Oracles are a vital part of the whole cryptocurrency ecosystem. People make and lose millions by trusting their money to oracles’ advice. Chainlink is the biggest oracle provider in the industry and today we will tell you everything you need to know about the company.
What is Chainlink?
A decentralized oracle network, that collects and verifies centralized data for its further use inside blockchain smart contracts.
What exactly are oracles?
Some business models require off chain data for proper functioning. As we all know, before being written into a block any information has to be verified. Oracles are responsible for this 🔮
Why Chainlink?
The main difference between Chainlink and other oracle services is the decentralization.
Oracles were initially all centralized, which led to multiple major problems. Moderated by a single person or company, most centralized oracles weren’t really using various information sources, thus limiting the diversity of data available. This caused significant bias that was simply unacceptable for such operations. Manipulated by the owners, oracles were not objective enough to be trusted 🙅♀️
Chainlink improved the technology by introducing decentralized oracles. The problem was solved by diversifying data collection between multiple nodes and hence increasing the number of informational sources.
How does this work?
Aggregators like CoinGecko, CoinMarketCap, Cryptocompare, etc. receive direct price and trade data from exchanges and other platforms.
These values are passed to Chainlink nodes. No blocks are produced at this stage - the nodes’ current duty is to request and process information. When a request is received, a randomly selected group of suitable oracles answers, redirecting the data from external sources to the nodes.
Chainlink nodes are divided into two types: Core nodes accept requests from users and Adapter nodes act as a “bridge” between the node and an external data source 🌉
The data received by oracles is compared and analyzed by a special Chainlink Aggregation Contract until the consensus in response is reached. The value finally reached its destination - the smart contract that sent the original request.
Tokenomics
LINK token, included in the TOP-50 cryptocurrencies by capitalization was issued on Ethereum platform. The emission of LINK is limited to 1 billion tokens.
The crypto asset is used as payment for oracles’ work and acts as an economic incentive for node operators. LINK is also used to improve the accuracy of data processing and maintain the stability of contracts on the network 🙌
Conclusion
Chainlink is not new to the market and has been around for a while now. With stable tokenomics and no alternative platforms it can easily be considered a blue chip.
Stay tuned 📻
