The blockchain today is much more than just cryptocurrencies. What started with Bitcoin has now become a technology used by thousands of different businesses. The interest in blockchain technology has grown tremendously over the past years and startups, as well as established businesses, are looking for new ways to implement it in their services.
After smart contracts became known thanks to Ethereum, programmers around the world have explored their potential and plenty of businesses are currently looking into other ways of adopting smart contract technology in their products or services.
ChainLink was founded in September 2014 and has been connecting smart contracts to external systems and APIs ever since.
What is ChainLink
ChainLink is a network that connects smart contracts to external APIs or blockchains. The platform allows users to create decentralized oracle networks, a ‘collection of independent node operators, a method for aggregating data, and pre-made ‘Chainlinks” that can connect your smart contracts to APIs and give them access to ‘secure and reliable data inputs and outputs’.
Let’s break it down using a few real-world examples. ChainLink could be used to access APIs that report market prices, interest rates and other data for things like bonds. It could also be used for Insurance-related services to collect reliable data. The idea behind ChainLink is that the data provided cannot be dishonest as it is gathered from a decentralized network of oracles. Just like other blockchains, the information gathered is passed through a consensus. A single oracle can still provide false information but it will get penalized heavily for doing so.
ChainLink Smart Contracts
ChainLink makes use of smart contracts to achieve their goals. A smart contract is basically a self-executing contract coded onto a blockchain. The code is executed when the agreement between parties is met. However, smart contracts alone are not that great, ChainLink makes use of its decentralized oracle network to obtain reliable information.
This information is then used to execute smart contracts. The idea behind using smart contracts is that they cannot be tampered with as long as the code is good. Smart contracts are not a new technology and they have been used for years but ChainLink is utilizing this technology in conjunction with its decentralized oracle network. This practice allows businesses to extract the maximum potential of smart contracts and gives customers transparency and trust.
Smart contracts, as long as they are coded properly, cannot be changed and will automatically execute when specific requirements are met. Unfortunately, the information that goes into these smart contracts is not always 100% accurate. That’s what ChainLink is trying to solve and seems to be doing a great job so far.
How Does ChainLink Work?
The main mission of LINK is to provide reliable oracles to startups, enterprises, and other businesses. Because ChainLink uses a group of oracles, the information gathered is a lot more reliable than traditional contracts that rely on a single input.
ChainLink can bring a lot more trust in a plethora of markets and industries around the world. Products and services can basically become automated through LINK. There are numerous applications for ChainLink including the tokenization of assets.
You can tokenize real-world assets through plenty of services, however, in order for a tokenized asset to maintain a specific price, there needs to be some sort of system that can provide the issuer with reference prices.
ChainLink also promotes bank payments. Again, smart contracts make it extremely easy to connect to current banking systems as they use public APIs in most cases. The idea is that ChainLink could be used to significantly reduce the costs of online payments.
LINK – The Project’s Currency
ChainLink has issued LINK, an ERC-667 token with all the functionality from traditional ERC-20 tokens. The main mission of LINK is to reward node operators and to be used for deposits placed by node operators.
LINK itself doesn’t have a lot of utility and its value is basically determined by demand and how well the ChainLink platform is performing. There is a lot of criticism around LINK as many people are suggesting that the tokens are not necessary because other cryptos could be used to reward node operators.
The platform conducted a token sale capped at $32 million and ended in September 2017. It is now one of the highest-ranked coins by market capitalization and it’s listed on all top cryptocurrency exchanges. It is fairly easy to buy LINK tokens, however, there seems to be almost no use for them other than speculation.
Conclusion
It’s clear that ChainLink has a lot of potential to solve real-world problems. The project has already partnered with many businesses and enterprises and continues improving every day.
Chainlink allows financial institutions like banks and payment providers to utilize smart contracts and access reliable information. The entire network is decentralized which allows businesses to not depend on trust knowing the information received is immutable.
Links of interest
- Web: https://chain.link/
- Twitter: https://twitter.com/chainlink
- Youtube: https://www.youtube.com/chainlinkofficial
- Telegram: https://t.me/chainlinkofficial
