The Oracle Machine returning from the cold

Author: Thejaswini, Source: Token Dispatch

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

They almost lost in their first training match against college players.

The problem does not lie in talent. Michael Jordan, Magic Johnson, and Larry Bird were on the same team, theoretically unstoppable from day one. But the issue is that superstars do not automatically form a championship team. You need a system that can translate individual strengths into collective advantages. You need someone to build the bonds that elevate everyone.

Dream Team coach Chuck Daly did something that seemed very boring in the first week, far less eye-catching than highlight dunks: he established passing routes. He determined the timing of screens. He created the infrastructure that turned a group of Hall of Fame players into an unstoppable force. By the time the Olympics rolled around, miracles happened. Every pass created better shooting opportunities. Every defensive rotation made the next one easier. Each player made the others more valuable.

Genius lies in creating the infrastructure that amplifies everyone’s capabilities.

This is essentially what Chainlink does in the cryptocurrency space.

While other crypto projects try to become the Michael Jordan of blockchain, Chainlink quietly became the Chuck Daly of digital finance. They built the infrastructure that makes it easier for others to take action.

In 2019, Chainlink launched its mainnet with a simple goal: to bring sports scores and weather data onto Ethereum, allowing people to bet on football matches without relying on centralized betting companies. Six years later, JPMorgan utilized the same infrastructure for cross-chain government bond trading settlements, with the Federal Reserve nodding in approval behind the scenes.

Chainlink solves the so-called “oracle problem” in the cryptocurrency world, which is essentially that blockchains are like digital islands that cannot communicate or listen to anything. If you want your smart contract to know the price of Apple stock, whether it rained in Kansas yesterday, or whether someone actually has the dollars they claim in their bank account, you need something to transmit that information onto the blockchain. That something is an oracle, and Chainlink is the oracle that has absorbed all other oracles.

Chainlink has supported over 60% of decentralized finance (DeFi) value, approaching 80% on Ethereum. As traditional assets migrate on-chain, they will 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 was not initially intended to be a bridge between Wall Street and Web3. However, at some point, traditional financial institutions realized a problem: if you want to tokenize government bonds, you need a way to prove that the bonds actually exist and that their value is as you claim.

Thus, Chainlink’s Proof of Reserve system emerged, which sounds very advanced, but in reality, it is just a very complicated way to prove that you are not engaging in a fractional reserve scam.

Suddenly, every major stablecoin issuer needs this service, as simply telling people “trust us, we absolutely have 100 billion dollars in government bonds” is no longer sufficient to appease regulators, especially after the Terra and FTX crises.

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

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

Their new Automated Compliance Engine (ACE) can automatically handle all the regulatory paperwork that makes cryptocurrency 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 will automatically handle all of this, ensuring that every transaction complies with any regulatory requirements in your jurisdiction.

This positions them perfectly for the upcoming wave of tokenized finance. Every bank, asset management company, and government agency that wants to try blockchain technology first needs to address compliance issues.

Chainlink’s story for 2025 is particularly noteworthy.

Tuttle Capital applied for the first Chainlink ETF (Exchange-Traded Fund) in January, with the expectation that the U.S. Securities and Exchange Commission (SEC) will make a decision in the fall of 2025. The timing perfectly aligns with the current supportive regulatory environment for cryptocurrencies.

JPMorgan’s Kinexys completed the first cross-chain currency settlement between the traditional banking system and public blockchain using Chainlink.

The Intercontinental Exchange, which is the parent company of the New York Stock Exchange, integrates Chainlink Data Streams to bring foreign exchange and precious metals data on-chain. When the world’s largest stock exchange needed oracle infrastructure, they chose Chainlink.

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

Chainlink has launched data streams for the US stock market and ETFs, providing real-time price data for stocks such as Apple, Tesla, and the S&P 500 index.

The central banks of Brazil and Hong Kong are using Chainlink for central bank digital currency (CBDC) pilot programs and cross-chain settlement experiments. When governments need blockchain infrastructure, they choose Chainlink.

The model remains consistent: when institutions transition from the experimental phase to production deployment, they consistently choose Chainlink.

The “Flywheel” of the Treasury Printing Machine is Live

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

The following is how the flywheel operates:

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

Step Two: All payments—whether fiat currency, stablecoins, or other tokens—are automatically converted to LINK through its Payment Abstraction system.

Step 3: A portion of LINK enters strategic reserves and is locked for several years.

Step 4: As more institutions tokenize their assets, the demand for Chainlink services increases, generating more revenue and more automatic buybacks of LINK.

The beauty of this system lies in its direct linkage of LINK’s demand with real-world commercial adoption. Traditional crypto projects rely on speculation or the utility of tokens within their ecosystem.

Since the launch of the reserve plan, they have accumulated over 150,000 LINK tokens, worth approximately 4.1 million dollars. This may not seem like much, but considering the development trajectory. They are shifting from pilot projects to production deployments across multiple institutions simultaneously.

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

• Data stream: Used for accurate pricing and valuation
• Cross-chain capability: Move assets between different networks
• Identity and Compliance: Meet Regulatory Requirements
• Reserve Proof: Verify Supporting Assets
• Reporting and Auditability: Meet the supervisory needs of institutions

Chainlink may be the only provider that offers all these services in a single integration. When institutions want to tokenize assets, they can work solely with Chainlink instead of piecing together solutions from multiple providers.

This puts them in a unique position in the upcoming wave of tokenization. As Nazarov pointed out in a recent interview, currently less than 1% of assets globally are tokenized. Even reaching 5% would mean the entire cryptocurrency market would expand by 10 times.

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

The Split between Bitcoin and Tokenization

Sergey Nazarov put forward a compelling argument regarding the future development of cryptocurrencies. Bitcoin may capture safe-haven demand during unstable periods, potentially reaching a value of trillions of dollars. However, tokenized assets will far exceed Bitcoin by several orders of magnitude.

Bitcoin, as digital gold, has attracted investors seeking uncorrelated assets during uncertain times. Tokenized assets are a more efficient version of existing financial products, with a value reaching trillions of dollars.

When sovereign wealth funds and pension funds allocate to crypto assets, they will not invest 50% in Bitcoin. They will maintain a diversified portfolio that includes stocks, commodities, bonds, and real estate – only in tokenized form. The potential market for tokenized assets is the entire traditional financial system.

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

Supply Dynamics

The circulating supply of LINK has increased from 470 million tokens in 2021 to 680 million today, a growth of 44%, which seems concerning until you understand the use of these tokens.

The dilution of these 210 million tokens has funded the most aggressive infrastructure development in cryptocurrency history.

Supply expansion is essentially the Series A, B, and C funding rounds of Chainlink, except they did not give equity to venture capitalists, but instead financed development by selling tokens. Critics call it dilution, while supporters refer to it as necessary investment.

According to Tokenomist data, 41% of the total supply of LINK (411.9 million tokens) is still locked, with no planned unlocking events. This suggests that the major dilution phase may have passed, as most historical unlocks occurred during the development period from 2018 to 2022.

The strategic reserve launched in August 2025 fundamentally changed this dynamic.

• 41% of the tokens remain locked, with no plans for unlocking.
• Strategic reserves have created ongoing buying pressure
• The net effect depends on the balance between the growth of corporate revenue and future unlocking decisions.
• Early accumulation data shows that reserves continue to grow.

This timing has created an interesting turning point. The growth in supply has funded the infrastructure that generates hundreds of millions in revenue today. These revenues, in turn, provide funding for strategic reserves, removing tokens from circulation as institutional adoption accelerates.

The seemingly bearish dilution over the past few years has become the cornerstone of sustained demand for 2025 and beyond. Investors focusing on supply expansion have overlooked the infrastructure being built. Investors who only pay attention to current repurchase volumes may miss the income trajectory that determines the future accumulation rate.

This raises a question.

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

In 2025, Chainlink’s Total Value Locked (TVS) surged to over $93 billion in decentralized finance protocols, tokenized assets, and cross-chain infrastructure. They provide data feeds for thousands of DeFi protocols. They are the bridging technology that enables 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 USD is not the value of the infrastructure—it entirely depends on the application value of Chainlink’s infrastructure. The infrastructure consists of Chainlink’s oracle network, data streams, and cross-chain messaging system.

But if Chainlink disappeared tomorrow, how much of this 93 billion dollars would become worthless? How many DeFi protocols would cease to operate? How many tokenized assets would lose price data?

The answer is: most. This indicates that the infrastructure may be more valuable than the applications, even if the market has not yet realized it.

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

In the cryptocurrency space, when everyone needs the same underlying services, 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 earn fees. DeFi protocols come and go, but the data layer supporting all these protocols continues to charge fees. Applications are commodities, and infrastructure is monopolistic. And monopolies, as we know, often capture a large portion of the value in an ecosystem.

Cracks on the Foundation

But let’s candidly discuss the potential issues, as the bullish argument for Chainlink assumes many things that may not hold true forever.

The first problem is that oracle networks are technically difficult to build. But the difficulty is not in the software, but in getting everyone to agree to use your version. Chainlink’s moat is the network effect and first-mover advantage, rather than some insurmountable technical barrier. Google and Amazon could build competitive oracle services tomorrow if they wanted to. The same goes for Microsoft. Any large cloud provider with a great engineering team can.

The second issue is the risk of regulatory capture. Chainlink has become so systemically important that if it fails, a large part of the tokenized financial system would also collapse. This is precisely the “too big to fail” situation that makes regulators nervous. What would happen if a senator realized that a private company, without government oversight, controls the data flow of trillions in tokenized assets? Chainlink could suddenly find itself facing regulatory scrutiny that turns a profitable business into a compliance nightmare.

The third question is the tokenization assumption. The entire value proposition of Chainlink relies on traditional finance migrating to the 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, making tokenization harder rather than easier? Chainlink is building infrastructure for a future that may not happen.

The fourth question comes from the competition of their clients. JPMorgan is currently using Chainlink, but JPMorgan also has thousands of engineers and billions of dollars in R&D budget. They decide to build their own oracle system instead of paying Chainlink fees indefinitely. How long will that take? This question is equally applicable to every large bank and asset management company attempting to tokenize.

The last question is whether any middleware company can maintain pricing power in the long term. History shows that the infrastructure layer often commoditizes over time. The internet started with expensive dial-up services and eventually turned into commoditized broadband. Cloud computing began with high charges from Amazon and ultimately became a competitive cost environment among multiple providers. Why would oracle networks be different?

Chainlink bets that they can maintain network effects and switching costs indefinitely. This is possible, but such bets tend to be effective until they suddenly fail.

But for now, this success story looks entirely different from the decentralized and disintermediated financial system that cryptocurrencies originally envisioned. Instead, it appears more like an old system with a more sophisticated API. Banks are still banks, regulators are still regulators, and funds continue to flow through institutions that the government can control.

Chainlink has not replaced traditional financial systems. They have built a translation layer that allows traditional financial systems to “speak blockchain language.” Now, as this translation layer becomes indispensable, it remains unclear whether cryptocurrency provides better tools for decentralized finance or merely for centralized finance.