Chainlink (LINK) Review

29 June 2023

Chainlink (LINK) is a blockchain protocol designed to communicate between blockchains and the outside world. To understand, let's first understand what blockchain is.

Blockchain is a technology that allows you to create secure and transparent records, known as blocks, and link them together in a chain. Each block contains information, such as transaction or contract data. Each block is linked to the previous block using hash functions, which ensures the integrity and security of the data.

However, blockchain has limitations in getting data from the outside world, such as weather information, financial data or sports event results. That's where Chainlink comes to the rescue.

Chainlink is the oracles of the blockchain world. Oracles are external services or devices that provide real-world data to the blockchain. Chainlink provides a link between the blockchain and the oracles, allowing the blockchain to receive and verify data from external sources.

How does it work? Imagine you have a decentralized application that offers betting on sports events. You want to get up-to-date match results from an external source. With Chainlink, you can connect to the oracle that provides this data and make sure it's accurate and reliable. Your app can then use this data to calculate payouts and update users.

Chainlink also ensures that the data is secure and reliable. It uses blockchain-based smart contracts to verify and validate data and automatically enforce terms or agreements between parties.

Chainlink (LINK) Overview

Who created Chainlink and when?

Chainlink was created by SmartContract, founded by Sergey Nazarov and Stephen Ellison. They introduced Chainlink in July 2017.

Sergey Nazarov is the CEO of the project, and Stephen Ellison is the technical director. They jointly developed this protocol to solve the problem of communication between blockchains and the outside world.

Since its inception, Chainlink has attracted a lot of attention and become one of the leading projects in its field. It helps blockchains get reliable data from the real world with oracles that provide that data.

Sergey Nazarov and Stephen Ellison have contributed significantly to the development of blockchain technology and created Chainlink to provide a link between blockchains and the real world.

How do Chainlink oracles work?

Chainlink oracles are special components that allow blockchains to receive information from the outside world. Let's look at how they work using a simple example.

Imagine that we have a decentralized application that offers betting on sports events. In order for the app to know the results of the matches, it has to get this information from an external source, such as a sports website or an API with results.

That's where Chainlink comes to the rescue. It provides a link between the blockchain and the oracles that provide the necessary data. Chainlink oracles work in several steps:

  1. Oracle selection: The developer selects the right oracle from the Chainlink ecosystem. The oracles in this system are reliable and verified.
  2. Requesting data: the developer sends a request to the oracle, specifying what information is to be obtained. For example, he can request the results of soccer matches.
  3. Getting the data: The oracle receives the request and searches external sources such as sports sites or APIs for the desired information. It checks the validity of the data and prepares it for transfer to the blockchain.
  4. Data validation: The oracle uses validation and verification mechanisms to make sure the data is valid. This is important to prevent the possibility of tampering with the information.
  5. Transferring data to the blockchain: Once the data is verified and validated, the oracle transfers it to the blockchain, where it becomes available for use by decentralized applications.

Chainlink oracles provide blockchains with access to real data, allowing them to function in communication with the outside world. This opens the door to creating a variety of applications that can use reliable information from external sources to make decisions and perform various functions.

What data can Chainlink oracles supply?

Chainlink oracles can supply a variety of data from the outside world to blockchains. Here are a few examples of such data:

  1. Financial data: Oracles provide information on stock prices, exchange rates, interest rates and other financial indicators. This data can be important for various decentralized financial applications, such as decentralized exchanges or predictive markets.
  2. Weather data: oracles can supply weather information, including temperature, precipitation, or forecasts. This is useful for various applications related to agriculture, disaster insurance or tourism.
  3. Sports results: oracles provides up-to-date results of sports events such as soccer, basketball or tennis.
  4. Product information: oracles can supply data on product prices, availability, and product characteristics. This can be useful for e-commerce or supply tracking applications.
  5. Event information: oracles can provide information about event schedules, tickets, or location information. This can be useful for ticketing platforms or travel guides.

Overall, Chainlink oracles can deliver a variety of real-world data that can be useful for a variety of decentralized applications. This allows blockchains to interact with the real world and expands the possibilities of blockchain technology applications in various fields.

How Chainlink contracts request information

Chainlink contracts can request information from external sources using special functions and mechanisms that are built into the protocol. Let's look at a simple example to understand how this works.

Imagine that we have a contract on the blockchain that wants to get the current bitcoin price. To do this, the contract can use the following steps:

  1. Oracle Selection: The contract developer selects a suitable oracle from the Chainlink ecosystem. It can be based on rating, reliability, and other factors to select a suitable and verified oracle.
  2. Create a query: the contract creates a query to the oracle, specifying what information to retrieve. In our example, the contract requests the current bitcoin price.
  3. Paying the commission: the contract can pay a commission to the oracle for completing the request. This can be an internal token or another form of payment that is agreed between the contract and the oracle.
  4. Sending the request: the contract sends the request to the oracle, specifying its address and the details of the request, including the required information.
  5. Processing the request: the oracle receives the request, processes it, and starts searching for the necessary information in external sources. In our example, the oracle looks for the current bitcoin price.
  6. Validation: oracle uses validation and verification mechanisms to make sure that the data it receives is valid. This is important to prevent the possibility of falsified information.
  7. Data return: After validation and verification, oracle returns the data to the contract on the blockchain. In our example, the contract receives the current bitcoin price.
  8. Use of data: the contract can use the received data for further operations and to execute the logic defined in the contract itself. For example, it can use the current bitcoin price to calculate product value or make decisions.

Thus, Chainlink contracts can request information from external sources using oracles. They send queries, receive data, and use it to perform various operations within the contract. This allows blockchains to get reliable information from the real world and use it for various purposes.

How Chainlink contracts request information

What other services are available on Chainlink?

Chainlink offers a variety of services that help extend the capabilities of blockchains and increase their functionality. Here are some examples of services available in the Chainlink ecosystem:

  1. Data Oracles: One of Chainlink's core services is data oracles. They give blockchains access to reliable data from external sources, such as financial data, weather data, sports scores and more. Oracles connect the blockchain to the real world and extend its capabilities.
  2. Event oracles: allow blockchain to provide real-time information about events. For example, it can provide information about conference schedules, sporting events, or other important events. This is useful for creating applications that require up-to-date event data.
  3. Assessment oracles: give oracles the ability to assess the quality of data and information. They can analyze data, verify its validity, and confirm its integrity. This is important to ensure the reliability and security of the data that is delivered to the blockchain.
  4. Identity oracles: provide blockchains with the ability to verify the identity of users or entities. It can be used to authorize and authenticate users or to authenticate documents and certificates.
  5. Media oracles: allow blockchains to access media, such as images, video or audio. This can be useful for applications related to media or content processing.
  6. Geolocation oracles: provide information about geographic location or coordinates. It can be used to create applications related to geolocation, location or navigation.

These are just some of the services available in the Chainlink ecosystem. Each of them provides unique opportunities to extend blockchain functionality and use reliable external data.

Chainlink: A reliable and secure network for oracles and smart contracts

Let's understand why Chainlink is considered such an important and secure technology. Oracles are components that link a blockchain to the outside world, giving it access to real data. However, using oracles can be complex and requires reliability to avoid possible attacks or data tampering. And that's where Chainlink comes into play.

Chainlink offers a robust and secure environment for oracles and smart contracts. Here are a few key features that make Chainlink reliable:

  1. Decentralization: Chainlink is built on the principles of decentralization, which means that there is no single point of failure. Instead, Chainlink oracles are distributed throughout the network, which increases system security and resilience.
  2. Cryptographic Security: The Chainlink protocol uses cryptography to ensure data security and authentication. This helps prevent possible attacks or changes to the data during transmission.
  3. Censor-resistant: The technology allows developers to select oracles from different sources, which helps prevent censorship or data manipulation. This ensures the reliability and validity of the data received.
  4. Management Network: Chainlink offers a dedicated management network that is responsible for oracle selection and verification. This helps establish trust in the oracles and prevents the use of unreliable data sources.
  5. Data Validation: The protocol has data validation mechanisms that help verify the validity and integrity of the data. This is important to prevent data tampering and ensure the reliability of smart contracts.

Chainlink ensures the security and reliability of oracles and smart contracts by enabling blockchains to access reliable data from external sources. It is an important step in the development of blockchain technology because it provides a link to the real world and extends the capabilities of blockchains.

What is the future of Chainlink?

The future of Chainlink promises to be exciting and promising for the development of blockchain technology and the use of oracles. Here are a few aspects that could shape the future of Chainlink:

  • Ecosystem expansion: Chainlink will continue to expand its ecosystem by attracting new developers, oracles, and users. This will lead to more data and functionality available, as well as a more robust and secure system;
  • Integration with various blockchains: The protocol is already actively integrating with various blockchains, and this will continue in the future. This will allow developers to use Chainlink oracles on different blockchains, expanding the capabilities and application of the technology;
  • Development of new services: Chainlink will continue to develop new services and functionality to meet the diverse needs of developers and users. New services may include enhanced data capabilities, improved validation mechanisms and other innovations;
  • Increased security and reliability: Technology will continue to improve its security and reliability mechanisms to prevent potential attacks or data tampering. This is important to ensure that the system is trusted and widely accepted;
  • Use in real-world scenarios: As Chainlink evolves and improves, use of the technology in real-world scenarios is expected to increase. Chainlink oracles could become an integral part of financial applications, logistics, decentralized exchanges and other blockchain projects.

Overall, the future of Chainlink promises to be bright and innovative. Oracle technology has great potential to improve blockchain infrastructure and enhance the ability of blockchains to interact with the real world.

What is the future of Chainlink?

Advantages and disadvantages of Chainlink

Chainlink has a number of advantages that make it a valuable technology in the blockchain world. However, it also has some disadvantages. Let's take a closer look at them:
  1. 1.

    Advantages of Chainlink

    1. Data reliability: One of the main advantages of Chainlink is its ability to provide reliable data from external sources. Chainlink's oracles verify and validate data before it is used in smart contracts, which increases reliability and prevents possible manipulation or falsification of information.
    2. Expanding blockchain functionality: Chainlink extends the capabilities of the blockchain by allowing it to interact with the real world. This opens up new opportunities for creating various decentralized applications and using the blockchain in various industries, such as finance, logistics, insurance, and others.
    3. Decentralization: Chainlink is built on the principles of decentralization, which makes it more resistant to attacks and system failures. Chainlink oracles are distributed throughout the network, which reduces the risk of a single point of failure and ensures more reliable operation.
    4. Flexibility and extensibility: blockchain technology offers a flexible and extensible architecture that allows developers to create new services and integrate them into the Chainlink ecosystem. This allows you to quickly adapt to changing market needs and introduce new innovative solutions.
  2. 2.

    Disadvantages of Chainlink:

    1. Possibility of centralization: Although Chainlink is built on the principles of decentralization, there is a potential that most oracles may be controlled by a few key players. This may increase the risks associated with centralization in the system.
    2. Dependence on external data sources: Chainlink relies on oracles to get data from external sources. If these data sources are inaccessible, incorrect, or subject to attacks, this can affect the validity and reliability of the information entering the blockchain.
    3. Potential integration difficulties: Integrating Chainlink can be challenging for some blockchain platforms and developers. The need to implement new protocols and adapt to the Chainlink architecture may require additional effort and resources.

    Chainlink offers significant advantages for blockchain technologies, but also has some disadvantages that should be considered when using it.

Chainlink as a breakthrough in the world of blockchain technology

Chainlink (LINK) is an important and innovative technology in the blockchain world. It provides secure and reliable interaction between blockchains and external data through its network of oracles.

One of the main advantages of Chainlink is its ability to provide trustworthy data from external sources, providing trust and reliability in the operation of smart contracts. Its decentralized architecture and use of cryptography increases the system's security, and its flexibility and extensibility allow it to adapt to changing market needs.However, Chainlink also has its drawbacks, including potential centralization and dependence on external data sources, which can affect the credibility of information.

Chainlink provides the blockchain community with a powerful tool to empower blockchain and connect with the real world. As the ecosystem evolves, integrates with various blockchains, and improves security, Chainlink promises to play a significant role in the future of blockchain technology. When using Chainlink, it is important to consider its shortcomings and take appropriate measures to minimize risks. Reliability, security, and innovation make Chainlink an important element in the development of the blockchain industry and its future remains promising.

If you want to learn more about cryptocurrencies and get skills, experience and tools that you can immediately apply in the cryptocurrency market - sign up for trading courses at the CRYPTOLOGY trading school.

Frequently asked questions about Chainlink (LINK)

What is Chainlink?

Chainlink is a decentralized oracle network that allows smart contracts on various blockchains to securely interact with external data, APIs, and traditional payment systems. It solves the problem of the so-called “oracle paradox” by providing smart contracts with secure and verifiable data sources.

How does Chainlink work?

Chainlink utilizes a network of nodes that independently collect data from external sources and feed it into the blockchain. This data is then aggregated and processed for consensus before becoming available for smart contracts. Nodes are rewarded with LINK tokens for providing and processing the data.

What is a LINK token and what is it for?

The LINK token is a cryptocurrency used in the Chainlink network as a means of paying the nodes providing labor to operate the network and as a form of collateral to guarantee data reliability. It is needed to motivate the node operators and ensure the stability and security of the network.

Where can I buy LINK tokens?

LINK tokens are available for purchase on many cryptocurrency exchanges including Binance, Coinbase, Kraken and others. Users can buy LINK with fiat money or exchange for other cryptocurrencies.

What are the main benefits of using Chainlink?

Key benefits include the ability to integrate trusted data into smart contracts, increased security and resilience of applications on blockchain, and improved interoperability between blockchains and traditional data systems.

What projects are using Chainlink?

A host of defai (DeFi) projects and blockchain platforms use Chainlink to access external data. This includes platforms for loans, derivatives trading, insurance and many others.
Join our mailing list. No spam.
Only exclusive offers.