What is Chainlink Cryptocurrency ? [Everything U Need to Know]
The Beginner’s Guide
Chainlink is a cryptocurrency aiming to incentivize a global network of computers to provide reliable, real-world data to smart contracts running on top of blockchains.
If you’re unfamiliar, smart contracts are agreements programmed to execute if and when certain conditions are met. To date, smart contracts have been used for everything from creating novel crypto-financial products to developing new crypto assets.
However, an issue that has persisted is that most smart contracts need to rely on some kind of external data source to properly execute their terms.
For example, smart contracts seeking to replicate bonds or insurance agreements may need access to APIs reporting on market prices or Internet of Things data.
Chainlink was created to address this issue by incentivizing data providers (called “oracles”) to act as a bridge between blockchain smart contracts and external data sources.
Every oracle within the Chainlink network is incentivized to provide accurate data since a reputation score is assigned to each. Further, when nodes follow the software’s rules and provide useful data, they are rewarded in Chainlink’s cryptocurrency, LINK.
Arriving amid a crowded field of projects in 2017, the Chainlink team has so far been able to deliver on its vision, expanding efforts beyond Ethereum (ETH) amid a surge in market activity.
As of 2020, Chainlink is seeking to support all blockchain-based smart contract networks.
Users seeking to stay connected on the current development status of Chainlink can follow its official project tracker for up-to-date details.
Chainlink Token
Chainlink’s LINK token is an ERC677 token, an extension of ERC. Tokens act as data payloads, feeding the required data from off-chain sources to smart contracts, which then act accordingly in response to the data provided by the token. According to Chainlink, the trade value derived from these tokens is used to pay node operators for retrieving data from smart contracts, and also for deposits placed by node operators as required by contract creators. Tokens can be stored in any wallet, as the ERC677 token retains all the functionality of an ERC20 token.
Chainlink is a decentralized blockchain oracle network built on Ethereum The network is intended to be used to facilitate the transfer of tamper-proof data from off-chain sources to on-chain smart contracts. The creators of the network say it can be used to verify whether the parameters of a smart contract are met in a manner independent from any of the contract’s stakeholders by “connecting the contract directly to real-world data, events, payments, and other inputs”.
How Does Chainlink Work?
The way Chainlink works is by connecting the blockchain to external environments. The process starts when the smart contract sends a request for information, which the protocol registers as an event, creating an SLA (Service Level Agreement Contract). The process is relatively simple:
- When a smart contract requests information, a node operator drafts an SLA agreement, another smart contract on the blockchain, outlining a specific set of data requirements to access off-chain data.
- Chainlink uses this SLA to match the requester with oracles that can provide the requested data in a process called Order-Matching Contract.
- Once the oracles are matched, these start to connect with the external sources to obtain off-chain data through a process called Aggregating Contract. This process takes all the data from the oracles, validates the information of each, and returns an accurate score to the user (the smart contract).
Once the process is complete, the issuer (the smart contract) pays the node operators for their work in LINK, which is the protocol’s utility token and main incentive. Oracles can be updated to meet technological changes.
Why Was Chainlink Created?
Chainlink was created to expand the capabilities of smart contracts by enabling accessibility to the real-world in a timely manner, payments and events without sacrificing the reliability and security guarantees inherent to blockchain technology.
Chainlink 2.0 Will Boost the Crypto To New Heights
The world decentralized finance, and in it, the use of smart contracts has been growing at an impressive pace. Oracles are used to ensure the veracity of the information provided to smart contracts, and Chainlink (CCC:LINK-USD) leads the way in this sphere. The roll-out of Chainlink 2.0 can redefine decentralized oracles and propel the price of the LINK token to new heights.
Chainlink is currently the 14th largest crypto. This month, it has shed close to 43% of its value in line with the broader crypto market. However, over the last year the LINK token has gained an incredible 330%. It is easily one of the best performing cryptocurrencies in the past year, with a substantial growth runway ahead.
With that being said, let’s look at some of the key elements which make Chainlink an attractive investment at this stage.
Should You Invest In Chainlink (LINK) ?
As you may have gathered from the above, the value of LINK remains volatile despite its huge gains since early 2020. Therefore, it may be best to invest in LINK only as a way to support the underlying technology. Otherwise, the high degree of volatility may be too much to bear for most investors. Nevertheless, Chainlink looks to be an important technology as cryptocurrencies continue to evolve. Having an oracle such as Chainlink in place will be key to the long-term stability and viability of cryptocurrency in general. Thus, LINK may be a sound investment if you believe Chainlink will become the industry standard as the most widely-used, decentralized oracle network.
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