Basic Guide: Chainlink

Chainlink was launched in June 2017 by the San Francisco fintech company SmartContract. Its developers describe Chainlink as a secure blockchain middleware intended to connect smart contracts across blockchains. By allowing smart contracts to access key off-chain resources such as data feeds, web APIs, and traditional bank account payments.

Chainlink developers claim that while smart contracts will revolutionize many industries by removing the need for conventional legal agreements. The underlying mechanisms of consensus related to blockchain technology contribute to smart contracts being unable to communicate effectively with external systems.

What are “Smart Contracts”

First designed in 1993, smart contracts are computer applications running on decentralized infrastructures, like a blockchain. While a standard contract outlines the terms governing a law-enforceable relationship, smart contracts enforce the cryptographic code contract relationship.

Once a set of circumstances is in place, smart contracts are executed and once a smart contract is executed, the fact it exists in a decentralized network means that no party can change its code or interfere with its execution. By preventing change, smart contracts bind all parties to an agreement as it has been executed. Thus creating a type of relationship that does not rely on trust in any party.

Founder: Sergey Nazarov

Sergey Nazarov starting his career at FirstMark Capital, he left to join the cryptocurrency revolution in 2011. He firmly believes blockchain technology has the ability to change the way societies distribute wealth, enforce contracts, and share critical information.

On 2017, he and his friends Steve Ellis created SmartContract.com and Chainlink in order to create proper middleware between traditional data sources and blockchain-based systems. They are working with money movers SWIFT as well as database company Oracle.

“We realized that a reliable oracle mechanism is a gating issue for the creation of most of the use cases that people are expecting from our space, and set out to solve this limitation of blockchain infrastructure with security, reliability, and easy consumption of the inputs/outputs needed by smart contracts to reach this new level of usefulness,” said Nazarov.

The Chainlink Network

The ChainLink Network is a distributed network of Chainlink Nodes. All of which sell directly to a smart contract the use of specific data feeds, APIs and various off-chain payment capabilities.

The Chainlink Network is made up of two separate parts. Both on-chain and off-chain, which will need to interact to deliver the service. The network has been designed in such a way that it can be updated. So that its various components can be replaced as new techniques and technologies arise. The on-chain portion of the network selects oracles based on the metrics that a party demands. Through a service level agreement (SLA) to enter into a smart contract.

Chainlink gathers the oracle’s answers to the SLA queries using these parameters. Sorting them using reputational and aggregation models, and delivering the final aggregate outcome of the Chainlink request that can be applied in the smart contract.

The network’s off-chain component consists of oracle nodes connected to the Ethereum network. Those harvest responses to off-chain requests on an independent basis. For example, an off-chain node operated by the New York Stock exchange could provide real-time trade information to the Chainlink network. Or an off-chain Visa network node could settle a transaction via the Chainlink network by communicating with both the customer and the seller.

Chainlink Technology Aims

The Chainlink technology aims to transform on-board nodes from all these industries into one all-purpose network. Acting as an intermediary (low cost) to interpret and correctly allocate the data as needed. The Chainlink system will ensure accurate results from oracles as well as allow oracles to remain independent of the data they provide.

Any data, payments, e-signature, or other API providers, as well as individual developers. They 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. In order to incentivize operators to provide API information. They are compensated in LINK tokens for their successful fulfillment of on-chain requests.

The project currently provides a fully decentralized network of oracles that are compatible with Bitcoin, Ethereum and Hyperledger. It is intended that other blockchains will be supported in the future. That will allow cross-chain connectivity between a smart contract. Any other public or private chains, allowing anyone in the world to use the Chainlink network, regardless of their platform. All service providers would be able to securely provide smart contracts with access to key external data and potentially even off-chain payments.

Chainlink Token

In order to compensate the off-chain needs of the Chainlink system, the LINK token has been introduced as the currency of choice to pay Node Operators. According to the developers, the LINK token is required to perform this function, with demand and value of the tokens being directly correlated to the number of operators that offer off-chain services to the system.

As LINK tokens are used as a currency on the Chainlink platform, the more usage the Chainlink platform has, the more valuable LINK tokens should be, and the demand for it will be higher.

Overall chart of Chainlink Price [Source: CoinMarketcap]

Total supply of Chainlink token are 1,000,000,000 LINK, and currently, already 350,000,000 LINK are circulating in the market. It reached the All-time high on 29th June 2019 at a price of 4.54 USD and currently, the price is at 2.10 USD. Chainlink Marketcap is $735,476,411 USD and currently ranked no 16 in CoinMarketCap.

Source: blockonomi.com

Whitepaper Chainlink

Photo credit: blockonomi

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