Chainlink is a decentralized oracle network designed to connect smart contracts with real world data. In other words, Chainlink sends information from off-blockchain sources to blockchain-based smart contracts via so-called oracles. In case you’re not familiar with the concept, oracles collect data feeds and transfer it to the blockchain. Chainlink, in an essence, combines such oracles, fuels the network and improves smart contract interconnectivity. Interested in buying or selling Chainlink? Get started right now!
The History of Chainlink
Chainlink was developed by Sergey Nazarov and co-founder Steve Ellis as a project under the parent company SmartContract.com. The initial goal behind their project was to develop a bridge between external data sources and blockchains. The result of this idea was Chainlink - a network of oracles that feeds data from any web API or data source. For example, exchange-rate data, geo-location data or even weather data can be used as an external source.
Smart contracts are self-executing instructions that are coded in the blockchain. If A happens, than B triggers. But how does the blockchain know when A actually happens? Oracles provide the data and transfer it to the smart contract network.
The Origin of Chainlink and Initial Problems
Chainlink was initially created in September 2014. However, the project has gone through a long journey since then. In 2014, the team of SmartContract.com found out that they were reliant on centralized sources. This was called ‘the oracle problem’ and Sergey and Steve had to wait a few years for the market to mature.
The 2017 ICO
In 2017, SmartContract.com wanted to build a decentralized network with Chainlink as its fuel. With the market maturing, they decided that it was time for an ICO (initial coin offering). A cryptocurrency crowdfunding, if you will. By September of 2017, Chainlink had raised $32 million on its first ICO round. This amount was used to further develop the project. Chainlink’s mainnet went live via the Ethereum network on the first of June, 2019. Chainlink has now fully developed into a decentralized oracle network and has over 77 different use cases.
The History of the LINK Token
Along with the Chainlink decentralized network of oracles, the fintech company SmartContract.com also created the LINK token that is used in Chainlink environments. With the Oracle network in full swing and its endless potential, it didn’t take long for LINK to become a desirable product. Currently, LINK is a top 10 coin in terms of market cap and can only grow from here on out.
Regarding the most recent events tied to Chainlink and its token, the company behind it announced that Chainlink has partnered with Polkadot, another blockchain that deals with similar connectivity issues. They also partnered with Ethereum Classic along with several smaller dApps and DeFi projects.
One of the most important 2020 partnerships, was the one between SmartContract.com and China’s national Blockchain Services Network (BSN). This partnership was created with the intent to obtain and organize off-chain data at an enormous scale. Lastly, Chainlink partnered with Binance in July 2020 to provide off-chain market data to this Binance’s DeFi platform.
Specifications of Chainlink
|Founder(s)||Sergey Nazarov and Steve Ellis|
|Date of Release||September 19th, 2017|
|Consensus mechanism||Proof of performance|
|Hashing Algorithm||Single Pass Signature (SPS)|
|Average Block Time||5 Minutes|
The Price of Chainlink
Unique Aspects of Chainlink
The Purpose of Chainlink
Overall, the purpose of Chainlink relates to solving the connectivity and interoperability issues within smart contracts and blockchain-based services and technologies. Thanks to Chainlink, bank and retail payment systems, market data APIs, and other off-blockchain systems can be connected to blockchain networks. In fact, almost any API connection that you can imagine can be used in combination with the smart contract network. Think of all the possibilities regarding decentralized finance, payments, gaming, supply chains etc. Chainlink can truly be a pioneer in terms of real life blockchain engagement.
The LINK Token
Besides Chainlink and its main purpose, SmartContract uses the LINK token to fuel its network. In the meantime, Chainlink has become a valid cryptocurrency with a total supply of 1 billion tokens. This cryptocurrency is used to pay the node providers within the Chainlink decentralized oracle network. What’s unique in this system is that node providers who have large amounts of LINK can be rewarded with larger contracts. The system is created in such a way that node providers who deliver inaccurate information will experience token deductions. Good work is incentivized and promoted, whereas shoddy work is ‘punished’. Moreover, LINK is an ERC20 token with the ERC223 ‘transfer and call’ functionality.
The most unique aspects of Chainlink are the oracles within this decentralized network. As we’ve already explained, oracles are DeFi instruments responsible for sending data from off-chain sources to blockchain-based smart contracts. The system is designed in such a way that the participants are incentivized to provide smart contracts with access to external data.
These contracts need to match the requesting contract with the right oracle within the network. There are three types of contract here: a reputation contract (check’s the source’s integrity and acts accordingly), an order-matching contract (connects the service level agreement with the best bidding oracles), and an aggregating contract, which is responsible for gathering data within the oracles to find the most accurate results. Thus, Chainlink solves common smart contract issues such as the issue of Ethereum smart contracts that only work with data that comes from their own blockchain.
Chainlink creates the much-needed interoperability solution within blockchain-based smart contracts. By enabling data from external sources to reach smart contracts, Chainlink’s developers have significantly increased the potential use cases for blockchain technology. Overall, Chainlink creates the possibility for smart contracts to leverage any data source, no matter what it is or where it comes from. Perhaps the most important use of Chainlink thus far is the integration of this system within the SWIFT banking transaction network, which is one of the largest global financial networks. Another good thing is that Chainlink has very little competition within its segment. Even the projects that could be considered similar to Chainlink are very far behind from its level of development and integration.
In addition, Chainlink’s price went up roughly 400% after its launch on the Ethereum network. Based on the positive outcome of last year’s partnerships, Chainlink is expected to continue growing in 2021 and beyond. The future of the Chainlink ecosystem, and its third party interconnectivity, is an exciting development for the entire crypto scene.