Chainlink (LINK)

 

Chainlink’s technology claims to solve one of the biggest challenges for the practical implementation of smart contracts, connecting blockchains to real world data

What is Chainlink ($LINK)?

Chainlink discovered out how to transfer data into and out of a blockchain while maintaining its security, reliability, and decentralized character. Oracles, or data sources that connect the blockchain to the “real” world, no longer have to be a single point of failure for a smart contract application. Chainlink established a network of nodes for the purpose of transferring data to and from the blockchain, hence establishing a critical element of smart contract architecture. This “blockchain middleware” enabled Chainlink oracles to offer critical information like as price feeds, event results, and connections to legacy payment systems while maintaining decentralization and security.

LINK began operations in 2017. The concept originated from a prior experiment undertaken by its parent business, SmartContract.com. They have previously attempted to establish a decentralized oracle solution for blockchains, but were unable to accomplish so. Centralized oracles are viewed as untrustworthy because if they source erroneous data, it will be permanently recorded on the blockchain, with no means to correct it.

Blockchains are designed to derive their data from information stored on the blockchain. This increases their security and resistance to tampering. However, smart contracts may occasionally require off-chain data from the actual world. External data such as fiat currency exchange rates or any other sort of external data may only be incorporated on-chain via oracles such as Chainlink.

Features of Chainlink

One of the primary obstacles to widespread adoption of decentralized apps is their inability to communicate with data not included within the blockchain.

What does Chainlink solve?

To really appreciate Chainlink’s significance, we must first explore two critical concepts: Oracles and smart contracts

• Oracles are centralized third-party devices that are not a part of the blockchain’s consensus system. This makes it impossible to trust them, as there is no way to know for certain whether the information presented is accurate, therefore negating the benefits of blockchain technology. For instance, a smart contract might perform an action based on inaccurate or out-of-date data.
• Smart contracts are two-party agreements that can execute and enforce themselves autonomously and independently without the need for counterparties. They do so by converting contract words into computer language scripts.

With these two notions in mind, smart contracts are incapable of interacting with external real-world data and systems without the assistance of centralized, untrustworthy third parties. Chainlink fills this need by acting as a decentralized mediator, linking smart contracts and real-world data without the need for counterparty risk.

Understanding how it works

The Chainlink blockchain is powered by three types of smart contracts.

• The Chainlink Reputation Contract verifies the validity and performance history of an oracle provider — and then analyzes and discards disreputable or unreliable nodes.
• The Chainlink Order-Matching Contract communicates the Requesting Contract’s request to Chainlink nodes and solicits their bids (where the Requesting Contract does not specify a specific set of nodes) — and then picks the appropriate number and kind of nodes to fulfill the request.
• The Chainlink Aggregating Contract collects data from the selected oracles and verifies and/or reconciles it to provide an accurate result.

Chainlink is a protocol that connects the blockchain to other settings. The process begins when the smart contract makes an information request, which the protocol logs as an event, so producing a SLA (Service Level Agreement). Here is the process:

• Oracle Choosing: To begin, users of Chainlink create a service-level agreement (SLA) outlining a set of desirable data requirements. The program then matches the user with oracles that can give the data based on the SLA. The user then submits the SLA and puts their LINK cryptocurrency in an Order-Matching contract that takes bids from oracles
• Data Reporting: This is the process by which the oracles link to external sources and get the real-world data specified in the SLA. The oracles then process the data and send it back to Chainlink contracts
• Aggregation of Results: The last stage entails summing the results of the data oracles and returning them to an Aggregation contract. The Aggregation contract collects replies, validates their authenticity, and gives to the customer a weighted score calculated from the total of all the data received.

Through this process, Chainlink has created a way to efficiently provide reliable and accurate off-chain data to smart contracts. 

What is unique selling point?

Chainlink is the most commonly utilized decentralized oracle network, safeguarding tens of billions of dollars in live applications across a variety of blockchains and use cases. Chainlink is not a single oracle network, but an ecosystem of several decentralized oracle networks that operate concurrently. Each Oracle network is capable of providing a diverse range of Oracle services without relying on other Oracle networks, including the following:

• Decentralized Price Feeds that may be linked into any DeFi application to provide access to a high-quality, tamper-resistant, and continuously updated source of financial market data on a broad range of assets with complete market coverage.
• A Verifiable Random Function (VRF) that provides a provably fair and secure Random Number Generator (RNG) for use in NFTs and on-chain gaming applications.
• Proof of Reserve (PoR) technology enables smart contracts to verify the genuine collateralization of any on-chain asset backed by off-chain reserves, such as stablecoins backed by cash, cross-chain tokens, and tokenized assets.
• Keepers provides decentralized and cost-effective transaction automation to dApp developers for triggering smart contract functionality and executing contract maintenance through off-chain computing.
• The Cross-Chain Interoperability Protocol (CCIP) is an open-source standard for the multi-chain ecosystem that enables cross-chain apps to send messages and transfer tokens across various blockchains using commands.
• External Adapters are modular and may be used to connect to any off-chain resource, such as premium data providers, authorized web APIs, IoT sensors, bank payments, enterprise backends, and other blockchain networks.
• Off-Chain Computing capabilities include Fair Sequencing Services for transaction ordering, DECO for privacy-preserving attestations of TLS web session data

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