Since the development of Bitcoin as the first cryptocurrency in the market, blockchain has become very popular. It is a secure, peer-to-peer, and decentralized network. Chainlink is another decentralized network of nodes that allows users to access information from off-blockchain sources to blockchain smart contracts. Chainlink is a decentralized oracle network that aims to provide new features in the blockchain industry. Here we will talk about everything you need to know about this cryptocurrency. Stay tuned; Chainlink might be the cryptocurrency you have been looking for.
What Is Chainlink?
Chainlink is an oracle network that aims to fill that gap between blockchain and real-world information. Suppose you have been long enough in the cryptocurrency market. In that case, you know that blockchain is a great technology to prevent malicious actors from manipulating data and censorship, but it has its limitations. Blockchains are closed systems that do not connect with the rest of the world. They provide security and integrity, but the same feature limits the input data a blockchain can accept.
Chainlink is the best solution to solve the problem. This decentralized oracle network tries to provide input from various external sources of data. This network uses smart contracts to offer off-chain information to a blockchain.
Smart contracts are agreements programmed to execute when a specific condition meets. Ethereum is the first blockchain that introduced and used smart contracts. Chainlink launched on Ethereum in 2019. It incentivizes data providers or oracles to fill the gap between blockchain smart contracts and external data sources. Nodes and oracles are rewarded in chainlink cryptocurrency LINK for providing valuable and accurate data.
How Does Chainlink Work?
Blockchain-based smart contracts should connect to external data sources to provide off-chain information on a blockchain, but how Chainlink does that?
- In the first place, the user drafts a Service Level Agreement or SLA to specify the data requirement.
- The Chainlink Software tries to find the appropriate oracles to find the user’s data.
- After finding the right oracles, the user deposits LINK in a contract that accepts bids from oracles.
- Next, oracles connect with the external data source to obtain data requested in the Chainlink SLA.
- The oracles confirm the data and send it back to the contract.
- Finally, the data collected by the oracles return to an Aggregation contract. Aggregation contract examines The validity of data and sends it to the user’s smart contract.
Different Types of Contact in The Chainlink Eecosystem.
We have talked about Service Level Agreement or SLA contract before; here, we will talk about three types of arrangements SLA launch in the network.
Chainlink Reputation Contract
The reputation contract is the first contract that verifies an oracle’s authenticity. This contract is programmed to review the history of every oracle to see how accurate there were. In the end, the agreement gives the oracle a rank.
Chainlink Order-Matching Contract
The system delivers the order-matching contract to the nodes in the next step. Then nodes start to bid.
Chainlink Aggregating Contract
The aggregating contract is the last contract that assesses the accuracy of the data. By executing this contract, the system will review the information. When the date is validated, it will be available on the blockchain.
What Makes Chainlink So Powerful?
We have talked about the process of Chainlink previously. The fact that Chainlink can validate data from different external sources is impressive.
- This network can determine how much a source is trustworthy.
- The network uses LINK to pay node operators for their services.
- The system incentivizes Chainlink operators with LINK rewards, just Like a proof of stake in the consensus mechanism.
How to mine LINK
The total supply of LINK is 1 billion. If you are thinking about mining LINK just like Ethereum (ETH) and Bitcoin (BTC), You should know that the process of mining is not the same. Chainlink operators receive LINK for providing and verifying the data. Nodes act as miners on other crypto projects, but the process is different.
Should You Invest in LINK?
The Decentralized oracle network is a promising technology. So it might be best to invest in LINK despite the volatility of the price.
As cryptocurrencies continue to evolve, Chainlink will be an important technology because it will ensure cryptocurrency’s long-term stability and reliability.