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Chainlink was launched in June 2017 by San Francisco-based fintech company SmartContract and is described by the developers as blockchain-based cross-platform software designed to connect smart contracts with outside data sources such as data channels, APIs, sockets, etc.
What problem Chainlink solves
The developers of Chainlink consider that smart contracts have the potential to transform most existing industries by replacing traditional legal agreements with foundational blockchain consensus protocols through smart contracts, but their ability to obtain data from external sources is limited at the moment.
Traditionally, this problem has been overcome by so-called “oracles. Chainlink offers to create a secure and fully decentralized oracle system based on blockchain technology and allowing to connect smart contracts with external (off-chain) sources of information.
Since oracles are outside services run by centralized authorities, that are not subject to the rules of the blockchain consensus mechanism, the question arises about the validity of the data provided by such oracles. Any owner of a data channel, API, etc. will be able to transmit information to the Chainlink network, receiving a payment in the system’s own tokens.
The way Chainlink works
Chainlink ecosystem is based on LINK token and ChainLink network. Through the development of APIs and other platforms, developers aim to increase the possibilities of using smart contracts in commerce.
ChainLink is a decentralized network of nodes where data is distributed and sold.
ChainLink contains two parts: an offchain part and a blockchain part. Both parts need to collaborate with each other for the service to be up and running. The blockchain filters oracles according to metrics requested by the smart contract.
The offchain part consists of oracle nodes connected to the Ethereum network that separately collect data from outside sources. Such a node, for example, could be owned by the New York Stock Exchange, which would provide ChainLink with real-time trading information. ChainLink plans to connect multi-directional oracles into a one system to get more accurate data.
To present day, ChainLink is ready to offer a network that is compliant with Bitcoin, Ethereum, and Hyperledger. It is planned to add support for other blockchains in the future, as well as the ability to run a single smart contract across multiple blockchains.
LINK token
Node operators are paid for their services in LINK tokens. According to the creators, the value of a LINK token directly depends on the number of node operators, meaning that the more popular the company’s product becomes, the more expensive its token will be. Some people believe that the project does not need its own token and could use other cryptocurrencies to perform the same tasks. The creators, in response, argue that the value of the LINK token will be gained with the launch of a full-scale network.
Chainlink Grants Program
The Chainlink Community Grant Program is funding the creation of new smart contract Apps that deliver more value in a wider range of markets.
Links
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