What is Chainlink?
The most widely used decentralized oracle network, Chainlink provides real-word data to hybrid smart contracts via oracles.
Sadly, this doesn’t explain much. What is Chainlink in more detail? Let’s try to understand how the network functions and what are its benefits.
The Need for Decentralized Oracle Networks
Why do decentralized oracle networks exist in the first place?
Smart contracts are agreements on a blockchain that evaluate information and self-execute upon meeting predetermined conditions.
To craft agreements based on the information found beyond the blockchain, smart contracts require off-chain data in an on-chain format. Decentralized oracle networks, or DONs, connect off-chain sources of information to blockchain smart contracts in a language that they both understand. Put differently, DONs harmonize disparate technologies.
In general, oracle networks support operations on main chains, enabling secure and flexible hybrid smart contracts. In turn, they combine on-chain and off-chain computation with connection to external resources.
Decentralized oracle networks securely enhance and extend the capabilities of smart contracts. Just as important, their main benefit is the ability to bootstrap new blockchain services.
What is Chainlink?
Chainlink is a decentralized oracle network that forwards data from off-chain resources onto blockchains.
Chainlink’s decentralized metalayer of oracle networks allows smart contracts to seamlessly use and create a broad range of decentralized services that enable fast and efficient dApp (decentralized application) development and cross-chain functionality.
In simpler terms, the network uses extra secure hardware that removes reliability issues out of the equation.
How does the Chainlink Network function?
Essentially, the network’s nodes translate incoming requests from on-chain language to off-chain language that real-world information sources understand. What happens next is the translated request is routed to an external application programming interface (API) that collects data from those sources.
Lastly, when the data has been collected, the request is translated back into on-chain language.
The LINK Token
LINK is the ERC-20 token of the Chainlink Network.
LINK tokens are used by Chainlink node operators to stake in the network, demonstrating their commitment to the network and incentivizing good service.
- You can also read more about staking cryptocurrencies.
In addition, LINK is used by Requesting Contract holders to reward the network’s node operators for their work. Prices are set based on two factors: demand for the data the node operators can provide and the current market for the data.