WTF is Chainlink?
In simple terms, Chainlink provides data and information from off-blockchain sources through a decentralized network to on-blockchain smart contracts using oracles. Let's simplify the concept further.
Suppose you want to share real-world data on your blockchain and connect it with smart contracts. You need a decentralized node or decentralized oracle network to make the connection safer. That's where Chainlink comes in. Smart contracts contain pre-specified agreements on a blockchain. This blockchain can evaluate information and also trigger the contract automatically once its conditions are met.
But how do you pay in this system? Through Link tokens, Chainlink's native currency. Consider Link tokens as your digital assets that you can use to pay for services on your blockchain network.
Why is Chainlink exciting?
First of all, let's take a look at four reasons why people are so excited about this decentralized oracle network:
Reliable and tamper-proof network – Security, security, and more security. That's what this network delivers. If you are looking for one of the safest oracle networks, you should consider using this one for a change. As already mentioned, this is a decentralized network that contains premium data, cryptographic proofs, and trusted nodes. These are helpful in connecting highly accurate APIs and data to any smart contract.
Seamless connection to APIs – This network allows you to build smart contracts on flexible frameworks that can retrieve data from various APIs. Make sure you connect with some of your existing systems before integrating with any blockchain.
Tried and tested solution – You should always focus on time-tested oracle solutions before investing in one. This one is not just tried and test; it's also battle-hardened, meaning it can secure billions of dollars of investment for different market-leading blockchain projects.
Transparent oracle computation – It allows you to independently monitor and verify its open-source code, its performance, and quality of its individual node operators.
Now that you know what makes Chainlink exciting, let's take a deeper look into how it executes smart contracts.
Suppose you enter a contract where if you deposit 100 ETH into your smart contract within the 15th of next month, it will release its fundraiser payment immediately. If you cannot make the deposit, the donors will receive their payment back. Remember, smart contracts are immutable on blockchains. They are verifiable, and they guarantee a high trust level because they need to meet the contract agreements. The respective blockchain will only trigger the contract if it meets its agreement terms.
But what if you want your smart contracts to craft agreements beyond the data available on blockchains? In that case, you will need an oracle network that operates on an on-chain format and off-chain data. However, the challenge is to connect outside information sources to the blockchain smart contracts with a language that both parties understand. Oracle provides that middleware software. It becomes the intermediary that translates data back and forth from the real world to the blockchain's smart contracts.
Chainlink's advantage here is it provides smart contracts via oracles right from its onset. This process comes with fortified software that eliminates reliability issues because it uses a single centralized source.
In this process, the smart-contract-enabled blockchain first comes into action when the smart contract requires data. It sends a request for information called Requesting Contract. The network's protocol then registers the request and creates corresponding smart contracts called Chainlink Service Level Agreement Contract or SLA Agreement. This allows the network to receive off-chain data. The SLA contract later generates three subcontracts: a Chainlink Aggregating Contract, a Chainlink Order-Matching Contract, and a Chainlink Reputation Contract.
Once the network creates a reputation contract, it checks the oracle provider's track record. This shows the provider's performance history and authenticity. The check also helps to eliminate unreliable and disreputable nodes, thus making the network more secure.
As soon as the reputation network is over, it delivers an order-matching contract that links the nodes and accepts their requested bids. It then goes on to select the appropriate numbers and types of nodes to ensure it fulfills the request. Later, the aggregating contract takes the data from its chosen oracles before validating or reconciling the data for accurate results.
According to experts, the most interesting part is when the aggregating contract validates data from its single source and multiple sources. It shows its capability when it has to reconcile millions of data from different sources every minute. Suppose there are five nodes delivering a specific answer and a couple of other nodes providing a different answer. The network will validate data from its single source to avoid confusion. One of the benefits of triggering the aggregating contract is it can repeat its validation process as many times as it wants. It will later reconcile the validated data, average it, and put it out as a single data piece.
Chainlink's token and governance model
$Link is Chainlink's native currency. This token can help finance the growth of this project. It is quite similar to Ethereum and Bitcoin. The only difference is they work on different blockchains. Link acts as an incentive for users, just like Ethereum and Bitcoin.
The advantage of this token is Chainlink's node operator sets its token prices. It determines the price according to the demand for data to correspond to the current market for that respective data. In fact, its node operators use Link for the network's stake. They need to deposit Link to demonstrate their commitment to the network and also incentivize good service.
Let's go back to the reputation contract stage. This is where the network checks the node's stake before matching it with its respective data requests. Nodes that have a greater stake are more likely to appear on the list first. This allows them to have their requests fulfilled first. Does that mean there are no unreliable nodes that make their way through the network? They do, but they get heavily punished. Link was created in accordance with Ethereum's ERC-20 token standards. You can buy or sell it for digital currencies and other fiat currencies.
Who is on the team?
Chainlink expands your capabilities of various smart contracts. It enables access to both off-chain computation and real-world data while maintaining security and also guaranteeing reliability to blockchain technology. With such a huge networking plan in action, it takes some of the best minds in the business to put everything together. Needless to say, Chainlink spent a considerable amount of time to scout the best in the business. Here are the most crucial team members responsible for putting the network up and running:
- Ari Juels – Ari is the technical advisor and also a professor of computer science at the Jacobs Institute at Cornell Tech. He is also the co-director of IC3, an Initiative for Cryptocurrencies and Contracts. He was also the chief scientist of the RSA.
- Andrew Miller – Andrew is a decentralized consensus expert and leader in secure blockchain infrastructure. He is also an associate professor of computer science at the University of Illinois and advisor for Tezos and ZCash.
- Evan Cheng – He is also a technical advisor and creator of LLVM that generates low-level machine code for Apple devices, Intel, Nvidia, and Google.
- Brian Lio – Brian is in the advisory panel and a teacher of blockchain research. He offers in-depth analysis of ongoing token sales and evolution of decentralized technology.
- Hudson Jameson – He is a technical advisor and manager of the Ethereum community known for authorizing smart contracts and developing Ethereum roadmaps.
- Tom Gonser – Tom is in the advisory panel like Brian. He leads the e-signature department that literally revolutionized digital contracts.
How to participate in the network?
There are four ways to participate in the Chainlink network:
• Through real-world data
• Through blockchain network
• Through real-world events
• Through Link tokens
You can enjoy the following benefits once you participate with any of the above networks:
• Provably secure nodes that offer cryptographic proof.
• End-to-end decentralization that uses independent nodes for high availability and resistance manipulation.
• High-quality data that can access authenticated API data source and password-protected data source.
• Crypto-economic security that leverages binding service agreements to eliminate poor results.
• In-depth defense that apply multiple security layers, such as trusted execution environment, cryptographic signatures, and zero-knowledge proof.
• Open-source community that improves network security, and in turn, accelerates development of tokens.
Introducing #Chainlink 2.0: Next Steps in the Evolution of Decentralized Oracle Networks, a 136-page second whitepaper, which describes how Hybrid Smart Contracts in #DeFi and beyond will reach new heights by utilizing Decentralized Oracle Networks. https://t.co/OxVkiY7jq8— Chainlink - Official Channel (@chainlink) April 15, 2021