Chainlink is renowned for being one of the biggest oracle platforms in the cryptosphere, making it possible for real-world data to communicate with blockchain applications. The platform aims to fix one obstacle that has prevented smart contracts from becoming more widespread in business and various industries. Below we take a deeper look at what Chainlink is and what the platform has to offer.
What is Chainlink (LINK)?
Chainlink is a decentralized oracle platform designed to merge the blockchain world with the real world through data integration. The main aim of the platform is to allow smart contracts to capture real-world data, merging the two worlds.
Smart contracts are digital agreements that automatically execute when the agreed-upon conditions are met. Native to the blockchain industry, there is a significant gap between smart contracts capturing blockchain-specific data and external data like the weather, fiat currencies prices, sports scores, etc.
Bitcoin, for instance, has a very small range of these input capabilities, while Ethereum can handle more due to its smart contract functionality. Chainlink is designed to provide a far greater range of input across the blockchain space through its network of oracles.
These oracles are data providers that provide a bridge between smart contracts and external data sources. Each oracle is incentivized through a "reputation score" system to provide accurate data and rewarded accordingly with the platform's native token, LINK.
Who created Chainlink?
In 2014, Sergey Nazarov and Steve Ellis created a platform called SmartContract which allows smart contracts to come to life by connecting them to external data and widely accepted bank payments. This acted as the prelude to what would become Chainlink.
The initial version of Chainlink first emerged in mid-2017, founded by SmartContract. Three months later, the Chainlink whitepaper was launched by Navarov and Ellis. This was followed by a successful ICO which raised funds equating to $32 million, selling roughly 35% of the max supply of 1 billion LINK, funding the further development of the platform.
How does Chainlink work?
At its core, Chainlink allows smart contracts to access external data. To do this, it provides an off-chain infrastructure that links smart contracts to all kinds of different data providers. This makes it much easier for smart contracts to get the information they need. The smart contract can then use this data in whatever way it needs to.
The first thing to understand is that smart contracts need external data in order to do their jobs. This makes sense, right? Your standard contract clearly specifies what happens when certain conditions are met. So what determines whether (and when) those conditions occur? Usually, it's some external force that a smart contract simply doesn't know about.
That means a blockchain-based smart contract can't filful its purpose without a way to get information from outside of the blockchain. So what do you do? You could have every individual app developer write their own oracles for each and every smart contract... or you can use a decentralized oracle network.
But what is the difference between centralized and decentralized oracles? Chainlink is unique because it can be used to provide an 'outside view' to smart contracts. The platform allows blockchain applications to securely access off-chain resources like traditional APIs, bank payments, and any other resource that are not currently on the blockchain.
Chainlink provides the security that developers need to run smart contracts without worrying about whether their favourite API is having problems. Chainlink also makes it possible for new data sources to be added to any smart contract which needs them.
Chainlink has three main processes in which it facilitates the communication of off-chain data with on-chain smart contracts. This is done through oracle selection, data reporting and result aggregation, as outlined below.
In this step, network users create a service-level agreement (SLA) outlining a set of desired data requirements. The platform then connects that SLA with relevant oracles providing that data. Parameters are then set and the user submits the SLA and deposits the required amount of LINK into what is called an Order-Matching contract, which is matched to the best bidding oracles.
Oracles then acquire the necessary real-world data outlined in the SLA from external sources, process the information and send it back to the smart contracts operating on the Chainlink network.
The results obtained by the data oracles are then tallied in an Aggregation contract, which assesses the validity of the data. It then allocates a score of the sum of all the data received to the user. This "track record" is used to verify an oracle's integrity, keeping a log of its completed requests, amount of LINK staked and average response time.
Chainlink is also able to connect with oracles outside of its own blockchain network which is able to collect real-world data requested by the contracts. This process is managed by the Chainlink Core and Chainlink Adapter nodes.
The network uses a Proof-of-Stake (PoS) consensus, relying on a staking protocol to ensure the network's security.
How does Chainlink benefit me?
Chainlink is a decentralized oracle network that allows smart contracts to connect to external data sources. These can include APIs, internal systems, or other types of external data feeds. Chainlink's goal is to create a platform where developers aren't restricted from having their smart contracts interact with the outside world in any way they see fit.
You can start using Chainlink right away - no new platforms to learn, APIs to configure, or other complex integrations.
What is LINK?
LINK is the native token to the Chainlink network and facilitates the communication of data. Considered to be an essential tool in merging blockchain technology with real-world applications, the token has gained wide popularity in the blockchain industry. Users use LINK to pay the nodes for their retrieving, verifying and the sending of data. These prices are established by the node operator and based on the current market and demand for that data.
The node operators stake LINK in the Chainlink network to prove their commitment and good intentions. Nodes with bigger stakes take priority over nodes with smaller ones when matching them with SLAs.
LINK is an ERC20 token that powers the Chainlink Network. The LINK token serves three primary purposes:
- A method to pay Chainlink Node operators for the retrieval of data from off-chain data feeds, like web APIs and other inputs
- Incentivizes the development of oracles that provide data to smart contracts.
- A method of staking by clients who want access to the oracle network.
The primary purpose of the LINK token is to secure the network by staking them and faciliatating network operations. The user must stake a certain amount of LINK tokens to run a Chainlink node, which then acts as an oracle. In return, the user is paid for providing this service.
How to buy Chainlink
If you'd like to incorporate LINK in your crypto portfolio you can easily do so by purchasing the token through a cryptocurrency exchange. Always ensure that you make use of a reputable exchange, one that is compliant with the necessary regulations and local financial authorities.
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