4 min reading
There are a lot of cryptocurrencies on the market today. Now we are going to talk about Chainlink.
What is Chainlink?
Chainlink is a decentralized network of nodes supplying data and information for blockchain smart contracts. One of its goals is to increase the number of computer networks for delivering real data to smart contracts running on blockchains. Smart contracts, if you don’t already know, are programs that are stored on the blockchain and run at a predetermined time, subject to the required conditions.
They are especially used to automate and execute an agreement so that everyone involved has immediate confidence in the outcome, and without the involvement of a third party, which saves time.
Creation of Chainlink
You will be interested to know that the Chainlink network was created by the co-founders of the smart contract development company Steve Ellis and Sergey Nazarov in 2017, who, together with Ari Jules, published a white paper that same year.
How does Chainlink work?
It all starts with the blockchain with smart contracts when it needs data. These smart contracts send information requests, which are then recorded by the Chainlink contract, which then creates the corresponding smart contract. Smart contracts send a request for information. Three sub-contracts are generated from the chain-to-chain service agreement contract: chain reputation, order reconciliation, and aggregation.
How do these different subcontracts work Aggregate contracts collect data from oracles and associate them with the most precise smart contract. Order set contracts are in accordance with a smart contract service level agreement (SLA) with the best oracles. Reputational contracts validate the integrity of Oracle by checking its track records such as the total number of requests executed, the average response time, and the number of LINKs in crypto that Oracle has delivered.
In order to facilitate communication between Chainlink users and external data sources, Chainlink broke down the execution process into three phases: Oracle selection, data exchange, and aggregation of results. How do these steps work? The first step is at the Oracle Selection tier, where Chainlink users create a Service Level Agreement (SLA) that specifies the desired data requirements. The software then uses this data to match users and oracles that can provide the data. Data reporting is a platform where oracles connect to external sources to get the data requested by the SLA. This data is then processed by oracles and sent back to the contracts running on the Chainlink blockchain. The aggregation of the results is the final step, which involves adding the results collected by the oracles and sending them to the aggregation contract.
The Chainlink network uses the ERC677 token, which almost exactly adopts functionality from the ERC-20 standard and allows tokens to be transmitted as an initiative to support data turnover. It is also used to pay blockchain data providers. This data is subsequently paid for by the data buyer. Prices for their services are determined both by the data providers themselves and by oracles when they publish offers on the platform. In addition to directly earning tokens for supplying data, it is also possible to purchase Link on cryptocurrency exchanges. Although Chainlink initially launched only on the Etherium blockchain, oracle services are now available on other blockchains as well. Data buying and selling can be done by independent developers as well as large companies.
In conclusion, LINK is built on Ethereum according to the ERC-20 standard for tokens. In addition, Chainlink allows financial institutions and businesses to use smart contracts through the Chainlink network without having to switch to smart contracts themselves, thereby allowing them to get all the benefits of decentralization, trust, and immutability without the cost of building a new system or network.