Chainlink: The Guide To The Decentralized Oracle Network
Chainlink was launched by a San Francisco fintech company SmartContract back in June 2017 and is described by the developers as a secure blockchain middleware that intends to connect the smart contracts across the blockchains by allowing the smart contracts to have access to key off-chain resources such as data feeds, web APIs and bank account payments.
The developers of the crypto project believe that despite the smart contracts can revolutionize many industries by simply replacing the need for traditional legal agreements by underlying the consensus protocols that are related with the blockchain technology making the smart contracts unable to communicate with the external systems. The Chainlink ecosystem revolves around the LINK token and the LINK network. With the release of APIs and other platforms, the developers plan to enhance the applicability of the smart contracts across the business world.
What Exactly Is A Smart Contract?
First invented in 1993, the smart contacts are computer applications that are executed on the decentralized infrastructure such as the blockchain. While a standard contract outlines the terms by governing a relationship that is enforced by law, the smart contracts enforce the contractual relationship with the cryptographic code. The smart contracts are executed once a certain set of circumstances get in place and once a smart contract is executed, the fact that it is living in the decentralized network means that the party can alter its code with its execution. By simply preventing the alteration, the smart contracts bind all parties to an agreement the agreement when the contract is executed and thereby creating a type of relationship that does not rely on trust on simply one party.
However, according to the developers of Chainlink, there are multiple drawbacks to the current structure of the smart contracts of the blockchain. For example, because the smart contracts are based on information that is secured on a blockchain, they are unable to interact with external resources such as the data feeds and traditional banking systems. This problem is usually solved through the use of a blockchain middleware called an ‘’Oracle.’’ Chainlink uses the Oracle network that is completely decentralized by being built on the blockchain technology.
What Are Oracles?
The Oracles are much needed because the blockchains cannot access the data outside of their network and they are defined as an agent that finds and verifies the real-world occurrences and submits the information to the blockchain in order for it to be used in the smart contracts. It also provides the external data that is needed to trigger the execution of the smart contracts. Because the Oracles are third party services with centralized power and are not a part of the consensus mechanism, the problem that emerges is whether the data received from an Oracle is trustworthy.
Smart contracts are self-executing and based on certain conditions which are why it is important that the oracles have to provide accurate and trustworthy information. If inaccurate data is transmitted into the blockchain, the smart contract will execute the wrong function. Some oracles rely on the notarization for the data to be verified and according to the Chainlink developers, these types of oracles are flawed because they need recursive verification.
The Chainlink developers aim to solve this issue by creating a decentralized oracle network for the smart contracts in order to securely interact with the resources that are external to the blockchain such as cryptographically secure the data feeds and to facilitate the inter-operability in between the blockchains. The Chainlink network will allow everyone who has a data feed or any other API to provide them with a smart contract directly in exchange for the Chainlink tokens. These are called Node Operators and all such data providers to sell the APIs to a smart contract in exchange for LINK tokens.
The ChainLink Network is a decentralized network of nodes which are all selling the usage of specific data feeds and offer many off-chain payment capabilities. The Network consists of two separate parts which have to interact to deliver the service properly. The network is built so it can later be upgradeable and its different components can be replaced as better techniques and technologies arise. The on-chain feature of the network filters the oracles based on the metrics requested by a party to a smart contract through a service level agreement.
By using the same metrics, ChainLink collects the oracles responses to the SLA queries and sorts them by using reputational and aggregation models and provides the final collective result of the query that could be implemented into the smart contract. The off-chain component of the network consists of an oracle node that is connected to the Ethereum network which harvests the responses to off-chain requests. These nodes could be within any industry and for example, an off-chain node that runs by the New York Stock exchange could provide the Chainlink network with a piece of real-time accurate trade information. The ChainLink technology aims to onboard the nods from all of the industries into one purpose network acting as a low-cost middleman and to interpret the data as needed.
The Chainlink ecosystem will ensure that the results received from the oracles is accurate as well as allowing the oracles to remain independent. All of the data, payments, and e-signatures, as well as individual developers, can simply join the ChainLink network by connecting an API that they are familiar with the network. Once the API is connected to a Chainlink, the user becomes a Chainlink Node Operator and is responsible for keeping the API connected to the chainlink network. To incentivize the operators to provide API information, they have to pay their LINK tokens for their successful fulfillment of the on-chain requests.
As LINK tokens are used as currency on the Chainlink platform, and the more usage the tokens have, the more valuable LINK tokens should be. The commentators suggested that the tokens are unnecessary to the project because other cryptocurrencies are perfectly adequate to provide compensation to operators and that the oracles themselves would have the incentive to keep the network and access to data constantly.
Partners And Short Summary
The network has a huge capacity and a considerable usage thanks to the many partnerships that were announced before even the mainnet went live. This token will grow as more companies will join on board.