What is ChainLink?

what is chainlink

In order to utilize the power of oracles, a data source is queried for specific information, which is then connected to a blockchain. Smart contracts can be created to work on specific information flowing in from the data feed. The decentralized oracle service is currently based on Ethereum and brings the power of developing blockchain solutions for traditional businesses as well as enterprises.

Mobilum also recently partnered with Chainlink in an effort to use Chainlink as a secure and authentic off-chain data feed for its trading platform. Mobilum will use off-chain price feeds to reconcile cryptocurrency amounts needed for settlement — denominated in fiat currencies. Chainlink will also enable instant transactions, better liquidity, and low latency for the trading platform as market data is filtered into the system. In particular, Chainlink recently acquired Town Crier, the highly touted smart contract and data privacy project, out of Cornell University and IC3.

Requesting Contract holders use LINK to pay Chainlink node operators for their work. Prices are set by the Chainlink node operator based on demand for the data they can provide and the current market for that data. This newly translated version of the request is then routed to an external application programming interface (API) that collects data from that source. Once the data has been collected, it’s translated back into on-blockchain language through Chainlink Core and sent back to the Chainlink Aggregating Contract. To understand the benefits of Chainlink and how it functions, you need to understand some fundamental, interconnected concepts. He has worked in the blockchain space before, as the founder of Secure Asset Exchange, a ShapeShift like cryptocurrency exchange.

The ChainLink founders and team

Katallassos comes from Reto Trinkler, who also founded the digital asset management platform Melonport. Financial contracts on Katallassos can access off-chain information via Chainlink’s decentralized Oracle network and provides a crucial role https://1investing.in/ in financial applications. Blockchains, by nature, cannot access data outside their network on their own. But smart contracts (programs that automatically execute digital agreements) often need data from external sources to work correctly.

what is chainlink

In addition to carrying out this crucial function, off-chain nodes also allow developers to integrate external adapters. While it’s not a perfect parallel, external adapters are for ChainLink what decentralized applications are to the Ethereum network. These adapters are plugins that node operators can use to accommodate a number of additional programs into their base of operations. Additionally, they can perform subtasks that streamline the data collection process.

The total supply of LINK tokens is limited to 1 billion, which means that it is not possible to create new LINK tokens beyond a point, creating some scarcity and adding value to the token as time progresses. As LINK is an ERC20 token, it is supported by any wallet that supports Ethereum and ERC20 tokens. MyEtherWallet is one example of a wallet that can be used for holding these tokens.

Part of the Chainlink network is their reputation system, node providers with a larger amount of LINK locked up should be rewarded with the larger contracts. If they fail to deliver accurate information, then they will be penalized in the form of tokens being deducted. This looks a great system for token holders, as the more tokens locked up in contracts, the lower supply and therefore higher price the tokens should be. Any data, payments, e-signature, or other API provider, as well as individual developers, can easily join the Chainlink network by connecting an API that they familiar with to the network. Once the API is connected to a Chainlink, the user becomes a Chainlink Node Operator, and is responsible for keeping that API connected to the Chainlink Network.

Should You Invest In LINK?

LINK tokens are the digital asset token used to pay for services on the network. The lack of connectivity limits what smart contract developers can create. For example, an app like Uber uses multiple data feeds (like GPS data) and key outputs (like payment gateways) to provide convenient services for everyday use.

Chainlink offers an incentive market structure driving a “web of trust” — transparent reporting. In this article, we will discuss how Chainlink works, how to buy and store Chainlink crypto and whether Chainlink has a future. LINK is built on Ethereum in accordance with the ERC-20 standard for tokens.

Can I make passive income with Chainlink?

Thereafter, a smart contract on the blockchain utilizes the data, typically to determine whether to carry out the conditions or not. In simple words, Chainlink integrates real-world data into smart contracts and vice versa. The project seeks to solve this problem by enabling access to real-world data and off-chain sources securely and reliably. Chainlink supports a verifiable random function that provides a fair and safe random number generator for smart contract applications to nonfungible tokens.

Node operators are required to stake—lock a specific number of—their LINK tokens. Node operators set their own fees based on demand for the off-chain resource they provide. The recent signing of numerous partnerships among a diverse set of industry participants has set Chainlink on the pace of developing the standard of Oracle smart contracts.

  • The smart contract concept was first introduced by Ethereum; however, their smart contracts can only manage data on the blockchain.
  • Second is the order matching contract which takes bids from the individual nodes based on the SLA and the parameters set by the creator of a smart contract.
  • They read accurate event results outside of blockchain and report them to the on-chain, ensuring security and reliability of the data.
  • None of the content on CoinCentral is investment advice nor is it a replacement for advice from a certified financial planner.
  • Various Chainlink use-cases include accessing interest rates and pricing assets by decentralized finance (DeFi) applications to automate the settlement of contracts.

Chainlink uses blockchain technology to securely enable computations on and off chain, supporting what it calls hybrid smart contracts. Enterprises using Chainlink can access any major blockchain network, including Ethereum and Solana. In-order to understand interest rate swap meaning chainlink, we would suggest brushing up on smart contracts, which we had covered in an older article here. Chainlink aims to create a network where data providers also known as oracles are monetarily incentivised to provide reliable data to the blockchain.


As the first cryptocurrency, Bitcoin and its corresponding blockchain can only process a small range of this input. The LINK token is an ERC677 token that inherits functionality from the ERC20 token standard and allows token transfers to contain a data payload. It is used to pay node operators for retrieving data for smart contracts and also for deposits placed by node operators as required by contract creators. A valuable feature of smart contracts is that they can store and manage on-chain assets (like ETH or ERC20 tokens), just like you can with an Ethereum wallet.

what is chainlink

While this is certainly a massive jump in price, cryptocurrencies have largely gained popularity over that time. It’s important to remember that while you can hold LINK tokens as an asset, they also function as a way to pay for smart contracts on the Chainlink network. Chainlink can generate multiple subcontracts, while also taking data from only the most trustworthy nodes and oracles for premium accuracy. Although there isn’t a cap on the number of smart contracts the platform can handle, there is a one billion LINK token limit.

Under certain circumstances, not all answers can be averaged but for simplicity’s sake we won’t go further into depth here. By using TownCrier’s technology, the data provided to Chainlink’s oracles become more secure through the use of “trusted-execution environments” and specialized extra secure hardware. Where the blockchain meets the outside world has been a huge vulnerability in decentralized applications (dapps) until Chainlink created a secure bridge. The points where data comes into the blockchain are also the points where data can be manipulated, compromised, or simply falsified–these points of failure are where Chainlink creates value. They are very useful for real-world applications of blockchain technology, which is still in its infancy and may need to connect with existing technologies and platforms to mature and gain mainstream adoption.

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Oracles do exactly the same for blockchains and other existing platforms. They take queries from blockchains, inquire on the external platform, and return with the response. The users will be provided a listing service to make the oracle selection easier, which works off-chain but would eventually be added on-chain. Nodes can be determined automatically on their suitability for the assignment using an order-matching contract. Chainlink node operators with the largest stakes are the best positioned to earn LINK rewards.

By aligning with the Ethereum community’s approach to scaling its ecosystem, Chainlink is helping accelerate the adoption of high-throughput, data-rich dApps. The proof-of-stake mechanism rewards network participants for placing a freeze on the ETH they “stake” or put up as collateral for the chance to earn rewards.

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Prices stayed this way for a while, trading at less than a dollar per token until mid-2019, when the price per token increased, and it began trading at between $1 and $4 per token. However, for the latter half of 2020, LINK tokens began to increase in price even more to over $14. In February 2021, LINK reached an all-time high price of nearly $37 per token.

That being said, it’s also important to be cautious about any cryptocurrency investment. As mentioned earlier, prices are volatile, and they can rise or fall quickly. If you decide to invest in Chainlink, other projects, or cryptocurrency stocks, be cautious about how much you spend.