Going through the prolonged list of Chainlink’s "partners" and "integrators", it was apparent that the vast majority of them are neither using the network nor could have any synergies/joint initiatives in the foreseeable future. Three projects stand out, however. Aave, Synthetix and Kava claim that they are using Chainlink for a good portion of their operations. Moreover, they were among the few industry insiders that publicly supported Chainlink following the publication of our initial coverage and extensive analysis of the Chainlink ecosystem:
Apparently, there were actual Chainlink users able to pay what we believe are prohibitively high network service fees (the current unsubsidized price is north of $90 per data retrieval) in the highly competitive DeFi world:
Maybe $93.3 for tamper-proof price feed from 7-8 pre-selected data aggregators might be too expensive for users not dealing in hundreds of thousands per transaction. But hey, who are we to judge the decisions of the DeFi behemoths and question the truthfulness of their public statements? Maybe our rationale was wrong? Or maybe not.
So what do Chainlink, Aave, Sythetix and Kava have in common? The goal to revolutionize the financial industry? We doubt it. The sticking glue of the Chainlink ecosystem is Framework Ventures.
Framework Ventures are betting heavily on the growth of decentralized finance (DeFi), with Chainlink and Synthetix being the main investments in their portfolio. The DeFi market is booming in 2020 fueled by the growing support of major exchanges and investors all over the world cashing in on the hype. The perpetual market speculations and the fear of missing out led to skyrocketing valuations, which stand in sharp contrast with the small markets and transactional volume of the DeFi projects. The bubble is inflating, and Framework Ventures are diligently taking part in the process by nurturing an ecosystem of closely connected and dependent on each other DeFi projects. And Chainlink is the central piece.
Michael and Vance have put big money on Chainlink back in 2017 and are trying hard to make the best out of it. So what they do is - they purchase tokens from various DeFi’s and then push Chainlink in the project’s agenda while the LINK marines are set to aggressively shill their new friends. Here’s one example:
Ironically, concentration is a major concern in the development of the Decentralized Finance and Synthetix is no exception, with nearly 60% of the supply in the top 5 holders.
Framework Ventures are actively contributing to this problem, which undermines the trust in the system, and brag to be the largest LINK and SNX holders outside the core development team:
The controlling "interest" enables them to play an active role in the governance and establish an intertwined closed system of portfolio companies. Of course, creating synergies and market dynamics between portfolio companies is one of the core propositions of the venture capital industry. What we find alarming, though, is that pretty much all Chainlink integrators and supporters have financial ties with a major LINK holder.
From clients’ perspective, Synthetix and Aave are dependent on the price feed data provided by Chainlink Oracles and have their hands tight should better and more competitive options emerge. The "network effect" created by Framework Capital has positioned Chainlink as an integral part of the closed ecosystem that is not based on a free market economy but internal synergies. Put outside of this orchestrated "market", Chainlink is just a financially unfeasible solution with flawed technology that big DeFi projects will never integrate.
Apart from the network effect, what else do 'Framework Ventures' offers to its investments?
Market-making and hardware infrastructure. This is, once again a great thing: the nascent crypto market needs liquidity and infrastructure to prosper. Unfortunately, in this case behind the "market-making" facade stands extensive price support during sell-side pressure (like the one that followed upon publication of our report) and more importantly, plain market manipulation during hours of low liquidity. How does the second work? Market buy orders of magnitude the current liquidity are placed on the exchanges, which results in an excessive slippage and wide price gaps. Next, the price is supported until the Chainlink propaganda machine floods the social media, claiming Chainlink is the future. Eventually, the FOMO kicks in as retail investors and crypto enthusiasts join the party. At this point, there is enough demand so the people behind the manipulation can dump their token at a higher price. Apparently, Chainlink’s institutional investors have invented the perpetuo mobile.
Conclusion
One of the few real integrations of Chainlink are with Aave and Synthetix. Chainlink enjoys very loud support from both projects, and the reason behind this is a common investor called Framework Ventures who are the largest owner of LINK and SNX, the native tokens of Chainlink and Synthetix. We believe the investment company is nurturing an ecosystem of "Chainlink users" to create a false sense of usefulness around Chainlink’s service. The end goal of Framework Ventures is to take full advantage of their massive LINK position. The investments made in Sythetix, Aave and Kava are minimal compared to the price appreciation of their LINK holdings following the integration announcements. Moreover, we believe the team is capitalizing on its trading expertise and capital on disposal so they can control the LINK price and manipulate it in their favor.
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