongest arguments for Chainlink and blockchain technology in general.
Chainlink and blockchain technology, in general, can become the cause and the most potent trigger for future changes in a business’s structure, performance, and perception. Such a significant role of blockchain is explained by its ability to rebuild traditional business communications (Casson and Wadeson 173). This, in turn, might lead to a swift in business departments’ vitality in making decisions by the company’s top management (Casson and Wadeson 174). According to Casson and Wadeson, “in the long run, certain types of firm may no longer be viable because of changes in the global system,” meaning that the market would obtain new barriers (184). In other words, the Chainlink effect on the market would be reflected in the intensification of competitiveness and its justification, which would most certainly lead to a vast number of firms exiting the market.
The most notable effect that Chainlink and blockchain technology in general traces is lowering the prices of particular actions implied in the interaction between business units, companies, and government, or ordinary people. According to the research conducted by Catalini and Gans, blockchain technology affects “the cost of verification, and the cost of networking” (20). More particularly, blockchain technology reduces the expenses on “running decentralized networks of exchange” and provides an opportunity to build ecosystems including elements of networking and shared digital space (Catalini and Gans 21). The most attractive feature of blockchain technology, in this case, is that no operators are required for maintaining and providing transactions (Catalini and Gans 21). That is why extra expenses are not needed, and the agents are entirely self-sufficient in their financial operations. The only complex issue would be the fact that the national economies of most countries are still not ready for such drastic changes, and it would take time to transform the economic models. Therefore, Chainlink has a chance of becoming the most popular resource for making transactions in the nearest future, when the state policies would create a suitable legislative framework for the system.
Continuing the discussion of the price decrease, this effect would have an even more significant repercussion. Chainlink allows startups to be the direct competitors of firms that have been marketing for a long time because platforms of the system have no control over themselves (Catalini and Gans 21). Moreover, nobody has control over these systems so that the operations can remain anonymous. The development of the system would not pursue aims that would have an intentionally negative effect. The mechanism provides a vast share of rents from network effects between the participants, making the result mentioned above possible.
What is more, Chainlink reveals new perspectives of approaching economic and social processes. Davidson et al. claim that blockchains are “a technology for creating and executing the types of rule-systems,” which emphasizes the universality of this technology to be used in various spheres (6). More particularly, the coordination of social and economic processes can be provided through the Chainlink system as well as simple transactions. This does not mean that blockchain has to restructure the institutions that perform the coordinating function now, but it would be an effective and valuable support system. In other words, although economic coordination is commonly perceived based on interactions between different organizations and institutions, it is not limited by those formations.
With the expansion of the essentiality of digital instruments and systems in the lives of people, society, and the state, there is no doubt that new technologies would have a more substantial effect on these categories. Although it may seem far from reality, it is not true because governmental decisions force the implementation of digital systems. In other words, the changes are already taking place, although their consequences are not visible yet. The negative side of the issue can be reflected in the disproportionate impact of blockchains if they are implemented too widely to control them and adapt the economy to them. Therefore, as soon as the goal of spreading the features of the digital economy is reached on the level of a country, there would be no way back from new measures, including using new currencies or blockchain technology.
Chainlink Solving Problems
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 processes based on a proof-of-work consensus mechanism for updating the database (Davidson et al. 2). 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.
Financial markets and financial stability have been affected drastically by the recent economic crisis. Seretakis claims that “financial crisis and the flaws exposed in the previous regulatory framework led to a radical overhaul and strengthening of financial market regulation”. This statement reflects the power which regulations have over the financial market now. Therefore, distributed ledger technologies are applicable to regulating the financial market and are beneficial due to their automaticity and independence. Blockchain and Chainlink, in particular, can substitute for the need to control financial markets’ processes, while implementing the same system to governmental structures can change the relations between the state and society altogether.
One more peculiarity of the blockchains’ effect is related to its nature and the patterns of the transactional system. If the transactions cost nothing, there would not be any inconsistencies, turbulence, and uncertainty; additionally, there would not be any incomplete contracts, which means that they will be considered market contracts. All of these are possible because blockchain and Chainlink, in particular, reduce the expenses of the participants to the minimum level due to using automatic systems instead of employees for maintaining the performance. Hence, the effect that the blockchain system can have over the world’s institutional systems is broad and robust due to the prevalence of peculiarities that exceed the functionality of all the existing instruments.
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. Together with the assumption of the equality of other conditions, it allows for using the total potential currency value.
Cryptocurrencies: Future Development
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 (12). 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). In other words, the predictions are not trustworthy enough currently to rely on them entirely while discussing the future of cryptocurrencies because the changes are too unpredictable and fast in the modern world.
Regarding the global consequences of implementing cryptocurrencies, some issues are going to complexify the process. To be more exact, Senner and Sornette highlight that cryptocurrencies “appear to resurrect outdated economic theories” (14). For example, production does not depend on cryptocurrency, and cryptocurrency does not depend on anything. Therefore, the needed amount of money in the economy that replaces fiat money with cryptocurrency is not precise, as well as their origin. Accordingly, the mechanisms of relating production to cryptocurrencies should be created. On the other hand, this approach only implies substituting one type of money with another one, which does not reflect innovations and progress because the traditional system is maintained. Hence, the alterations that the economy is going to face are more prominent than is assumed at first sight and should be fundamental, relevant, and almost revolutionary.
Nevertheless, the effect of cryptocurrencies on the world’s economic processes and economic system, in general, is considered to be more positive than negative. For instance, Radivojac and Grujić emphasize that cryptocurrencies are irreplaceable in specific situations, such as the need for hawala money transfer in their study (70). Mainly, cryptocurrencies work in situations when traditional ways of transferring money are not available, for example, when a visa expires and the person remains on the territory of a foreign country (Radivojac and Grujić 70). Moreover, the results of this research suggest that “steps forward will take place in B2B as well as in B2G segments” (Radivojac and Grujić 71). With the already mentioned effects of blockchain and cryptocurrencies related to the absence of transactions supervision (in other words, their anonymity), and the reduction of operational expenses, cryptocurrencies are likely to reach success.
Concerning the global overview of the future of cryptocurrencies, there is one more exciting opinion. Senner and Sornette suggest that every monetary system is destined to fail (17). Regarding crypto-monetarism, there are various reasons for it, including difficulties with distributing money and controlling their amount in the economy (Senner and Sornette 18). One more issue that cannot be left unnoticed is price stability, which the wide use of cryptocurrency would question because of the absence of prices and inflation control (Senner and Sornette 18). On the other hand, all the existing analyses of this phenomenon are undertaken concerning the present conditions of market economy, governmental interactions, and international trade. This is why despite the accuracy and width of these analyses, the forecasts on the destiny of cryptocurrency in the future cannot be reliable, as the technology would require a completely new system of interactions.
Competing the Traditions
No doubt, despite the complexity of the issue of implementing blockchains in people’s everyday life through the structures they face daily, there is a simple condition that can ease the process. According to Davidson et al., this condition is the ability of blockchains to “eliminate opportunism” (9). Then, the standard structure of any organization based on hierarchy and all the institutions that the society has created would be completed by blockchain due to their irrelevancy in comparison to it. Opportunism implies taking advantage of particular conditions in an egoistic way, without thinking of one’s actions’ impact on others. Then, its elimination is only possible when the mechanisms of the chosen economic system are apparent.
Moreover, the fairness of the system should be evident for every system’s participants. The issue of opportunism affecting the performance of organizations and institutions can be overcome by implementing blockchain because it eliminates the need for trust between people, as the system’s processes can fully replace it. Thus, trust is provided by blockchain technology, and people can rely on it since it does not involve human factors. This is a significant step in relations between people and artificial systems because the level of interconnection rises drastically. Consequently, it may be assumed that future changes would be led and triggered by this stage of increasing the closeness of communications and interactions between people and blockchain.
For instance, everybody who uses one of the blockchain systems should be sure that their private information is safe if stated in the blockchain conditions. One more example is that every transaction should be proven and recorded so that the blockchain participants can prove anytime that the transaction has been made. This specialty also highlights the necessity of a closer interaction with innovations because they can provide humanity with sources that people cannot accurately guarantee. Therefore, the system should provide people with the necessary information to make the change comfortable.
Chainlink is a system that is most certainly going to reach success. Chainlink is not only a communicational technology that improves transactions’ algorithms; it is a whole new institution. Although blockchains cannot be formerly named organizations because they do not comply with the criteria, they are strong competitors for organizations (Davidson et al. 11). Moreover, blockchains have similar features with markets – both facilitate the exchange, but the functionality of blockchains is more exhaustive in this case since it stimulates transactions, which are more complex (Davidson et al. 11). Probably, the existing institutions would not be concerned as reliable as the blockchains would be, or the frequency of addressing them would decrease notably because of the Chainlink’s availability and comfort. Therefore, blockchains’ functionality allows them to be a distinct institution and compete with organizations via the superiority of contracts and with markets via the excellence and width of functionality.
Blockchain as an Institutional Technology
Although most economists still perceive blockchain as a technology that can help deal with some bureaucracy-related issues and optimize the time and effort people give while performing some procedures, this is not the limit. Some economists reckon that blockchain’s capacity is much more comprehensive than this, and it has the potential to rebuild the whole system of economic relations that exists now. For example, Davidson et al. state that the existing business and government would adapt to blockchain and compete with it soon (10). Therefore, Chainlink cannot be perceived as a fundamental tool helpful in reaching the previously set goals; it is undoubtedly broader and more powerful.
Modeling the Economics of Blockchain
The role of a decentralized ledger in the future can be surprisingly substantial. Modeling the economy of blockchain may be a “decentralized ledger running down a leaning curve” (Davidson et al. 3). Otherwise, if the cost of this technology decreases, it would become a direct competitor of the commonly used centralized ledger, and as a result, the technological substitution would occur. Although this process is almost inevitable, there is most certainly no chance for it to follow a linear pattern (Davidson et al. 3). Introducing the technology to the market and institutes would require studying blockchain from the perspective of compliance with economic theories and the possibility of expanding the use of cryptocurrencies.
There exists a suggestion to create and develop a new branch of science related to cryptocurrency. This branch would be named cryptoeconomics and would study and design protocols applicable to cryptocurrencies and their implementation in social and governmental systems (Davidson et al. 4). In other words, this would be a science researching the ways of adapting cryptocurrency to the current economy and adapting the economic processes and patterns to comfortable use of cryptocurrencies. Creating a new branch of science would be extremely useful because it would allow us to deal with the difficulties faced during blockchain implementation to various spheres more quickly and effectively.
There is a different approach to creating a blockchain economy, which implies focusing on the decentralization that the technology provides. Davidson et al. state that “the basic developmental pattern in evolving complex systems is centralization to decentralization” (5). In addition, an undoubted advantage of decentralization is that the “dynamic efficiency,” meaning that the more freedom the system has, the more opportunities for development it gets (Davidson et al. 5). Centralization becomes irrelevant at some stage of the evolution of government and society because it starts to require more than it can give, triggering “inflation, corruption and rent-seeking” (Davidson et al. 5). Therefore, the economy needs an alternative with reduced costs and extended functionality to continue improving the transactions system. Blockchain is suitable because it additionally provides an incomparable level of safety for the transactions. The closeness of this technology to the market, as it is decentralized too, makes it even more relevant to use as a substitute for the existing transaction procedure.
Conclusion
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. In this scenario, national economies would be altered in a way that would let them change traditional transactions with operators to a more attractive format that blockchain technologies suggest. Consequently, if the world accepts the superiority of blockchain and Chainlink, the transaction procedure that most people are used to now would be changed drastically.
Although the speed of innovations and general scientific development is incomparably fast and is getting faster every year, there are still limitations for every innovation that should be considered. These limitations are mainly related to the unreadiness of the world, its infrastructure, and traditional processes to the upcoming changes. For example, it is reflected that most of the world’s regions do not know about digitalization and have no access to the digital economy, although these are global tendencies. Therefore, despite innovations that can drastically change the world for the better, there are not enough suitable conditions for these changes. Hence, humanity needs time to prepare to enter a new era of technology permeating people’s everyday lives.
Works Cited
Casson, Mark and Nigel Wadeson. “The Economic Theory of International Supply Chains: A Systems View.” International Journal of the Economics of Business, vol. 20, no. 2, 2013, pp. 163-186.
Catalini, Christian and Joshua S. Gans. “Some Simple Economics of the Blockchain.” National Bureau of Economic Research, Working Paper, 2019.
“Chainlink: Overview.”Chainlink Website.
Davidson, Sinclair et al. “Economics of Blockchain.”SSRN Electronic Journal, 2016, pp. 1-23.
Gandal, Neil and Hanna Halaburda. “Competition in the Cryptocurrency Market.” NET Institute Working Paper, 2014.
Nova, Annie. “Here’s What Cryptocurrencies Will Look Like in 50 Years According to Experts.” CNBC. Web.
Radivojac, Goran and Miloš Grujić. “Future of Cryptocurrencies and Blockchain Technology in Financial Markets.” Journal of Contemporary Economics, vol. 1, no. 1, 2019, pp. 56-75.
Senner, Richard and Didier Sornette. “The Holy Grail of Crypto Currencies: Ready to Replace Fiat Money?” Journal of Economic Issues, vol. 53, no. 4, 2019, pp. 966-1000.
Seretakis, Alexandros L. “Blockchain, Securities Markets and Central Banking.” Working Paper, 2017.