It is impossible to imagine the DeFi sector without Chainlink (LINK), which represented a guarantor of the digital infrastructure of decentralized finance. Over the past two weeks, the whole DeFi market surged, promising investors fantastic price gains.
Among the winners were Polkadot, Perpetual Protocol, 1Inch, Uniswap, Sushi and finally Chainlink. But what is LINK's role in this context and why should 2021 continue to offer attractive prospects for Chainlink?
Oracles are the key
Chainlink contributes a significant part to the infrastructure of the other DeFi protocols. Through its Oracles, primarily on-chain data is reliably retrievable for the other protocols. In this way, for example, Chainlink provides rate data and thus enables the correct calculation of rates in the area of borrowing or lending.
In principle, Chainlink also has the capacity to fetch data from one blockchain to another, or even data that is not part of a blockchain at all. Here, supply chain management would be a use case that is outside of DeFi and can definitely benefit extremely from blockchain technologies like Chainlink.
Thus, Chainlink not only has a unique selling point technologically, but also a special position in the market. With each additional project that relies on Chainlink, the network effect strengthens.
Paxos becomes a partner
One of the biggest milestones in the long list of partnerships was achieved just last week. The partnership with Paxos ensures that decentralized services from the US company will also be built on Chainlink in the future.
Paxos offers stablecoins, which the company hopes will be increasingly integrated into the global DeFi ecosystem in the future. These include PAX, which represents the equivalent value in U.S. dollars, and PAXG, a stablecoin whose equivalent value is backed by gold. Unlike many other stablecoins circulating in the market, Paxos has appropriate approvals to operate its own business in the US.
This combines regulatory compliance in the US market with availability in the DeFi ecosystem. Paxos is one of the most important players in the USA. The company is a strategic partner of PayPal and operates the PayPal-affiliated exchange itBit.
While many DeFi products that use Chainlink are considered experimental, Paxos is a partner of distinction and holds an international leadership position. Chainlink will ensure, through its technology and reconciliation, that users of stablecoins can be sure that they are backed by the equivalent amount of gold or U.S. dollars. The fact that Chainlink has become an important part of Paxo's plans has made investors bullish in recent weeks.