Chainlink is best known as a bridge between the real world and the world of blockchains. It is a platform for transferring data from external resources to blockchains in a decentralized way. In this article, you will find out how this is possible. We are going to cover everything about Chainlink and its functions in this article, and we will also take a look at its native token called LINK. Stay with us.
What is Chainlink?
After the creation of smart contracts and decentralized applications, many developers found out that the blockchain technology has much more functions than transferring digital value. They figured out that we can use this technology to decentralize all centralized processes, from data storage to insurance, digital identity, intellectual property, and Internet of Things. By the way, there was one big obstacle in the way of achieving this goal, and this was the need for external data. Blockchain platforms needed a way to transfer data from external resources, and they had to rely on centralized entities for this purpose.
Getting data from centralized entities had several problems. For example, you could never trust the validity of the obtained data, and there had always been the risk of manipulation. However, the biggest problem of this method was that it was in paradox with the theory behind the blockchain technology. Blockchain came to remove intermediaries, so how could it rely on a centralized intermediary for fulfilling its functions? Chainlink was the first blockchain project that aimed at this paradox.
How does Chainlink work?
Chainlink is actually a decentralized “oracle”. In the world of information technology, oracles are intermediaries that transfer data from external resources to applications using web-based APIs. These oracles could get used in blockchain projects, but they were centralized. Blockchain-based oracles solved this problem. Blockchain-based oracles are decentralized and distributed, and they report more valid data.
Chainlink is the first and also the most successful blockchain-based oracle (at the time of writing). It provides blockchain applications with data like the weather condition, the result of a sport event, or the price of an asset in different exchanges.
Imagine a decentralized application that aims to become a global real estate. This application needs the price of land and houses in different countries and cities of the world. This is where a project like Chainlink comes in. Chainlink consists of a collection of nodes that obtain off-chain data from different resources, validate them, go through a consensus process, select the most valid set of data, and report it to the blockchain. This data is transferred to the blockchain in the form of a transaction.
When Chainlink was created, all nodes had to report their response to the main network independently. Therefore, each node had to pay an amount of fee. Besides, this led to network congestion. After an update this network went through, the off-chain design was added to Chainlink. This off-chain design let all Chainlink nodes be connected to each other outside of the blockchain. These nodes now share their obtained results, validate them, and choose one result as the most correct one. They all sign this final result and send it to the blockchain in the form of a transaction. This method lowers the required fee and increases its scalability
Who created Chainlink?
Chainlink was developed by a company called Smart Contract. Smart Contract was founded by three blockchain developers called Sergey Nazarov, Steve Ellis, and Ari Jules. An investment company called Data Collective also supported Smart Contract. They wished to create a kind of bridge between blockchain projects and the real world. They named their project “Chainlink”, but it’s interesting to know that Chainlink was not decentralized at that time. This project used centralized oracles, and had NOT solved the paradox we mentioned earlier. In 2017, they decided to solve this problem, and updated Chainlink to the centralized version we know today.
Sergey Nazarov is Chainlink’s CEO. Before Chainlink, he had developed a cryptocurrency exchange called Secure Asset Exchange, and also a decentralized email service called CryptoMail. Steve Ellis is Chainlink’s CTO. Among other major members of the Chainlink team, we can refer to Andrew Miller, Hudson James, and Jake Brukhman, who all aid Chainlink as advisors.
The LINK token
Chainlink’s native token is called LINK. It’s an ERC-20 token and is as popular as the Chainlink project itself. It soon opened its way into the list of top cryptocurrencies by market cap. At the time of writing, each unit of LINK is being traded at $6.35. It is the twenty-third largest cryptocurrency by market cap. The LINK token has a market cap of more than 940 billion dollars and has been listed on more than 500 cryptocurrency exchanges (at the time of writing).
LINK has a supply cap of 1 billion units. Its ICO took place in 2017 and 35% of the LINK tokens were presold to users during this ICO. 30% of the LINK tokens belong to the developers, which they use to support Chainlink and pay its employees. The remaining 35% is distributed among Chainlink nodes as the reward.
Like all cryptocurrencies, you need digital wallets to store LINK. As we previously mentioned, LINK is an ERC-20 tokens, so you can use Ethereum-compatible wallets to store it. Some of the best wallets you can use for storing LINK include:
- Ledger (hardware)
- Trezor (hardware)
- MyEtherWallet (software)
- MetaMask (software)
- Trust Wallet (software)
- SafePal (software)
If you are confused by the large number and diversity of cryptocurrency projects and can’t asses them, remember one key point: fundamental tools are always needed. Chainlink is an example of a fundamental tool in the world of blockchains that due to its unique function, is always required. The demand for projects like Chainlink increases along with the growing popularity of blockchain networks. Chainlink is not the only blockchain-based oracle. It has rivals like Band Protocol, Razor Network, Modefi, and Umbrella Network. Chainlink’s most serious rival may be Band Protocol. By the way, its significant advancements and its huge fund-raising has convinced investors to continue supporting this project and waiting for a brighter future.