Chainlink was created to allow different blockchain networks to collaborate with each other. It is a decentralized network of nodes and servers that is built on Ethereum’s blockchain but is not limited to that blockchain only. Through Chainlink’s distributed software, data and information from sources outside the blockchain, can be added to smart contracts in the blockchain via so-called oracles. Chainlink is mainly used in DeFI and decentralized applications, but other industrial sectors can also apply Chainlink’s functionality.
LINK is the name of the proprietary token and it is used to give the oracle (validator nodes) in the network a reward for their work. Please note that you do not have to participate in the network and become an oracle to invest in LINK. Anyone can buy and sell LINK, which is built on one of Ethereum’s token standards, ERC-20. LINK has a limited supply of one billion and was distributed via an ICO in 2017.
One of the major uses in blockchain technology are smart contracts, these allow people to enter agreements that are automatically executed when predetermined conditions are met. These agreements act and are validated on the blockchain, making them safe from manipulation. However, problems arise when smart contracts need to access external data, outside the blockchain, as part of their automated function. Blockchains do not have such a built-in mechanism for retrieving external data, e.g. information about pricing, weather data or other events. Another problem is that data from third-party APIs is not always accurate. Chainlink solves this through a technical solution with decentralized nodes, so-called oracles, where they collect external and accurate data from outside. A smart contract is linked to the source of information, i.e. is connected to a centralized oracle and via Chainlink’s oracles, the information can be entered into smart contracts and then distributed on the blockchain.
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