The Prophet Returning from the Cold

Chainlink has not replaced the traditional financial system; instead, they have built a translation layer that enables the traditional financial system to "speak blockchain language."

Written by: Thejaswini M A

Translated by: Block unicorn

The 1992 Dream Team crushed their opponents in the Olympic basketball tournament by an average margin of 44 points, but there’s a detail in this story that most people forget.

They almost lost their first scrimmage against a team of college players.

The problem wasn’t talent. With Michael Jordan, Magic Johnson, and Larry Bird on the same team, they should have been unstoppable from day one. But the issue is that superstars don’t automatically make a championship team. You need a system that can turn individual strengths into collective advantage. You need someone to build the bonds that elevate everyone.

Dream Team coach Chuck Daly did something in the first week that seemed incredibly boring—far less flashy than a highlight dunk: he established passing lanes. He set pick-and-roll timings. He created the infrastructure that turned a group of Hall of Famers into an unstoppable force. By the time the Olympics arrived, magic happened. Every pass created a better shot. Every defensive rotation made the next one easier. Every player made the others more valuable.

The genius was in creating infrastructure that amplified everyone’s abilities.

This is essentially what Chainlink has done in the crypto space.

While other crypto projects tried to become the Michael Jordan of blockchains, Chainlink quietly became the Chuck Daly of digital finance. They built the infrastructure that made it easier for others to take their shot.

In 2019, Chainlink launched its mainnet with a simple goal: import sports scores and weather data into Ethereum so people could bet on football matches without relying on centralized bookmakers. Six years later, JPMorgan is using the same infrastructure to settle cross-chain government bond trades, with the Federal Reserve nodding approval behind the scenes.

Chainlink solved what the crypto world calls the “oracle problem”—blockchains are like digital islands, unable to talk or listen to anything. If you want your smart contract to know Apple’s stock price, whether it rained in Kansas yesterday, or if someone really has the dollars they claim in their bank account, you need something to bring that information onto the blockchain. That something is an oracle, and Chainlink is the oracle that has devoured all other oracles.

Chainlink already underpins over 60% of decentralized finance (DeFi) value, and nearly 80% on Ethereum. As traditional assets migrate on-chain, they’ll need the same infrastructure as DeFi. Chainlink is the market pioneer and is building the standards that other platforms follow.

Let me explain this infrastructure.

Chainlink wasn’t initially intended to be the bridge between Wall Street and Web3. But at some point, traditional financial institutions realized a problem: if you want to tokenize government bonds, you need a way to prove the bonds actually exist and are worth what you say they are.

Enter Chainlink’s Proof of Reserve system. It sounds sophisticated, but it’s really just a very complex way to prove you’re not running a fractional reserve scam.

Suddenly, every major stablecoin issuer needed this service, because simply telling people “trust us, we definitely have 100 billions in government bonds” was no longer enough for regulators—especially after the Terra and FTX crises.

Then came the Cross-Chain Interoperability Protocol (CCIP), which allows assets to move between different blockchains. It’s like building a universal translator. It helps banks communicate across blockchain silos. As a result, JPMorgan can now send tokenized deposits from their private Ethereum network to the public Solana network, with Chainlink acting as the trusted messenger.

Chainlink has also built tools specifically to help institutions comply with regulations.

Their new Automation Compliance Engine (ACE) can automatically handle all the regulatory paperwork that makes crypto transactions legal. Want to move tokenized assets between blockchains while maintaining Anti-Money Laundering (AML) compliance, Know Your Customer (KYC) verification, and audit trails? Chainlink handles all of this automatically, ensuring every transaction meets any regulatory requirement in your jurisdiction.

This perfectly positions them for the coming wave of tokenized finance. Every bank, asset manager, and government agency wanting to experiment with blockchain technology must first solve compliance.

Chainlink’s 2025 story is particularly compelling.

Tuttle Capital filed for the first Chainlink ETF (Exchange-Traded Fund) in January, with a decision from the U.S. Securities and Exchange Commission (SEC) expected in fall 2025. The timing aligns perfectly with the current regulatory environment supporting crypto.

JPMorgan’s Kinexys used Chainlink to complete the first cross-chain delivery-versus-payment settlement between the traditional banking system and public blockchains.

Intercontinental Exchange, the parent company of the New York Stock Exchange, integrated Chainlink Data Streams to bring forex and precious metals data on-chain. When the world’s largest stock exchange needs oracle infrastructure, they choose Chainlink.

Mastercard partnered with Chainlink to enable its 3 billion cardholders to purchase crypto directly. When payment processors need compliant crypto infrastructure, they choose Chainlink.

Chainlink launched data streams for U.S. stocks and ETFs, providing real-time price data for stocks like Apple, Tesla, and the S&P 500 Index.

Central banks in Brazil and Hong Kong are using Chainlink for CBDC pilots and cross-chain settlement experiments. When governments need blockchain infrastructure, they choose Chainlink.

The pattern is consistent: when institutions move from experimentation to production deployment, they standardize on Chainlink.

The “Flywheel” of the Treasury Printing Machine Goes Live

In August, Chainlink announced a program called “Chainlink Reserves,” essentially Chainlink’s version of a stock buyback plan. The company uses fees collected from enterprise clients (JPMorgan, Mastercard, New York Stock Exchange) to purchase LINK tokens on the open market.

Here’s how the flywheel works:

Step one: Enterprises pay for Chainlink’s data streams, cross-chain services, and compliance solutions. Co-founder Sergey Nazarov confirmed they have already generated “hundreds of millions of dollars in revenue,” with the off-chain portion being substantial.

Step two: All payments—whether fiat, stablecoins, or other tokens—are automatically converted to LINK via their Payment Abstraction system.

Step three: A portion of LINK goes into strategic reserves and is locked up for years.

Step four: As more institutions tokenize assets, demand for Chainlink services grows, generating more revenue and more automatic LINK buybacks.

The beauty of this system is that it ties LINK demand directly to real-world business adoption. Traditional crypto projects rely on speculation or token utility within their own ecosystems.

Since launching the reserves program, they have accumulated over 150,000 LINK tokens, worth about $4.1 million. This may not seem like much, but consider the growth trajectory. They are moving from pilot projects to simultaneous production deployments at multiple institutions.

Chainlink is evolving from a data provider into what Sergey Nazarov calls a “transaction system.” Modern institutional trading requires more than just price data:

• Data streams: for accurate pricing and valuation
• Cross-chain capability: moving assets between networks
• Identity and compliance: meeting regulatory requirements
• Proof of reserve: verifying backing of assets
• Reporting and auditability: meeting institutional oversight needs

Chainlink may be the only provider offering all these services in a single integration. When institutions want to tokenize assets, they can work solely with Chainlink, rather than piecing together solutions from multiple vendors.

This gives them a unique position in the coming tokenization wave. As Nazarov pointed out in a recent interview, less than 1% of global assets are currently tokenized. Even reaching 5% would mean the entire crypto market expands tenfold.

The scale of this opportunity is staggering. Traditional finance represents about $500 trillion in assets. Chainlink’s argument is that most of these assets will eventually migrate on-chain, and all will need the infrastructure services that Chainlink can comprehensively provide.

The Divide Between Bitcoin and Tokenization

Sergey Nazarov has put forward a compelling argument about the future of crypto. Bitcoin may capture safe-haven demand during times of instability and could reach trillions in value. But tokenized assets will surpass Bitcoin by several orders of magnitude.

Bitcoin, as digital gold, attracts investors seeking uncorrelated assets in uncertain times. Tokenized assets are more efficient versions of existing financial products, which are already worth hundreds of trillions of dollars.

When sovereign wealth funds and pension funds allocate to crypto assets, they won’t put 50% into Bitcoin. They’ll maintain diversified portfolios of stocks, commodities, bonds, and real estate—just in tokenized form. The potential market for tokenized assets is the entire traditional financial system.

This shift will fundamentally change our definition of “crypto.” The space will no longer be defined by cryptocurrencies like Bitcoin and Ethereum, but by tokenized versions of traditional assets. Chainlink is positioning itself as the indispensable infrastructure for this transformation.

Supply Dynamics

LINK’s circulating supply has increased from 470 million tokens in 2021 to 680 million today, a 44% rise, which seems concerning until you understand what those tokens are used for.

This dilution of 210 million tokens funded the most aggressive infrastructure buildout in crypto history.

The supply expansion is essentially Chainlink’s Series A, B, and C funding rounds, except they didn’t give equity to VCs—they funded development by selling tokens. Critics call it dilution; supporters call it a necessary investment.

According to Tokenomist data, 41% of LINK’s total supply (411.9 million tokens) remains locked, with no planned unlock events. This suggests the major dilution phase may be over, with most historical unlocks occurring during the 2018-2022 development period.

The strategic reserves launched in August 2025 fundamentally change this dynamic.

• 41% of tokens remain locked, with no planned unlocks
• Strategic reserves create ongoing buying pressure
• The net effect depends on the balance between enterprise revenue growth and future unlock decisions
• Early accumulation data shows reserves are steadily growing

This timing creates an interesting inflection point. Supply growth funded the infrastructure that now generates hundreds of millions in enterprise revenue. That revenue, in turn, funds strategic reserves, removing tokens from circulation as institutional adoption accelerates.

The seemingly bearish dilution of the past few years has become the foundation for sustained demand in 2025 and beyond. Investors focused on supply expansion are missing the infrastructure being built. Those focused only on current buyback volumes may miss the revenue trajectory that will determine future accumulation speed.

All of this leads to one question.

What happens when the infrastructure layer becomes more valuable than the applications running on it?

In 2025, Chainlink’s Total Value Secured (TVS) in DeFi protocols, tokenized assets, and cross-chain infrastructure surged to over $93 billion. They provide data streams for thousands of DeFi protocols. They are the bridge technology enabling traditional banks to experiment with public blockchains. They are building compliance tools that determine which crypto applications are legal and which are not.

This $93 billion is not the value of the infrastructure—it’s entirely dependent on the application value enabled by Chainlink’s infrastructure. The infrastructure is Chainlink’s oracle network, data streams, and cross-chain messaging system.

But if Chainlink disappeared tomorrow, how much of that $93 billion would become worthless? How many DeFi protocols would stop working? How many tokenized assets would lose their price data?

The answer: most of it. This suggests the infrastructure may already be more valuable than the applications, even if the market hasn’t realized it yet.

They have become systemically important in the crypto space, a status few protocols achieve. The network effect is obvious: the more institutions use Chainlink, the more others want to use Chainlink, because everyone else is already using Chainlink.

In crypto, when everyone needs the same underlying service, network effects become self-reinforcing. The more institutions use Chainlink, the more others want to use it, because everyone else is already using Chainlink. Revenue is sticky because, regardless of which applications succeed or fail, the infrastructure continues to collect fees. DeFi protocols come and go, but the data layer supporting all of them continues to earn fees. Applications are commodities; infrastructure is a monopoly. And monopolies, as we know, tend to capture most of the value in an ecosystem.

Cracks in the Foundation

But let’s honestly discuss the potential issues, because the bullish case for Chainlink assumes a lot that may not always hold true.

The first issue is that oracle networks are technically hard to build. But the difficulty isn’t the software—it’s getting everyone to agree to use your version. Chainlink’s moat is network effects and first-mover advantage, not some insurmountable technical barrier. Google and Amazon could build competing oracle services tomorrow if they wanted. So could Microsoft. Any large cloud provider with a strong engineering team could do it.

The second issue is regulatory capture risk. Chainlink has become so systemically important that if it fails, a large part of the tokenized financial system collapses with it. This is exactly the “too big to fail” scenario that makes regulators nervous. What happens if a senator realizes a privately held, unregulated company controls the data streams for trillions in tokenized assets? Chainlink could suddenly find itself facing regulatory scrutiny that turns a profitable business into a compliance nightmare.

The third issue is the tokenization assumption. Chainlink’s entire value proposition depends on traditional finance migrating on-chain at scale. But what if it doesn’t? What if banks decide their private blockchains are good enough and don’t need to interact with public chains? What if the regulatory environment changes to make tokenization harder, not easier? Chainlink has built infrastructure for a future that may not happen.

The fourth issue is competition from those they serve. JPMorgan is using Chainlink now, but JPMorgan also has thousands of engineers and billions in R&D budget. How long before they decide to build their own oracle system instead of paying Chainlink forever? The same question applies to every large bank and asset manager experimenting with tokenization.

The final issue is whether any middleware company can maintain pricing power over the long term. History shows that infrastructure layers tend to become commoditized over time. The internet started with expensive dial-up services and ended up as commoditized broadband. Cloud computing started with Amazon’s high prices and ended up with multiple vendors competing on cost. Why would oracle networks be any different?

Chainlink is betting they can maintain network effects and switching costs forever. That’s possible, but such bets tend to work until they suddenly don’t.

But for now, this success story looks very different from the decentralized, disintermediated financial system crypto originally envisioned. Instead, it looks more like the old system with better APIs. Banks are still banks, regulators are still regulators, and money still flows through institutions that governments can control.

Chainlink has not replaced the traditional financial system. They have built a translation layer that enables the traditional financial system to “speak blockchain language.” Now, as this translation layer becomes indispensable, it’s still unclear whether crypto is decentralizing finance or simply providing better tools for centralized finance.