One of the hottest cryptocurrencies on the planet right now is Chainlink (LINK -4.07%), which is up 151% year to date. Over the past 30 days alone, this crypto is 89% higher.
Based on its recent performance, Chainlink, with a market cap just south of $8 billion, is close to breaking into the ranks of the top 10 cryptocurrencies in the world.
This recent performance is certainly impressive, but there could be even better days ahead. That's because Chainlink might just be the one large-cap crypto best poised to capitalize on the artificial intelligence (AI) boom. Let's dig in.
What is Chainlink?
Chainlink is a decentralized blockchain oracle network. In other words, it provides blockchain users with real-world data that can be used for smart contracts, which are small pieces of executable computer code.
If these smart contracts can't find the data they need on the blockchain, then they can ask Chainlink to find this data "off chain" (i.e., somewhere other than on the blockchain). This data can be just about anything, from real-time financial data to weather information. As such, Chainlink is not so much a cryptocurrency in the traditional sense as a crypto token that can be exchanged for data.
Right now, over 1,900 projects, from start-ups to large enterprises, use Chainlink to connect smart contracts with off-chain data. Partners include top cloud-services companies, large telecoms, and news providers.
As smart-contract volume increases, and as demand for off-chain data rises, that could result in people bidding up the price of Chainlink.
That's why it soared to an all-time high during the last crypto bull market rally in 2021. Back then, people were convinced that smart contracts would transform modern financial markets. Chainlink seemed to be at the center of this new interest in decentralized finance, and it soared from around $2 in early 2020 to an all-time-high of $53 in May 2021.
Chainlink and the AI boom
Now, more than two years later, we could see a similar market cycle. This time around, the buzz is being fueled by artificial intelligence (AI).
In February, just months after ChatGPT was launched, the founder of Chainlink suggested that there might be a huge new growth opportunity at the intersection of blockchain technology and AI. At the time, I was skeptical, because just about everyone wanted to be part of the AI boom, right?
Image source: Getty Images.
But in May, Chainlink unveiled a detailed study showing it could develop innovative uses for AI and blockchain technology. Some of these, such as using AI to improve the security of data exchanged between blockchains, might not strike you as being all that sexy.
Still, a few purposes, like using Chainlink to empower healthcare professionals with better medical data and airtight security, could be life-changing for some individuals.
According to Chainlink, a wide range of industries (including energy, healthcare, education, and agriculture) stand to benefit from the combination of AI and blockchain. If so, this intersection of two high-growth technologies could be huge for the long-term prospects of Chainlink, helping to push its valuation even higher.
Remember this before buying Chainlink
Just keep in mind that Chainlink is not a direct play on the AI boom and should not be considered an "AI token." It's more of an indirect play on AI and the world's fascination with data. Even if the AI boom eventually fizzles out, Chainlink is still valuable as a provider of data. Theoretically, this core data functionality should provide a floor to its price, as long as blockchain networks are widely used.
In the future, it might be able to capitalize directly on the AI boom by providing data to enterprise-class chatbots to help them come up with better responses for common business problems, such as how best to optimize a supply chain.
Already, some developers are working on Chainlink solutions involving AI, and other developers are working on AI-powered chatbots that are native to the blockchain (unlike ChatGPT, which is not built on the blockchain).
Even if only a handful of these projects pan out, it's easy to see how the AI boom could be a real catalyst. All the crypto needs to do is figure out a killer app that combines artificial intelligence with blockchain technology, and its value could soar even higher.
Currently trading nearly 75% below its all-time high of $53, Chainlink could be a magnificent indirect play on the AI boom.
