Many investors are checking out the cryptocurrency market nowadays. Some corners of the rapidly evolving sector hold several names with similar profiles, and it's not always easy to pick one over the other. On that note, we asked two of our cryptocurrency writers to hash out whether Polkadot (DOT 1.94%) or Chainlink (LINK 2.91%) is the better play on cross-chain connectivity tokens right now.
Read on to see why you might favor one of these altcoins over the other.
Master and servant
Anders Bylund (Polkadot): First and foremost, it's important to note that Chainlink and Polkadot don't compete with each other in any traditional sense. One can succeed without hurting the other's business prospects, and the two actually work together in many ways. Furthermore, they have a lot in common.
The Polkadot network and tokens allow other blockchain registries to exchange data with one another. "Any type of data across any type of blockchain," is the project's favorite battle cry.
Chainlink's vision is eerily similar. This decentralized oracle network connects Ethereum (ETH 2.85%) and Ether-based tokens to off-chain information sources, in order to let unrelated products and services make use of data housed in Ethereum's ecosystem.
These visions have already made connections. Chainlink data oracles started to connect with Polkadot's main network six months ago, giving app developers more ways to build programs and services around a combination of Chainlink and Polkadot functions. You'll note that this was Chainlink taking a subservient role inside the world of Polkadot blockchains and networks, not the other way around.
What this comparison comes down to is that Polkadot operates a larger and more ambitious system than Chainlink. I suppose it might be possible to flip that relationship in the future, but it's hard to see how. Therefore, Polkadot is essentially guaranteed to stay larger and more important than its oracle network partner.
Don't get me wrong -- I believe that both of these cryptocurrencies are solid long-term winners and I own a few tokens of each. But I keep a closer eye on Polkadot because that's where the money is.
Off the Chainlink
Rick Munarriz (Chainlink): If crypto was merely a popularity contest, the bullish argument for Chainlink when pitted against Polkadot would be moot. Chainlink's the much smaller digital currency, with a market cap approaching $9 billion, roughly a third of what Polkadot currently commands. Chainlink has also been relatively underwhelming as a wealth creator for recent investors. It's up just 42% over the past year, chump change in light of other crypto denominations, including Polkadot and its nearly 450% surge in the same time.
However, Chainlink plays a unique and vital role in the expanding realm of decentralized finance (DeFi). As a decentralized oracle network, Chainlink is a pioneer in making smart contracts smarter. Its arrival marked the ability for smart contracts and other DeFi apps to securely access external market data. More often than not, we're talking about external market prices that are critical in blockchain functionality.
Chainlink is doing a lot of the grunt work in improving what smart contracts can do, but when will it get the appreciation -- capital appreciation, that is -- that it rightfully deserves? Chainlink turned heads last week, when Eric Schmidt was tapped as a strategic advisor to Chainlink Labs.
If the name sounds familiar, it's because Schmidt was CEO of Alphabet's (GOOG 1.96%) (GOOGL 2.16%) Google from 2001 to 2011, widely credited as the one who helped turn the search engine created by its two founders into an online marketing juggernaut. He's now on board to help Chainlink scale its network, making it a global standard for seamlessly weaving real-world data into blockchains.
The past year may have been somewhat uninspiring for Chainlink investors relative to the returns in most of the other leading cryptocurrencies, but the pieces are falling into place for it to be a top performer in 2022 and beyond.