08-08-2020, 06:23 PM
Chainlink analysis - my thoughts and research
<!-- SC_OFF --><div class="md"><p>Disclaimer: no rule breaking intended. No price manipulation intended. I only want to share verifiable facts/links and my analysis. If I am doing anything against the rules please let me know and I will do my best to fix it ASAP. I trade crypto, including LINK, and I’ve both made AND lost money from both going long AND short on LINK over the last 12 months. I am currently short on LINK, to an extent that I can comfortably absorb my losses if the market proves me wrong. This is not investment advice; this is just for my own record and to start a discussion for anyone who might want more transparency around LINK.</p> <p>This post is for my own organization as much as anything else. I just got my laptop fixed so will also be putting this into a more digestible format soon.</p> <p><strong>LINK wallet addresses</strong> This is one LINK address whale with over 6 million LINK. Looks like some of the funds end up on a Turkish exchange Paribu. <a href="https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xc6bed363b30df7f35b601a5547fe56cd31ec63da">https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xc6bed363b30df7f35b601a5547fe56cd31ec63da</a></p> <p>If you trace chainlink oracle funds to their source, you can find some of the original addresses. Some of these early on (around 1000 days ago) were linked to AfroDex labs, which looks like now doesn’t work. <a href="http://afrodex.net/#!/trade/AfroX-ETH">http://afrodex.net/#!/trade/AfroX-ETH</a></p> <p>It looks to me that most of the funds that the oracle nodes pay out to their data providers come from the original chainlink wallets and not from end users. I wish I had a programmatic way to interact with etherscan.io or even the eth blockchain directly so I could tally it all up and put all LINK’s activity into numbers.</p> <p><strong>LINK overall transaction, volume, and tx fees</strong> A typical aggregator node tx (payout?): <a href="https://etherscan.io/tx/0xef9e8e6dd94ebe9bbac8866f18c2ea0a07408ced1aa77fa04826043eaa55e772">https://etherscan.io/tx/0xef9e8e6dd94ebe9bbac8866f18c2ea0a07408ced1aa77fa04826043eaa55e772</a> This is their ETH/USD aggregator paying out 1 LINK to each of 21 addresses. Value of 21 LINK ~= $210. Total eth tx fees: .233 ETH (~$88.5, ~42% of the total tx value. If LINK was $4.2 instead of $10, the tx fees would be 100% of the value of the tx). Transactions like this happen every few minutes, and the payout amounts are most often 0.16, 0.66, 1.0, and 2.0 Link.</p> <p><strong>LINK overall activity:</strong> This is slow to do manually by hand. I hope I will get my laptop working so I can automate and get a much larger sample.</p> <p>Chainlink’s node/job listing site, <a href="https://market.link">https://market.link</a>, lists 86 nodes, 195 feeds, 801 jobs, ~1,080,000 job runs (I can’t tell if this is over the past 2 months or 1.5 years). Only 20 nodes have over 1000 job runs, and 62 nodes have ZERO runs. Usual job cost is listed as 0.1 link, but the overall payout to the nodes is 10-20 times this. The nodes then cash out usually through a few jump addresses to exchanges. Some quick maths: (being generous and assuming it’s 1mil jobs every 2 months = ~6mil link/year = $60,000,000 revenue a year. This is the most generous estimate towards link’s valuation I’ve found so far. If we ignore the below examples where on multi-node payouts the tx fees are more than the node revenue itself, then it’s almost in line with an over-valued (but real) big tech company.</p> <p>For example, one of the latest CHF/USD job runs paid 0.1 LINK to 9 addresses (data providers?) - total $14.4 payout - and paid 0.065 ETH ($24.5) in fees. That’s a $10.1 LOSS on a $14.4 revenue: <a href="https://etherscan.io/tx/0xa6351bab810b6864bfebb0f6e1e3bde3c8856f8aac3ba769dd2e6d1a39c0d23f">https://etherscan.io/tx/0xa6351bab810b6864bfebb0f6e1e3bde3c8856f8aac3ba769dd2e6d1a39c0d23f</a></p> <p>Linkpool’s (one of the biggest node operators) “ETH-USD CryptoCompare” job costs 0.1 link and has 33 runs in the past 24 hours (once every ~44min), total ~78,000 runs since May 30 2019 (once every ~8min). <a href="https://market.link/jobs/64bb0845-c4e1-4681-8853-0b5aa7366101/runs">https://market.link/jobs/64bb0845-c4e1-4681-8853-0b5aa7366101/runs</a> (PS cryptocompare has a free API that does this. Not sure why it costs $1 at current link prices to access an API once)</p> <p><strong>Token distribution:</strong> Top 100 wallets (0.05% of ~186,000 total) hold 83% of tokens. 8 wallets each hold over 1% of total, 58 hold over 0.1%. Of these 58, 9 are named exchange/lending pool wallets.</p> <p>For comparison, for Tether (TUSD), the top 100 wallets (0.006% of ~1,651,000 total) hold 35.9% of the supply. 3 addresses hold over 1% of the supply and 135 hold over 0.1%. Of these 135, at least 15 are named exchange/lending pool wallets.</p> <p>LINK’s market cap is $3.5B (or $10B fully diluted, if we count the founder/dev-controlled tokens). Tether’s is $6.9B. Tether has 10 times more addresses and less distribution inequality.</p> <p><strong>Chainlink’s actual deliverable products</strong> AKA “what do I currently get for my money??” PR Hype Codebase (Chainlink’s github has around 140-200,000 lines of code (not counting html/css) Current network of oracles Documentation (Todo this part more - what else do they offer to me as an end consumer, and eg as a tech startup that I can’t code myself?)</p> <p>Open questions: 1) Are there other chainlink nodes other than those listed on market.link? If so, is there a list of them with usage statistics? Do they use some other token than LINK and thus making simple analytics of the LINK ERC20 token not an accurate representation of Chainlink’s actual activity?</p> <p>2) Why is the google tweet still pinned to the top of Chainlink’s twitter? Yes, congratulations, chainlink can pull data from google APIs. So can my python script. So can any other turing-complete device in the world.</p> <p>(Todo)</p> <p>Appendix, analytics, calculations, data sources: Etherscan.io allows csv export of the first 5000 txs from each day. From Jul 31 to Aug 6 I thus have 30,000 tx from midnight every day to an average of 7:10am (so 24 hour totals are 3.34x these numbers if we assume the same network utilization throughout the day).</p> <p>Summary of <em>all</em> LINK activity from 31.07 to 06.08, first 5000 txs of each day (30k total): 1) 6714 wallets sent 16,911,429 L to 8637 wallets. 2) 27 wallets sent 50% of volume, 40 wallets responsible for 50% of #txs 3) 25 wallets received 50% of volume, 45 wallets 50% of #txs 4) 4787 wallets of receiving wallets also sent out some link but overall had a net positive flow/gain of 6,265,399 L (meaning they received more than they sent) 5) 3407 receiving wallets spent exactly the 3,261,772L that they received and had zero net balance change. 6) 443 receiving wallets spent a collective 2,037,790L more than they received. 7) # of tx by popularity/size: 9152 of 0.16 LINK 1787 of 1 1072 of 2 674 of 0.63 191 of 0.66 186 of 50.0 173 of 0.5 ... 213 tx under 0.1 LINK each tx (4 LINK of total volume, “tv” from here on) 9428 tx under 0.2 - 1477 LINK tv 9736 tx under 0.5 - 1609 tv 12743 tx under 1.0 - 4203 tv 14162 tx under 2.0 - 6835 tv 14500 tx under 3.0 - 7676 tv 15172 tx under 5.0 - 10468 tv 16202 tx under 10.0 - 18422 tv 21283 tx under 100.0 LINK - 238037 tv 25974 tx under 1000.0 - 2,215,363 tv 30000 tx under - 16,911,429 tv</p> <p>8) of 9712 total different tx sizes, 170 tx sizes accounted for 50% of total volume.</p> <p>If we GENEROUSLY assume that EVERY SINGLE transaction under 10.0 LINK is ACTUAL chainlink nodes doing ACTUAL work, that’s 0.1% of the LINK network’s total volume being used for ACTUAL functioning. The rest is speculation, trading, node funding by founder/dev wallets, or dumping to exchanges (anything I missed?)</p> <p>Assuming the above, the entire turnover of the actual LINK network is currently (18,422 LINK) * ($10/LINK) * (3.34 as etherscan.io’s data only gives first 5000 tx per day which averages to 7:10am) * (52 wk/year) = USD $31,995,329 turnover a year. Assuming all of that is profit (which it’s not given tx fees at the very least), LINK would need a PE ratio (Price/Earnings) of 100 times to justify its current (undiluted) valuation of $3.5 billion of 300 if you count the other 65% of tokens that haven’t been dumped by the founders/devs yet. For comparison, common PE ratios are 32 (facebook), 29 (google), 37 (uber), 20 (twitter on a good year), 10 (good hedge fund returning 10% annual).</p> <p>Soooo, that’s it from me for now. I will continue to update as more stuff turns up. Ultimately ask yourself, how is this NOT overvalued? Given that it can’t be overvalued because the link marines are right and bulletproof, my actual question is:</p> <p><strong>Where’s Chainlink’s missing financial/performance/usage evidence to justify LINK’s current valuation of $10?</strong></p> <p>If anyone has any questions/clarifications I’m available to chat, feel free to PM. I’m not looking to spread neither FUD nor blind faith and want an honest transparent objective discussion. I personally believe more that LINK is overvalued, but my beliefs have evolved and may continue to do so.</p> </div><!-- SC_ON --> Kind Regards R
<!-- SC_OFF --><div class="md"><p>Disclaimer: no rule breaking intended. No price manipulation intended. I only want to share verifiable facts/links and my analysis. If I am doing anything against the rules please let me know and I will do my best to fix it ASAP. I trade crypto, including LINK, and I’ve both made AND lost money from both going long AND short on LINK over the last 12 months. I am currently short on LINK, to an extent that I can comfortably absorb my losses if the market proves me wrong. This is not investment advice; this is just for my own record and to start a discussion for anyone who might want more transparency around LINK.</p> <p>This post is for my own organization as much as anything else. I just got my laptop fixed so will also be putting this into a more digestible format soon.</p> <p><strong>LINK wallet addresses</strong> This is one LINK address whale with over 6 million LINK. Looks like some of the funds end up on a Turkish exchange Paribu. <a href="https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xc6bed363b30df7f35b601a5547fe56cd31ec63da">https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xc6bed363b30df7f35b601a5547fe56cd31ec63da</a></p> <p>If you trace chainlink oracle funds to their source, you can find some of the original addresses. Some of these early on (around 1000 days ago) were linked to AfroDex labs, which looks like now doesn’t work. <a href="http://afrodex.net/#!/trade/AfroX-ETH">http://afrodex.net/#!/trade/AfroX-ETH</a></p> <p>It looks to me that most of the funds that the oracle nodes pay out to their data providers come from the original chainlink wallets and not from end users. I wish I had a programmatic way to interact with etherscan.io or even the eth blockchain directly so I could tally it all up and put all LINK’s activity into numbers.</p> <p><strong>LINK overall transaction, volume, and tx fees</strong> A typical aggregator node tx (payout?): <a href="https://etherscan.io/tx/0xef9e8e6dd94ebe9bbac8866f18c2ea0a07408ced1aa77fa04826043eaa55e772">https://etherscan.io/tx/0xef9e8e6dd94ebe9bbac8866f18c2ea0a07408ced1aa77fa04826043eaa55e772</a> This is their ETH/USD aggregator paying out 1 LINK to each of 21 addresses. Value of 21 LINK ~= $210. Total eth tx fees: .233 ETH (~$88.5, ~42% of the total tx value. If LINK was $4.2 instead of $10, the tx fees would be 100% of the value of the tx). Transactions like this happen every few minutes, and the payout amounts are most often 0.16, 0.66, 1.0, and 2.0 Link.</p> <p><strong>LINK overall activity:</strong> This is slow to do manually by hand. I hope I will get my laptop working so I can automate and get a much larger sample.</p> <p>Chainlink’s node/job listing site, <a href="https://market.link">https://market.link</a>, lists 86 nodes, 195 feeds, 801 jobs, ~1,080,000 job runs (I can’t tell if this is over the past 2 months or 1.5 years). Only 20 nodes have over 1000 job runs, and 62 nodes have ZERO runs. Usual job cost is listed as 0.1 link, but the overall payout to the nodes is 10-20 times this. The nodes then cash out usually through a few jump addresses to exchanges. Some quick maths: (being generous and assuming it’s 1mil jobs every 2 months = ~6mil link/year = $60,000,000 revenue a year. This is the most generous estimate towards link’s valuation I’ve found so far. If we ignore the below examples where on multi-node payouts the tx fees are more than the node revenue itself, then it’s almost in line with an over-valued (but real) big tech company.</p> <p>For example, one of the latest CHF/USD job runs paid 0.1 LINK to 9 addresses (data providers?) - total $14.4 payout - and paid 0.065 ETH ($24.5) in fees. That’s a $10.1 LOSS on a $14.4 revenue: <a href="https://etherscan.io/tx/0xa6351bab810b6864bfebb0f6e1e3bde3c8856f8aac3ba769dd2e6d1a39c0d23f">https://etherscan.io/tx/0xa6351bab810b6864bfebb0f6e1e3bde3c8856f8aac3ba769dd2e6d1a39c0d23f</a></p> <p>Linkpool’s (one of the biggest node operators) “ETH-USD CryptoCompare” job costs 0.1 link and has 33 runs in the past 24 hours (once every ~44min), total ~78,000 runs since May 30 2019 (once every ~8min). <a href="https://market.link/jobs/64bb0845-c4e1-4681-8853-0b5aa7366101/runs">https://market.link/jobs/64bb0845-c4e1-4681-8853-0b5aa7366101/runs</a> (PS cryptocompare has a free API that does this. Not sure why it costs $1 at current link prices to access an API once)</p> <p><strong>Token distribution:</strong> Top 100 wallets (0.05% of ~186,000 total) hold 83% of tokens. 8 wallets each hold over 1% of total, 58 hold over 0.1%. Of these 58, 9 are named exchange/lending pool wallets.</p> <p>For comparison, for Tether (TUSD), the top 100 wallets (0.006% of ~1,651,000 total) hold 35.9% of the supply. 3 addresses hold over 1% of the supply and 135 hold over 0.1%. Of these 135, at least 15 are named exchange/lending pool wallets.</p> <p>LINK’s market cap is $3.5B (or $10B fully diluted, if we count the founder/dev-controlled tokens). Tether’s is $6.9B. Tether has 10 times more addresses and less distribution inequality.</p> <p><strong>Chainlink’s actual deliverable products</strong> AKA “what do I currently get for my money??” PR Hype Codebase (Chainlink’s github has around 140-200,000 lines of code (not counting html/css) Current network of oracles Documentation (Todo this part more - what else do they offer to me as an end consumer, and eg as a tech startup that I can’t code myself?)</p> <p>Open questions: 1) Are there other chainlink nodes other than those listed on market.link? If so, is there a list of them with usage statistics? Do they use some other token than LINK and thus making simple analytics of the LINK ERC20 token not an accurate representation of Chainlink’s actual activity?</p> <p>2) Why is the google tweet still pinned to the top of Chainlink’s twitter? Yes, congratulations, chainlink can pull data from google APIs. So can my python script. So can any other turing-complete device in the world.</p> <p>(Todo)</p> <p>Appendix, analytics, calculations, data sources: Etherscan.io allows csv export of the first 5000 txs from each day. From Jul 31 to Aug 6 I thus have 30,000 tx from midnight every day to an average of 7:10am (so 24 hour totals are 3.34x these numbers if we assume the same network utilization throughout the day).</p> <p>Summary of <em>all</em> LINK activity from 31.07 to 06.08, first 5000 txs of each day (30k total): 1) 6714 wallets sent 16,911,429 L to 8637 wallets. 2) 27 wallets sent 50% of volume, 40 wallets responsible for 50% of #txs 3) 25 wallets received 50% of volume, 45 wallets 50% of #txs 4) 4787 wallets of receiving wallets also sent out some link but overall had a net positive flow/gain of 6,265,399 L (meaning they received more than they sent) 5) 3407 receiving wallets spent exactly the 3,261,772L that they received and had zero net balance change. 6) 443 receiving wallets spent a collective 2,037,790L more than they received. 7) # of tx by popularity/size: 9152 of 0.16 LINK 1787 of 1 1072 of 2 674 of 0.63 191 of 0.66 186 of 50.0 173 of 0.5 ... 213 tx under 0.1 LINK each tx (4 LINK of total volume, “tv” from here on) 9428 tx under 0.2 - 1477 LINK tv 9736 tx under 0.5 - 1609 tv 12743 tx under 1.0 - 4203 tv 14162 tx under 2.0 - 6835 tv 14500 tx under 3.0 - 7676 tv 15172 tx under 5.0 - 10468 tv 16202 tx under 10.0 - 18422 tv 21283 tx under 100.0 LINK - 238037 tv 25974 tx under 1000.0 - 2,215,363 tv 30000 tx under - 16,911,429 tv</p> <p>8) of 9712 total different tx sizes, 170 tx sizes accounted for 50% of total volume.</p> <p>If we GENEROUSLY assume that EVERY SINGLE transaction under 10.0 LINK is ACTUAL chainlink nodes doing ACTUAL work, that’s 0.1% of the LINK network’s total volume being used for ACTUAL functioning. The rest is speculation, trading, node funding by founder/dev wallets, or dumping to exchanges (anything I missed?)</p> <p>Assuming the above, the entire turnover of the actual LINK network is currently (18,422 LINK) * ($10/LINK) * (3.34 as etherscan.io’s data only gives first 5000 tx per day which averages to 7:10am) * (52 wk/year) = USD $31,995,329 turnover a year. Assuming all of that is profit (which it’s not given tx fees at the very least), LINK would need a PE ratio (Price/Earnings) of 100 times to justify its current (undiluted) valuation of $3.5 billion of 300 if you count the other 65% of tokens that haven’t been dumped by the founders/devs yet. For comparison, common PE ratios are 32 (facebook), 29 (google), 37 (uber), 20 (twitter on a good year), 10 (good hedge fund returning 10% annual).</p> <p>Soooo, that’s it from me for now. I will continue to update as more stuff turns up. Ultimately ask yourself, how is this NOT overvalued? Given that it can’t be overvalued because the link marines are right and bulletproof, my actual question is:</p> <p><strong>Where’s Chainlink’s missing financial/performance/usage evidence to justify LINK’s current valuation of $10?</strong></p> <p>If anyone has any questions/clarifications I’m available to chat, feel free to PM. I’m not looking to spread neither FUD nor blind faith and want an honest transparent objective discussion. I personally believe more that LINK is overvalued, but my beliefs have evolved and may continue to do so.</p> </div><!-- SC_ON --> Kind Regards R