The crypto infrastructure company, Chainlink (LINK), offers its Proof-of-Reserve for projects such as TrueUSD and Paxos, but the system often relies on promises. The likely difficulty comes from wanting to integrate centralized data into decentralized protocols.
Summary
Chainlink (LINK) and doubts about the Proof-of-Reserve offered by the crypto company
According to reports, it appears that the Proof-of-Reserve (PoR) offered by the crypto infrastructure company Chainlink, for projects such as TrueUSD and Paxos, is of dubious transparency.
Basically, Proof-of-Reserve took hold among asset managers and crypto-exchanges after the FTX collapse, looking for a way to reliably (and thus blockchain-based) and timely prove their reserves.
This is why Chainlink PoR has been chosen by some crypto projects, as it allows crypto custodians to track real-world assets directly on the blockchain.
Unfortunately, however, the report claims that often the system offered by the leading cryptocurrency “oracle” provider also relies on “promises” instead of relying on “evidence.”
Not only that, Chainlink’s technology could add more confusion than transparency in some cases. Its decentralized network of oracles helps ensure the secure delivery of data on off-chain reserves, but it does not make that data any more credible than it otherwise would be.
Chainlink (LINK) and the dubious Proof-of-Reserve of the Paxos crypto project
To give an example of the doubts raised about Chainlink’s Proof-of-Reserve, consideration is given to the Paxos crypto project.
Basically, the stablecoin operator uses Chainlink PoR for PAXG, its gold-backed stablecoin, and for USDP, its stablecoin pegged to the US dollar.
The promise made to users is that Chainlink’s oracles will enable people to:
“quickly verify on-chain that PAX tokens are fully backed 1:1 by US Dollars and PAXG tokens are fully backed by gold bars, both of which are held off-chain in Paxos’ custody.”
And indeed, this statement is only a “promise” since of the 16 third-party node operators reporting PAXG gold reserves, each of them gets their data from the same place: Paxos itself.
Not only that, even for USDP: Chainlink’s “decentralized” network of 16 node operators each report that the stablecoin is backed by $1.04 billion, a number provided to them by a Paxos API, meaning the data comes directly from the project.
This means that regardless of the precise details of how Paxos calculates its stabecoin numbers, the data the company reports to Chainlink ultimately requires total trust in Paxos, not Chainlink’s network of third-party oracles.
Chainlink (LINK) and the integration of crypto data feeds into the Celo network
And so, while on the one hand doubts are being raised about the reliability of a service offered by the Chainlink network, the crypto infrastructure seems to be unabated.
Recently, in fact, Chainlink’s data feeds (LINK) were officially integrated into the Celo network. This means that Celo developers will be able to access reliable, high-quality data in order to create more advanced dApps.
This collaboration sees a real advance in blockchain for the Celo mainnet, as it ensures a new wave of more innovative apps in decentralized finance (or DeFi).
In fact, Chainlink’s data feeds offer a number of features that enhance their usability and reliability.
Among these is the data aggregation model that ensures data accuracy and precision, mitigating problems of API downtime, flash cash outliers, and data manipulation attacks.
LINK’s price: an 8% pump in the past seven days
Looking at Chainlink’s (LINK) chart, the crypto has experienced an 8% price pump in the past seven days.
And indeed, LINK has gone from $5.84 to the current $6.35. As of yesterday, the day the article about the dubious Proof-of-Reserve of the crypto infrastructure was published, LINK actually began to see a small price dump, as it was at $6.56.
Anyway, the 22nd largest crypto by market capitalization, with a market cap of over $3.4 billion, has also seen an increase in trading volumes in the past 24 hours, by +35%.
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