Chainlink is an oracle network built on top of Ethereum and has its own token called LINK. The token is the cornerstone of the entire Chainlink ecosystem and plays a crucial role in the operation. The maximum number of LINK tokens is predetermined. Chainlink serves other blockchain applications as a kind of central instance, offering oracles for the execution of smart contracts. The service uses independent and trustworthy data from reputable sources to provide impartial, reliable, and secure oracles for a wide variety of platforms.
Applications and functions
Chainlink oracles can be used by smart contracts for various purposes such as digital securities, supply chains, and asset management. Chainlink focuses primarily on providing reliable data for dApps. This means that financial data, data from IoT devices, and the connection between blockchains and payment systems can be securely processed.
It uses external data providers such as central or decentralized exchanges to determine price data. Then nodes aggregate the data from third-party providers to create a tamper-proof price update. In this way, Chainlink can offer its services and data to both data providers and data users such as DeFi companies. It not only delivers data to the rapidly developing DeFi market but also cooperates with some large technology and financial players who want to enter the crypto market. Chainlink works with SWIFT and Google and is used in almost all cryptocurrency projects that require information generated by oracles.
For Chainlink to be attractive as a service for as many scenarios as possible, the quality of the information offered must remain at the level that was promised by the provider in the long term. Otherwise, it would be possible for a node to develop a good reputation and then try to pull the money out of unsuspecting buyers with worthless information. Therefore, providers who demonstrably deliver worse than agreed information are financially punished by the system.
It can be said that without Chainlink’s Oracle solution, the development of the cryptocurrency market would have progressed more slowly and most of the major innovations in the market would not have been technically possible. In the future, Chainlink’s success will depend on the development of the project and the growing popularity of smart contracts. Theoretically, smart contracts can replace every contract in digital form in the future. Without Chainlink’s Oracle solution, this would be a major challenge.