Today we continue to discuss the 26-year investment research series, still talking about Chainlink. Why talk about it twice? Because I saw comments suggesting that good projects should be discussed more!

I think it makes sense!

First: An article may not comprehensively introduce a topic; there will always be omissions, and the focus may differ. For example, in the previous article about Link, I emphasized why oracles are important and the products of Link, without specifically detailing the functional applications in specific scenarios, and I briefly mentioned ETFs. So discussing it again can help fill in the gaps.

Second: The cognitive process of a person requires time and continuous knowledge input, just like our primary school learning, which is essentially about repeatedly instilling knowledge points. Although China's rote learning education has its drawbacks, it is undeniable that it has been successful overall.

Third: Although there are thousands of projects in the crypto space, I have discussed over 800 projects in the past three years. There are very few that are truly good, valuable, innovative, have application prospects, and have real revenue—estimated to be no more than 50+. The logic of 'value investment' is that if such projects cannot grow with the tide of WEB3, can those garbage shanzhai and MEME projects thrive?

Fourth: I firmly believe that the future WEB3 industry will definitely disrupt many traditional industries, and this huge wave will surely come!

Back to the point, let's continue to analyze the value of Chainlink; observing more can help you form a comprehensive cognitive system from points to lines and lines to surfaces!

The previous article mentioned that Chainlink plays a very important role in many areas (the leading oracle Chainlink, the future of Sanbing is immeasurable!)! An oracle is the bridge that anchors the prices of the real world and on-chain prices!

This is relatively easy to understand in some fields. For example, the on-chain gold price must use oracles to anchor the spot gold price. This is very important for the RWA field. Similarly, on-chain stablecoins, real estate, stocks, bonds, and insurance follow the same principle! As for the RWA field, there is no need to elaborate, as it must be the trend of the future. This track will only continue to grow because the scale of quality U.S. stocks going on-chain is immeasurable!

The following details why the DEFI field is indispensable;

1. Lending protocols: such as MakerDAO, Aave, Compound. Loans and liquidations rely on accurate asset prices because collateral assets are required, and when assets are under-collateralized, liquidation is needed, and how to obtain asset prices requires oracles!

The current scale of the WEB3 lending market is $63 billion, which is actually not very large, because any listed American bank has a market value of several hundred billion, so I predict that the future WEB3 lending market will challenge traditional banks, and the lending market will definitely exceed one trillion. At that time, you will definitely feel that the importance of oracles is self-evident!

2. Derivatives and perpetual contracts: such as Synthetix, GMX, dYdX. Because perpetual contracts do not have settlement, margin calculations, liquidation triggers, and settlement of perpetual contract underlying must be accurate and real-time.

I have said that DEX will definitely replace CEX in the future because decentralization is the consensus of web3, and centralization is the original sin. Therefore, this area will also have a large scale in the future. Currently, the trading volume of DEX accounts for less than 5% of the total DEX trading volume, so there is definitely huge space here. This is also why centralized exchanges have seen the rise of HYPE and have launched their own Perp DEX to counter it. Let us wait and see!

3. DEX routing and automated market making: AMM, being an automated market maker, controls through the function XY=K. However, if the pool is small, the slippage will be high, significantly affecting the spot price. Thus, on-chain AMM needs external asset price judgments to identify arbitrage opportunities and adjust liquidity!

Of course, the RWA and stablecoin sectors mentioned at the beginning are also indispensable key components if we consider the DEFI field!

Without reliable oracles, DeFi will become mere talk. The most famous previous example is the 'flash loan' attack!

Because borrowing large amounts of funds in a very short time affects the prices in DEX pools, thus completing arbitrage! For example, in 2021, the price manipulation of pancake's Bunny operation involved massive issuance and then selling off to zero, while in 2020, Harvest Finance exploited AMM + lending loopholes, resulting in a loss of $34 million.

So the popularity of 'oracles' is largely driven by 'flash loans'!

In conclusion, the current DEFI market has flourished after 2021. Although the industry scale has reached $100 billion, in comparison to the traditional financial industry, this scale is still a 'small bamboo shoot,' just showing a sharp tip. The future space will be vast, and Chainlink, as an important supporting role, is often undervalued by many! Only time can witness the growth of its value!$LINK