Debunking the ‘Zeus Capital’ Disinformation Report on Chainlink
Recently, an anonymous and fraudulent entity going by the name ‘Zeus Capital’ published and heavily marketed a hit piece on Chainlink as part of a ‘Short and Distort’ scheme. The fraud is driven by greed and built upon an entire campaign of misinformation, false accusations, and easily debunkable lies about the Chainlink network, the LINK token, and the SmartContract team. Instead of putting reputational risk behind their outlandish claims, they are attempting to make a quick and dirty profit by hiding behind anonymity and using disinformation to emotionally manipulate LINK token owners into selling their holdings and betting against one of the most widely adopted technologies in the entire blockchain industry.
We broke our analysis down into several different sections (click on the hyperlinks to jump straight to any section, unfortunately only works on desktop and not mobile):
Define a ‘Short and Distort’ scheme
Showcase Chainlink’s industry-leading adoption
Explain Zeus Capital’s manipulation campaign on Chainlink
Explain why Zeus Capital LLP is a fraudulent entity
- Claim #1: Market Manipulation
- Claim #2: Permissioned On-boarding
- Claim #3: Broken Tokenomics
- Claim #4: Only on Testnet
- Claim #5: Founders are Dumping
- Claim #6: LINK is a Security
- Claim #7: On-Chain Token Data
- Claim #8: Max Addressable Market
- Claim #9: Secondary Provider
- Claim #10: Economics and Competition
- Claim #11: Team
- Claim #12: Code Progress
Short and Distort: A Primer
Before we dig into Zeus Capital or the actual report itself, we first must set a baseline understanding of what it means to perform a short and distort scheme. Investopedia summarizes it in a few key points below.
In order to drive the price of the asset down, malicious short-sellers have a strong incentive to distort the truth and control the narrative by spreading fear, uncertainty, and doubt (FUD). Sometimes this goes as far as knowingly spreading disinformation about a project/company to convince others to sell their assets and go short as well. Short and distort schemes can involve a myriad of activities, including but not limited to:
- Writing and publishing false research reports/articles
- Using a pseudonym to hide their true identity
- Lying about credentials and impersonating an established firm
- Circulating false rumors on social media
- Accusing malicious intent/fraud by a project’s founders
- Manipulating data sets to fit a specific narrative
- Lying through omission using half-truths
- Using provocative and hyperbolic language
- Paying for advertisements and coverage
While “short and distorts” are possibly effective for subpar and already failing projects, these schemes used against fundamentally solid technologies that consistently deliver often result in massive financial losses. The reason being that the positive momentum of technological innovation and adoption is so strong that it cannot be overcome by manipulative and dishonest bearish entities. By failing to control the narrative, short-sellers can become increasingly desperate and turn malicious, especially as their short position collapses and they are deeply underwater financially. Sometimes it even results in unintended consequences like an innovative project’s community rallying together to expose the short and distort scheme in a public manner, e.g. Tesla’s community rallying to bankrupt short sellers.
Zeus Capital’s attack on Chainlink is the most recent example of a short and distort in the cryptocurrency market, going to great lengths to try and create a false narrative. Not only are they pushing their own false agenda, but they continually attempt to pay others to help spread it.
Both Bitcoin and Ethereum both experienced similar phenomena, such as Bitcoin being declared dead over 380 times and TechCrunch publishing an article titled “The collapse of ETH is inevitable.” But as we have seen with Bitcoin and Ethereum, short-sellers get crushed when betting against next-generation technology that provides real-world value.
Chainlink: The Industry Standard Blockchain Oracle
Since its live mainnet launch over a year ago, Chainlink has become the most widely used oracle mechanism across the entire smart contract ecosystem, making it a foundational piece of infrastructure for both the growing DeFi ecosystem and a wide variety of use cases across all blockchain platforms. Chainlink plays a critical role at the intersection of traditional economies and blockchain ecosystems, acting as a secure communication bridge between the two. By doing so, Chainlink allows smart contracts to use real-world data to automate blockchain transactions and trigger actions on legacy systems.
Since its inception, Chainlink has cemented itself as the industry-leading decentralized oracle network. It is widely adopted by blockchains, dApp startups, and enterprises alike. A few of Chainlink’s notable accomplishments include:
- The industry standard oracle mechanism within decentralized finance: Securing over a billion dollars of value for leading DeFi projects such as Synthetix, Aave, Loopring, Nexus Mutual, Bancor, and many more. Also increasingly being used by numerous Centralized Finance (CeFi) companies such as Celsius and Digitex.
- Most widely adopted blockchain middleware for enterprise: Working with multinational enterprises like Google, Oracle, Deutsche Telekom subsidiary T-Systems, and SWIFT; numerous top-tier South Korea banks; and is part of the first public/private initiative to help modernize the Colorado State Lottery. They are also spearheading and/or contributing members to numerous standardization and enterprise working groups such as Cornell Tech’s IC3, Hyperledger Avalon, Baseline Protocol, EEA Task Force EMINENT, and the Interwork Alliance. These enterprise alliance organizations count some of the largest companies in the world as members like Microsoft, EY, and IBM.
- Most flexible and adaptive blockchain abstraction layer: Integrated within most of the leading blockchains like Ethereum, Polkadot, Kava, IRISnet, Tezos, Ava, NEAR, etc and with in-progress integrations with Hedera Hashgraph, Harmony, Matic, Zilliqa, Conflux, Solana, China’s BSN, CasperLabs Hyundai’s Hdac, and Kakao’s Klaytn, and the vast majority of industry-leading blockchains.
- Selected by the top independent research institutions: Chainlink was selected by the World Economic Forum as one of its ‘100 Technology Pioneers for 2020’ — a collection of the world’s top “early to growth-stage companies”. It was also featured by Gartner in numerous articles praising Chainlink’s innovation and technology and discussed by the MIT Technology Review as tackling the most critical pain point to widespread smart contract adoption.
These are just some of the 200+ partnerships, collaborations, integrations, and recognitions regarding Chainlink, more details of which can be found here. It’s also one of the most discussed projects on social media and widely recognized as a leading cryptocurrency in the blockchain market due to its strong fundamentals and deep liquidity across exchanges.
Additionally, the number of smart contracts on the Ethereum blockchain that interact with the Chainlink protocol has been steadily growing, even recently turning exponential to now include over 16,000 contracts. This growth is being driven by an accelerating number of projects launching with Chainlink on mainnet, further fueling its strong network effects as a single standard for oracle data.
The Short and Distort Scheme Against Chainlink
On July 17, 2020, an anonymous source referred to as ‘Zeus Capital LLP’ published a 66-page report titled “The Chainlink Fraud Exposed.” They accompanied it with a large-scale spam email campaign, promoted ads on twitter, and private messages to larger cryptocurrency influencers/traders about paying them to do bearish technical analysis on the LINK chart.
Besides the anonymous source and paid disinformation campaign — often capitalizing words like ‘STRONG SELL’ and making hyperbolic claims without supporting evidence — it becomes immediately obvious that they undertook writing the report with ill and dishonest intentions. Most points in the report only require a simple Google Search to debunk. For example:
- They claim Chainlink is on Testnet when in fact it has been on mainnet since May 30th, 2019, and provides oracles for countless live applications that collectively secure over $1.5B USD in value. They tried to explain this away as Chainlink wasn’t a live blockchain, but it was never designed to be a blockchain. It’s middleware that runs both on-chain (any blockchain) and off-chain (to connect to any external system).
- They claim that Chainlink’s adoption is declining when in fact it’s been growing exponentially since launch, with over 200 partners/integrations/collaborations. Numerous market-leading projects have stated that integrating with Chainlink allowed them to obtain critical off-chain data resources, go-to-market quicker, and become more secure through increased decentralization.
- They claim projects are freeloading and even get paid to use the Chainlink network, when in reality numerous project founders that have integrated with Chainlink, such as Kava and Aave, have publicly confirmed that they pay to utilize the Chainlink network.
- They claim the team is small and inexperienced when in fact the Founder is the pioneer of the blockchain oracle space (involved since 2014), the team is rapidly growing (now 40+ members), and they have outspoken and highly experienced advisors such as Ari Juels (former Chief Scientist of RSA), Tom Gonser (Founder of DocuSign), Evan Chang (Director of Engineering at Facebook), and numerous others.
- They claim the Google and SWIFT partnerships are fake because the logos were “taken off the website” when in reality Google is prominently shown on the chain.link website. All you have to do is exert a tad of effort to scroll through their panel of quotes to find one from Google’s Allen Day. On the other hand, SWIFT is featured on the smartcontract.com website, with links to the Sibos PoC work they conducted.
These are just a few of the very easily debunkable claims that anyone can independently verify with minimal effort.
Zeus Capital LLP: A Fake Anonymous Entity
Before dissecting the information presented in the report, it’s important to examine the entity that released it. According to the website linked within the report, they claim to be “an asset management firm focused on alternative investments, market infrastructure inefficiencies, and event-driven opportunities.” However, once you exert the slightest amount of effort, it becomes clear they are anything of the sort.
Fraudulent Misuse of Company Logos and Brands
Zeus Capital’s website features a list of “Zeus Friends” which contains various news outlets, companies, and projects. The purpose was to form social proof around Zeus’s legitimacy, however, their “friends” have publicly and/or privately stated that they have no connection to Zeus and have requested to be removed.
Below is Marc Zeller of Aave — a developer for a top three DeFi protocol that currently has around a billion dollars in value locked into its decentralized lending platform — stating that Aave did not give any consent to be listed on their website and demanded to be removed immediately. The irony is that Aave is actually one of the largest live users of Chainlink and has stated on multiple occasions the importance of Chainlink in their success as a project.
As of writing this article, Aave has yet to be removed from the Zeus Capital website. He is not the only one either who has requested to be removed yet still remains. A fellow community member contacted numerous firms listed on Zeus’s website and they all said they had no affiliation with Zeus Capital and their logo was posted without their consent. None of these false affiliations have been removed. In fact, they haven’t even issued any kind of statement clarifying the matter, leading to the conclusion that Zeus knowingly lied about their partners in order to further their agenda.
No legitimate firm would ever act in such an unprofessional matter and it’s clear that Zeus Capital is not well connected with anyone. Zeus aimed to “appeal to authority” to gain the reader’s trust, but all of this falls apart when you contact their supposed partners directly. While a major red flag on its own, this is only the tip of the iceberg of the malicious behavior and shady tactics that Zeus Capital has employed.
Anonymous Entity
Zeus Capital is entirely anonymous, with no listed people on their website, no known office locations, no history of activity before this report, and not registered with any regulatory bodies required to operate as a private asset firm. For example, they claim to have office locations in New York and London, but are not compliant with SEC/FCA regulations. In fact, investment firms are not even allowed to be registered as a Limited Liability Partnership in New York and you have to register with the New York Secretary of State (which Zeus hasn’t done). This basic research alone shows that they are clearly lying about their name and the “firm” is fraudulent in nature.
When looking deeper into their website using the WayBackMachine (an Internet Archive service), it shows that it was essentially non-existent until July 17th, 2020, just days after the Chainlink report was published. Additionally, Zeus has never published a report prior to the launch of their website.
Well known media outlet CoinTelegraph reported in a recent article that they were unable to get into contact with the firm as the phone lines offered by Zeus were switched off or went straight to voicemail.
“The purported asset management and research firm claims to be based in New York, London, Singapore, and Hong Kong, however, Cointelegraph was unable to contact the firm — with the phone number for its London office appearing to be switched off, and the Hong Kong office diverting calls straight to voicemail.”
Impersonation
Apart from being unreachable, Zeus Capital LLP took the name of a legitimate investment banking firm Zeus Capital Ltd. While companies may accidentally have similar names, Zeus Capital LLP never made a single attempt to address the confusion or apologize for any inconvenience despite being constantly informed about it on social media. Not only is it a very sleazy way to operate, but it forced the legitimate Zeus Capital Ltd, an established investment banking firm based in the United Kingdom, to go out of their way and publicly denounce any relation or affiliation with “Zeus Capital LLP” or the Chainlink “research” report.
Zeus Capital Twitter Account
Part of Zeus Capital’s strategy has been spending time and money paying for promotional tweets. It’s not just a casual occasional promotional tweet either, but a constant wave of ads sent to the same people, even causing many Crypto Twitter accounts to start voicing their frustration about being spammed by Zeus’s advertising.
The substance of the tweets is rather unprofessional as well, including provoking “American-Russian’’ tensions to spark emotion in the mind of the innocent reader and associate it to the Co-founder of Chainlink, Sergey Nazarov, who happens to be a Russian American. One of the screenshots posted above (in white) is from a promoted tweet by Zeus that contains a collage of screenshots from articles published in the early 2010s discussing Russian companies being charged with fraud, all of which are completely unrelated to Chainlink and happened before Chainlink was even created.
It is also interesting to note that Zeus Capital is likely paying for likes and retweets as the majority appear to be from bots and non-crypto users. They block anyone who voices opposition or offers counter-narratives to the report, opting instead for an echo-chamber to support their own narrative. More recently, Zeus Capital was even caught trying to pay for bearish TA (technical analysis) charts from popular traders on Crypto Twitter that they could then retweet to further their narrative.
Debunking the Executive Summary
Now that we have some basic context on the entity that released this report, the next logical step is to go through the main points. Given its extensive length (66 pages), we are going to provide a debunk of the points made in the executive summary, with verifiable web links that anyone can independently verify themselves. This should provide anyone new to the situation with more context, which will make it quite obvious that the report is intentionally dishonest and designed specifically to enrich the creator through a short and distort scheme that preys on people’s emotions.
Besides the many outright lies throughout the document, two distinct tactics stand out, both of which are logical fallacies. The first is an “argument from ignorance,” which is the tactic of making a claim without evidence and assuming it’s true because it hasn’t been debunked. This tactic often is used to shift the burden of proof to someone else to disprove it with the assumption it’s true despite no evidence. In actuality, the burden of proof is always on the person who makes the claim.
The other logical fallacy is referred to as “gish gallop,” wherein a debater confronts an opponent with a rapid series of many specious arguments, half-truths, and misrepresentations in a short space of time, which makes it impossible or incredibly time-consuming for the opponent to refute all of them within a reasonable amount of time. The goal is to make so many technical-appearing claims in order to appear legitimate to a novice reader and overwhelm a more advanced reader not wanting to spend the time and effort to independently address each and every one of the claims made.
With that in mind, let’s briefly analyze the multiple claims made in the executive summary.
Claim # 1: Market Manipulation
Zeus starts with the classic “pump and dump” accusation based on numerous unbacked claims. There is no evidence to suggest that the team is performing any form of market manipulation or malicious behavior. While the SmartContract team has sold a small portion of its founding tokens, which were allocated to them as part of the ICO, they have also grown the team tremendously (40+ people from around the world), subsidized the early growth of the network (bootstrapping it through a quasi block reward for oracles similar to Bitcoin and Ethereum’s block reward for miners), and have a growing list of paying users (of which no other oracle project compares).
Chainlink’s price has remained in a steady consistent uptrend during its entire existence, including during one of the worst crypto bear markets in 2018–2019, where most tokens lost the majority of their value and dropped over 90%. The positive momentum is highly correlated to the adoption of the Chainlink network, which has increased dramatically over the last two years and become the most widely used oracle network today.
This adoption is evident in its over 200+ integration pipeline, the over 35+ price reference feeds live on mainnet, and 38+ independent Chainlink nodes being paid on-chain for oracle services in the LINK token. These price feeds are used in production by 31+ paying DeFi projects that collectively secure over $1.5B+ in user funds. This represents only a small sample size of the target market for Chainlink too, which is nearly limitless and can expand across numerous other market verticals like traditional finance, gaming, insurance, supply chain, energy, advertising, enterprise, government, and more.
This growth is also evident in the clear uptrend in smart contracts that interact with the LINK token on Ethereum.
Thinking objectively, it would actually be irresponsible for a team with aspirations of long-term success to not sell any tokens after the large price appreciation over the last few years. Proper risk management is critical in order to lock-in a long-term runway and grow the network. The Ethereum Foundation itself performed the same strategy, selling portions of their Ether during ATHs in 2018 to ensure they had a predictable runway. Proper risk management means no matter the greater economic factors of the crypto market, the SmartContract team has a stable source of funds to pay employees and continually develop the Chainlink Network. It not only secures the continued development of the network, but it provides Chainlink users assurances on its long-term viability of being able to supply data for many years to come.
Not to mention, the team would be doing an objectively terrible job of ‘pump and dumping’ their token considering they have never mentioned it on Twitter, never posted hype or ‘announcements of announcements,’ nor do they allow price discussion in their official telegram or discord. All of this is easily verifiable by scrolling through the history of their social media channels. Their primary focus is security and adoption, which naturally fuels appreciation of the LINK token as the team delivers.
Claim #2: Permissioned On-boarding
This statement shows clear confusion and a lack of research on how the network fundamentally works. Chainlink is a permissionless, open-source framework that anyone can use today to run their own Chainlink node and/or build their own Chainlink oracle network using whatever nodes, data sources, and network parameters they desire. There are also third-party sites (such as market.link and honeycomb.market) where node operators can publicly list their services and smart contract creators can search and filter for nodes.
Chainlink’s Price Reference Data networks are one type of oracle network design, which exclusively use professional, high quality, and time tested nodes that have been thoroughly security reviewed by the team. These nodes are independent of the Chainlink team, instead run by leading blockchain and DevOps teams, many of which run PoS infrastructure for several other leading blockchains and secure millions of dollars in user funds. In fact, Deutsche Telekom’s subsidiary T-Systems operates a Chainlink node as well as major cryptocurrency exchange Huobi.
The reason these price reference networks currently operate on a permissioned node model is that users want certain quality control standards in place in order to cultivate trust in the networks responsible for securing over a billion dollars in value in DeFi alone. Being the most widely used collection of oracles in the market, Chainlink’s Price Reference Data is clearly filling the market demand, as oracle networks without quality control standards currently have zero adoption in production.
As more features such as threshold signatures and binding service agreements with staking go live, Chainlink-powered projects may feel they can incorporate a greater amount of unknown nodes in their networks and still get the security guarantees they need. Sergey also stated in a recent video that they will continue to decentralize the governance of reference feeds over time.
Ultimately, Chainlink’s Price Reference Data is just one type of oracle design available on Chainlink, but by no means is it the only. Chainlink is not a monolithic network, but an open framework that can support an infinite collection of independent and customizable decentralized oracle networks operating in parallel. This extreme flexibility is what has earned Chainlink the status of being the industry leader with the greatest network effects in the oracle space.
Claim #3: Broken Tokenomics
In the last three years, all the stakeholders mentioned above have benefited: holders have seen the LINK price steadily appreciate in value, clients are getting subsidized on-chain data for their applications, and the founding team has expanded their operations around the world and across numerous market verticals. In addition, Chainlink node operators are getting paid to run oracle infrastructure through a shared cost model, where multiple teams contribute to paying for the same oracle data feed. Each new project that shares in the costs effectively lowers the costs for each individual user.
The LINK token is already proving its utility, as it is exclusively used to pay nodes for oracle services. By being paid in LINK, nodes take part in a form of implicit staking, where the quality of their services on the network are aligned with their personal interests of growing wealth. If nodes become malicious and try to cheat the network, the value of the LINK token decreases. This not only puts at risk their current business model and any current LINK holdings, but it jeopardizes any future revenue opportunities. It is simply more profitable to be honest and help grow the network than to try and perform a one-time attack, especially considering it wouldn’t work without numerous other independent entities involved. This is a major contributory factor to why networks like Bitcoin have not been 51% attacked.
In the future, this crypto-economic security will extend out further through explicit staking, where nodes must stake their LINK tokens as collateral in the service agreement to act as a form of quality-backed insurance of oracle services. The staked LINK can be taken away (slashed) if the node fails to meet the terms of the pre-agreed upon service agreement. This not only encourages nodes to acquire more LINK in order to service more contracts, but it ties the token directly to the security and overall economic value of the network.
The current price of LINK doesn’t matter for end-users or data requesters as the cost of data requests is not set to a fixed-rate payment. If a data requestor is concerned about token volatility, the token can be abstracted away into the background through meta-transactions — when a user purchases oracle services in fiat on-demand via a relayer service that handles the backend payment to the Chainlink Node in LINK. The Chainlink team is also building a network model where data requests can be priced in USD amounts of LINK (e.g. $0.30 of LINK per request) to automate the cost balancing.
The team’s share of the tokens also benefits from increased adoption of the Chainlink network. The more adoption, generally the more demand there is for LINK by both users and nodes. This is likely to result in an increase in the value of the token and thus increase the total value of the team’s supply that can be used to grow the network even further.
In the Chainlink ecosystem, there is no entity that benefits from a decreasing price of LINK. More information about the crypto-economic security of the Chainlink network can be found in a recent presentation by Sergey below.
Claim #4: Only on Testnet
Chainlink has been on mainnet for over a year now (May 30th, 2019), so to claim that Chainlink is on testnet is both an objective lie and shows genuine disregard for intellectual honesty. Chainlink is today on Ethereum today, securing over $1.5B in DeFi and continually expanding to support a wider array of blockchains, applications, and use cases.
Zeus Capital tried to walk back their testnet claim when challenged on it by saying that Chainlink wasn’t a live blockchain, but this only further supports the conclusion that they either lack knowledge on the subject or are straight-up lying. Chainlink is not and has never been designed to be its own blockchain. It is a blockchain agnostic oracle network that exists as middleware between any blockchain and any external system to bridge data between them. Hence why it’s being integrated onto so many blockchains simultaneously, including Etheruem, Polkadot, Cosmos, Avalanche, Tezos, China’s BSN, and 60+ others.
Ethereum‘s gas price fluctuations, network congestion, core bugs, and ETH price volatility are not an inherent component of Chainlink, but attributes of the Ethereum mainnet itself. This is one blockchain environment that Chainlink operators within, and all decentralized applications and smart contracts on Ethereum experience these attributes. With Layer-2 solutions such as zkRollups becoming more prominent and the expected launch of ETH 2.0 phase0, Ethereum’s network congestion is being mitigated head-on by the Ethereum community. Regardless, being blockchain agnostic means Chainlink can support smart contracts within any environment, including more scalable environments.
It is true that staking is not yet live, however, enforcing on-chain penalties for off-chain data outliers within an aggregated data set is a complex distributed systems problem. No other project has presented any research on this solution and Chainlink has proven through other academic research and innovative solutions that it is the leading candidate to solve it. In fact, they were the first to even introduce the concept of staking in oracle systems, and their team includes one of the smartest cybersecurity and distributed systems researchers in the world in Ari Juels. While some oracle projects claim to have staking already implemented, that form of staking is only the right to produce blocks within an application-specific blockchain network, not to secure the external data being transported and aggregated.
Additionally, it is important to note that staking becomes more important after other key upgrades are implemented, such as Threshold Signatures and the FluxAggregator contract, which will allow for orders of magnitude more decentralization at a much lower cost. In essence, staking is an additional layer of security and not a fundamental requirement during these early days of adoption, especially when the contracts being secured are not yet near the valuations of the traditional financial world.
Claim #5: Founders are Dumping
Like many of the other arguments made, this is yet another wild claim that is not based on any evidence or facts. All objective data shows that the funds are being sold to grow the network by subsidizing the costs of running nodes, as well as growing the team to keep pace with its exponential growth. Token movements are fully viewable on-chain and the team has been public about how such funds will grow the network.
There is no evidence to suggest that the “founders are dumping their tokens at a substantial discount” and they provide no context as to who these “selected institutions” are. Additionally, the math backing their claim of “a substantial discount” is highly flawed as they’re comparing rates on an open market where node operators set their own prices to subsidized networks that bootstrap the supply side. Subsidizing oracle networks is not “dumping tokens on retail” but using token allocations for their intended purpose of seeding network infrastructure, which has been publicly known since day one.
Their logic on a downward spiral is equally flawed and based on the assumption of staking never being implemented. This is similar to saying ETH will never accrue its full value because ETH 2.0 will never launch. Even without staking, it’s hard to believe there are more than two other projects providing as much value to the blockchain space as Chainlink. Furthermore, throughout all traditional markets, asset value is driven to a large degree by upcoming improvements that users expect to see happen, not just current metrics (which we’ve demonstrated are impressive too). Future expected growth is almost always priced in.
Claim #6: LINK is a Security
Chainlink is indeed a decentralized ecosystem today as evidenced by the 30+ price reference feeds live on mainnet, operated by 30+ independent nodes and 7+ different data sources. The token is being used for its intended purpose (pay nodes for their off-chain data) and its utility is no different in this regard than Ethereum’s native token ETH (pay nodes for verifying transactions and producing blocks), which has already been declared not a security by SEC Chairman Jay Clayton. When LINK begins to be staked by nodes, this will be similar in concept to ETH2 staking, which the SEC considered when looking at ETH.
The Crypto Rating Council, a consortium of crypto business and lawyers like Grayscale and Coinbase, developed a framework to analyze cryptocurrencies and answer the question if a crypto asset is a security or not. Their framework determined that both Ethereum and Chainlink rank at a level 2 (on a scale of 1 to 5, where lower is better) meaning that they are both equally unlikely to be securities due to their decentralization and utility token nature. Since the SEC already considers ETH to not be a security, this leads to the conclusion that LINK is unlikely to be any different in this regard.
Additionally, numerous top-tier and U.S. based regulated exchanges such as Coinbase and Gemini have listed LINK for trading not only within the United States (where the SEC operates) but also within New York state, which has some of the world’s strictest security laws. When some of the most reputable and trusted crypto exchanges in the world list LINK in such a highly regulated region, it is clear that they have done their due diligence and deemed LINK not a security.
The “x token is a security, so stay away” scare tactic has been around for years in the crypto space, and at this point and has become a meme similar to the revolving “China has banned Bitcoin” narrative. This is a common tactic to scare the uninformed into selling their tokens. Such a claim usually requires extensive proof, and Zeus Capital offers none.
Claim #7: On-Chain Token Data
This is factually not true, adoption of the Chainlink network is continuing to go exponential. Where Zeus Capital is confused here (more likely intentionally dishonest) is that Chainlink-powered projects (DeFi and CeFi alike) utilize and contribute funding to the same common oracle networks to reduce costs, ultimately creating a shared public good model. This allows projects to get access to an oracle network that is cheaper and more secure than what they could create on their own.
Thus, instead of ten projects creating their own ETH/USD price feed and paying the full cost, they can share the costs of a single ETH/USD oracle. This is a good thing, as it reduces the costs for each individual, making it a major contributor to Chainlink’s growing adoption and network effects.
The number of projects integrating Chainlink oracle networks, which is the metric that matters, is continuing to increase rapidly, with often 5+ live or upcoming integrations a week. Additionally, network activity is actually at an all-time high, processing more data requests than ever before as more projects get integrated. Growth has accelerated in the number of nodes, number of data requesters, total daily fees, response times, and more. Reputation.link, third party data analytics site, shows the current statistic of the Chainlink network over the past seven days.
As adoption continues to accelerate, these on-chain metrics will maintain their upward trajectory and hit an inflection point of going exponential, which we are already seeing the beginning stages of today. This metric is fully verifiable using on-chain data and can be generated by anyone with only a connection to an Ethereum node.
Claim #8: Max Addressable Market
This argument shows genuine dishonesty, as Chainlink is already securing more than $1.5B+ in DeFi alone. To say that Chainlink’s addressable market in three years will only be $300M when it is already over 5x times that today, puts the whole report into serious question. Zeus Capital’s claim is based on a false assumption about the market the Chainlink network is aiming to capture.
Contracts are a fundamental component of society today, used in all types of functions whether people realize it or not. All contracts require inputs to produce outputs, which puts Chainlink’s addressable market at nearly all contractual agreements, as smart contracts set out to be the dominant form of digital agreement. The legal industry is $849B, the insurance industry is $1.3T, the global stock market is $90T, and the derivatives market is $640T. Additionally, the World Economic Forum estimates that the blockchain industry is expected to worth roughly $176B in 2025 (586x Zeus’s prediction in 2023) and $3.1T in 2030 (10,000x Zeus’s prediction in 2023). The market to capture here is nearly limitless.
Let’s just focus on a few of the immediate target markets for Chainlink, which include:
- Securing smart contracts and the DeFi economy
- Decentralizing traditional finance (CeFi) and FinTech
- Providing a blockchain abstraction layer for enterprises
To begin, Chainlink has been a major factor in the success of the decentralized finance industry, which is growing exponentially right now and has huge upside as a parallel financial ecosystem. We are seeing a wide range of DeFi applications integrate Chainlink such as exchanges (Loopring), derivatives (Synthetix), money markets (Aave), insurance (Nexus Mutual), asset management (Set Protocol), futures (FutureSwap), privacy mixers (Tornado Cash), domain names (ENS), real-world assets (DMM), and more. As existing DeFi platforms grow in value and new use-cases emerge, Chainlink will continue to absorb a larger market share by being the standard oracle solution used throughout.
The next logical product market fit is centralized finance (CeFi) and FinTech (e.g. RobinHood), where Chainlink can be used to gradually decentralize services and provide users with more transparency. This involves Chainlink’s decentralized on-chain price feeds being used as a price anchor and/or to determine product outcomes. For example, ensuring the internal price feeds of a CeFi system don’t deviate too far from Chainlink’s price data or using Chainlink to supply interest rates for determining interest payments on loans. Firms like Celsius (over $600M in user funds) and Digitex are already working with Chainlink to implement these features and many of the largest South Korean banks are working to provide data feeds for it.
Lastly, Chainlink serves a blockchain abstraction layer for enterprises, allowing them to interact with any blockchain platform through a single gateway. By providing a single communication bridge with access to all blockchains, enterprises can sell data and services across blockchains. They can also build on and/or integrate with any blockchain environment as part of a comprehensive strategy of both internal dApp development and external synchronization with blockchains used by their counterparties. This vastly reduces the time and costs of integrating with all the various chains and prevents lock-in to a single platform.
As an example, the Depository Trust & Clearing Corporation (DTCC), the post-trade financial services company clearing and settling the majority of financial securities in the United States (handles $1.7 quadrillion dollars worldwide), developed a case study of using the Ethereum mainnet, a Compliance Oracle, and APIs to tokenize securities and use them within the decentralized finance ecosystem. As the largest financial value processor in the world, DTCC is actively looking to use blockchain oracles as a fundamental piece of their infrastructure that connects together all the various elements, which will no doubt have to be flexible enough to support any existing or future chain and any legacy systems. A DTCC compliance oracle alone absolutely dwarfs any notion of Zeus Capital’s estimate.
Claim #9: Secondary Provider
This is another provable lie where no evidence is provided to back up its claim. The vast majority of DeFi projects that require oracles are utilizing Chainlink, with the next closest being Maker’s stagnating oracle network. Every other oracle project out there is either not yet live or doesn’t receive any in-production adoption. Chainlink not only has more users and secures more value on mainnet today than any other oracle network by a wide margin, but it’s also accelerating in adoption, which can’t be said about any of its competitors.
There hasn’t been a single project who has ever stated that they were using Chainlink to “take advantage of Chainlink’s deep pockets” or anything similar. This claim has no proof and goes against public statements by paying users who have integrated Chainlink as their primary/sole oracle solution. It’s exemplified best in a recent blog post published by bZx, a margin trading DeFi protocol that integrated Chainlink, stating:
Chainlink is the industry standard and most widely used oracle solution in the smart contract ecosystem; to say it is only a ‘secondary data provider’ is simply a lie.
Claim #10: Economics and Competition
This claim falls apart for the same reason as claim #7, Chainlink oracle networks are utilized and funded by numerous entities, where each new user lowers the cost for every existing and future user. After a data request is on-chain, any smart contract can query the Chainlink aggregator contract for its current value, only paying for the gas costs which are network dependent. Additionally, with Chainlink networks being subsidized to bootstrap the network during its early days, the costs are lowered even further (a key advantage of having a native network token).
Chainlink oracle networks do not sacrifice on decentralization, transparency, or accuracy. Quality comes at a cost, and while there are cheaper options, every other oracle project makes serious trade-offs that put it at a disadvantage to Chainlink. Many other oracle networks only showcase lower costs by running a centralized operation, relying on on-chain data, or utilizing low-quality free APIs, all of which are subject to several severe attack vectors that put users’ funds at serious risk. There is no clearer evidence that these tradeoffs are important to dApp developers than Chainlink being the most used and fastest-growing oracle network in the market bar none.
Chainlink is also clearly aware that it must lower costs while maintaining still core features, hence why it is set to launch the Flux Aggregator and Threshold Signatures. These two features will make it the cheapest oracle network to use in the market in addition to the shared cost model and all the other superior guarantees it provides.
Other oracle projects are extremely unlikely to ever reach tech parity with Chainlink, as many are only applicable within DeFi while Chainlink is fully generalized and can be used far beyond just crypto price feeds. The network effects of Chainlink will be near impossible to contend with, especially considering all the other oracle networks mentioned run oracles as a secondary function of their protocol, whereas Chainlink is solely dedicated to oracles. Chainlink’s network effects on both usage, addressable market, and first-mover advantage are nearing a point of escape velocity.
Let’s briefly examine some of the issues with the competitors mentioned above:
- MakerDAO’s oracles are highly opaque, where 75% of the whitelisted nodes are anonymous. Maker oracles’ data quality is vulnerable to volume shifts, especially in thinly traded markets, as nodes pull data from pre-selected exchanges. This is especially concerning given all the new collateral additions. Additionally, they only offer oracles for a few crypto price feeds and only have a handful of users, which appears to have stagnated in new adoption.
- Uniswap v1 is a highly insecure oracle solution, which has led to protocols getting oracle attacked and losing user funds. Uniswap v2 and it’s Time Weighted Average Price (TWAP) based oracle is set up in a manner where price accuracy is inversely correlated with tamper-resistance, meaning it’s hard to get both price accuracy and security. Additionally, Uniwap only supports price feeds for Ethereum tokens and the only known user is Augur, showing real limitations in network effects.
- Compound’s current oracle solution is centralized, completely under the control of the core team, and only used by Compound. They are working on an Open Oracle System which is designed to support signed price data (a feature Chainlink has supported since day one) taken directly from cryptocurrency exchanges, opening it up to similar attack vectors like Maker. Compound’s OOS is not live and does not have any planned users outside of Compound.
Any oracle network you could ever desire can be built using the “toolbox of Chainlink.” There is no need for another oracle solution when Chainlink is already decentralized at both the node operator the data source level, connects to every blockchain imaginable, and offers connections to every off-chain service that exists today or into the future with modular and expandable external adapters. Anybody wanting additional security can use the Chainlink Meta Oracle.
Claim #11: Team
While credentials are important, the initial assumption of ‘professional experience’ being the main and only critical driver to success in a new industry is a bit misguided. New industries require pioneers, hence Vitalik didn’t have professional experience before he created Ethereum and many of the best blockchain developers are not always involved in the corporate professional world.
Despite that, a quick look at the team and its advisors shows that the team is unparalleled in the blockchain space. The Chainlink co-founders have been studying and building externally-connected smart contracts and blockchain oracle technology since at least 2014 when SmartContract.com was launched (before the launch of Ethereum). The team has worked directly with top developers and enterprises who need blockchain oracles and has produced original research developments like TownCrier, Threshold signatures, Mixicles, and more. Chainlink’s 40+ person development team features seasoned experts in blockchains, oracles, cryptography, machine learning, artificial intelligence, and business development.
- Started building smart contracts pre-Ethereum in 2014
- Built the first widely used interface for DEXes
- Built the first blockchain-based email service
- Built the first centralized oracle service
- Last but not least, built the first decentralized oracle network
- Lead companies that have been acquired by Amazon
- Expert in applied artificial intelligence
- Best selling Amazon author
- Graduated from Harvard Business School.
- Worked previously a software engineer and team lead at Pivotal Labs
- Built mission-critical systems securing sensitive HIPAA compliant data and building scalable payments automation software.
- Oversees countless engineers and integration specialists who aid in the development and deployment of Chainlink oracle networks
Additionally, they have a top tier list of business and technical advisors:
- Professor of Computer Science at the Jacobs Institute at Cornell Tech
- Former chief scientist of RSA
- Formalized Proof of Work consensus in 1999 (powers Bitcoin and Ethereum)
- Created Proof of Retrievability in 2014 (powers FileCoin and Sia)
- Co-author of the Chainlink whitepaper in 2017 and only works with Chainlink
- Co-author of the Mixicles whitepaper in 2019
- Co-founder of The Initiative For CryptoCurrencies & Contracts (IC3)
- 36,000 total scholarly citations
- Founder of DocuSign, the industry-leading e-signature provider in the world
- Joined as a business advisor to Chainlink in early 2019
- Decentralized consensus researcher
- Associate Professor at the University of Illinois
- Associate Director of the Initiative for Cryptocurrencies and Contracts (IC3)
- Board member of the Zcash Foundation and Ethereum Enterprise Alliance
- Advisor to both Zcash and Tezos
- Former Senior Manager at Apple
- Director of Engineering Blockchain at Facebook
- Co-creator of the LLVM, which generates the low-level machine code running every Apple device, as well as much of Google, Nvidia, and Intel
- Ethereum Core Dev and developer liaison at the Ethereum Foundation (the glue between Eth core devs and the community)
These are just some of the many other highly experienced and knowledgeable engineers, business leaders, academics, and more that make up the Chainlink team. Chainlink is rapidly expanding too, with numerous job openings for integration engineers and software developers, further evidence of the growing demand for Chainlink.
The “focused on marketing” claim is ironic too, considering for the first year after their 2017 ICO Chainlink got mocked by many for its lack of advertising and community outreach as they put their head down and built the foundation of what would become the Chainlink network. This was in stark comparison to every other crypto project that was heavily promoting themselves and claiming it could solve the world’s problems. In fact, you will be lucky to find a single instance of the Founders or team talking about the token.
Claim #12: Code Progress
This is provably false as the SmartContract developers and other open source contributors have launched major changes and upgrades to the Chainlink repo on Github over time. Cosmetic changes exist but are only minor additions that pale in comparison to the technology being built. The team is working on numerous new innovative technologies in order to scale the Chainlink protocol, enable data privacy, and generate secure randomness.
The first major development being worked on is Threshold Signatures, which will enable transaction batching within oracle networks and substantially reduce gas costs. This enables highly decentralized oracle networks that are economically and technologically feasible, allowing Chainlink oracle networks to secure more value in-production.
The second major development is Mixicles (mixers + oracles), which provide smart contracts privacy for both the terms and outcomes of the financial instruments they execute. Additionally, this is done without expensive cryptography and can support rigorous regulatory and auditing requirements, all of which are a requirement for enterprise adoption of smart contracts.
The last, but definitely not least major technological innovation being built is Chainlink VRF, a verifiable randomness function that gives smart contracts access to on-chain randomness that is tamper-resistant against miner attacks and fully verifiable by users. This will initially power blockchain gaming and NFT applications that need a secure source of RNG. PoolTogether and countless other blockchain gaming applications have already committed to using Chainlink VRF. Additionally, this work is being done in tandem with threshold signatures to solve data withholding attacks.
In the past month alone there have been 4 new Chainlink client updates, 74 merged pull requests, and dozens of contributions from the Chainlink team and external developers. The majority of the activity was not cosmetic, but upgrades to the Chainlink protocol itself, the node software, and system of smart contracts, which can be fully verified on Chainlink’s open-source GitHub activity page. The team also has an active bounty program on Gitcoin to allow the open-source community to contribute in its development and help make it more secure.
The team makes their development progress transparent and available to everyone through their public pivotal tracker, which shows the development progress over time and the features currently being worked upon. This means rather than a vague roadmap with arbitrary deadlines, the Chainlink team provides context into the work being done on the protocol.
There has also been numerous contributions to the Chainlink codebase on GitHub from external projects such as Parity (the team behind Polkadot), Tezos, Ontology, Harmony, Near Protocol, Binance, and more. These teams are actively developing native support for Chainlink within their own platforms and have merged changes that allow this to be possible.
Conclusion
Now that we have laid out all the evidence and disputed their report, let’s take a holistic view of the situation. This report was created by a completely anonymous and untrustworthy source known as “Zeus Capital LLP” that not only impersonated a legitimate investment firm “Zeus Capital Ltd” and lied about being a limited liability partnership, but paid for non-stop advertisements containing hyperbolic claims and unbacked accusations of mal-intent. The contact information on their website and in the report is fake, making them impossible to contact, identify, or openly debate.
Their claimed partners have denied any connections and have already asked numerous times to be removed from their website. They have paid influencers to drive their narrative and have blocked anyone on Twitter who dare question it. Lastly, Zeus has openly stated they are short LINK and continually encourage others to follow along using leverage, even giving people a step by step guide on how to do so.
Looking beyond the firm, the Chainlink report is filled with an overabundance of provable lies, unbacked claims, and gross misinformation that tries to overwhelm a novice reader and waste the time of an honest researcher. As we have shown above, Zeus never had honest intentions when they published their report, hence why they are hiding their identities. It was designed solely to manipulate the emotions of the reader and craft a very specific narrative that’s completely disconnected from the scope of reality in order to deceive others into selling.
Zeus Capital has unilaterally failed in its attempt to short and distort the Chainlink project and its token LINK. Not only has the price of LINK appreciated since Zeus published their report, but it actually had a complete inverse effect of rallying the wider blockchain community around Chainlink in order to push back and call out Zeus’s heavy-handed tactics and paid disinformation campaign. Shorting one of the most innovative and fastest-growing projects in the blockchain ecosystem has not only turned out to be an abysmal failure but it serves as a perfect case study for why you can’t trust everything you read. In general, betting against technological innovation, especially one with a track record of consistently delivering and winning, is a surefire way to be on the wrong side of history. The entities behind Zeus Capital are likely to never recover financially, which is why they continue to lash out and showcase their utter desperation.
Despite this disinformation campaign, Chainlink and its ecosystem of partners, users, developers, and token holders are completely unphased and continue towards the same goal of making smart contracts the dominant form of contractual agreement throughout the world. Chainlink is stronger than ever and continues to grow at an exponential rate with new integrations and developers joining the ecosystem every day.
Hopefully, by reading this article, you understand the great lengths that desperate entities will go to in order to cover their financial losses. We recommend you independently verify all the information within this article and become more educated on the innovation taking place by Chainlink and smart contracts as a whole.
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