Chainlink: Decentralized Oracle Network Explained

Blockchain technology is one of the most innovative technologies. It has transformed the process of record-keeping by introducing a chain of record. However, a big question strikes the mind. What creates the authenticity and trustworthiness of blockchain technology? The answer lies in understanding Chainlink Oracle Network. 

Chainlink is a decentralized blockchain network and web3 service with Oracle technology. In simple words, Chainlink crypto is the futuristic solution with top-notch computational power to offer verifiable web3 services. 

As a middleman to verify the available information and data for trustworthiness, Oracle is a document containing complex code and programming data. Chainlink Oracle Network serves the purpose of offering verified on-chain and cross-chain records to the blockchain. 

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This article will explore each topic in detail. Here is what we will cover in this guide: 

• What Chainlink Oracle Network is?
• How does the Chainlink network work?
• Native crypto token of Chainlink
• Benefits and risks associated with Chainlink (LINK)
• The future of Chainlink, etc. 

After reading and understanding this guide, most of your questions regarding LINK and its associated technology will find answers. 

What is Chainlink (LINK)?

Chainlink is a suite of technology stacks that connects non-crypto users and enterprises with blockchain technology for enhanced security and functionality. Chainlink has a decentralized Oracle network that acts as middleware in the process. Thus, consumers can enjoy gapless connectivity between their off-chain data and the blockchain network. 

To do so, Chainlink has a robust hybrid smart contract for the integration of off-chain data into the on-chain ecosystem. Chainlink’s native crypto token, LINK, is the ticket to connect and pay for the Chainlink network. 

We will cover more of these terms comprehensively in the coming sections of this guide. 

Why Is Chainlink Important?

Chainlink network is highly important in the blockchain ecosystem. It has various features and benefits for organizations as well as individuals. For instance, the secure sharing of data and computation is one of the multiple perks of the Chainlink network. 

Here is a list of the top benefits that Chainlink Crypto offers to crypto enthusiasts and enterprises: 

• Hybrid smart contracts support decentralized and secured data sharing,
• The Oracle network offers a verifiable and trustworthy source of data,
• Chainlink blockchain automates the process,
• Cross-blockchain interoperability is possible through Chainlink, etc. 

History of Chainlink

The co-founder of Chainlink, Sergey Nazarov, has made notable contributions in the crypto space. For instance, the entrepreneurial innovation of Nazarov, SmartContract, aimed to bring smart contracts to life. 

In 2017, Nazarov teamed up with Steve Ellis. Steve is another high-rated figure in the cryptocurrency industry who has made multiple contributions to crypto. With the objective to solve the problem of trust and verified data sharing to the blockchain, Stever and Sergey co-founded Chainlink. 

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Chainlink Decentralized Oracle Network

In a blockchain, the role of smart contracts is inevitable. A smart contract is what automates the blockchain network as it executes automatically after certain conditions. The Chainlink decentralized oracle network serves the purpose to perform this data transfer in a safe and tamper-proof manner. 

Oracle network is an independent entity between blockchain and off-chain networks for various functions. The function of an Oracle network includes: 

• Retrieving data from multiple sources,
• Aggregating the data, 
• Validating the sources,
• Sending the data to the smart contract,
• Cutting off centralized points of failure. 

The following illustration of Chainlink decentralized oracle network will demonstrate how it works. 

The example highlights the USD price of the Ethereum token (ETH) through ETH/USD price feed. When Chainlink performs this action, it employs various oracle nodes. Oracle nodes retrieve the data from the Ethereum blockchain, which is the source of data. Then, deliver the price data to the Chainlink network. 

A blockchain application that needs ETH price can use the Chainlink oracle network to fetch the price data and show it to its consumers. 

Types of Oracles

Since oracles are the best sticking point for enhanced security and trustworthiness, it has two types based on authoritative intervention. That includes: 

• Centralized Oracle: It refers to a single entity that retrieves data from a source to the smart contract. The centralization of this oracle network is due to the single operator or controller. Thus, a centralized oracle network reduces the trustworthiness and verifiability of the data. 
• Decentralized Oracles: Unlike centralized oracles, a decentralized oracle network (DON) employs multiple sources for the retrieval of data to a smart contract. Therefore, decentralized oracles increase authenticity and reduce single points of failure in a smart contract. 

Importance of Oracles in Smart Contracts

Every blockchain depends on smart contracts for smooth functionality. Oracle networks enhance the vitality of smart contracts, ultimately resulting in improved blockchain technology. 

Oracle networks are key to the global adoption of blockchain technology. This is due to its ability to link off-chain and on-chain data in a more secure and reliable way. 

A Statista report reveals that blockchain will become a $1,000 trillion industry by 2030. Provided that, Chainlink LINK oracle network is one of the contributing factors in this endeavor. 

Working of Chainlink

So far, you have understood what Chainlink is and what it does. It is time to know how it works. Since Chainlink oracle network offers connectivity between off-chain data providers to smart contracts on the blockchain, it works in three layers. They are as follows: 

• Data Source: It is the external input data point, which may be price feed or any other data source. The data source is from where you want to retrieve data for the smart contract. For instance, CoinMarketCap is the price data aggregator or data source for the price of something you want to feed into the smart contract on a blockchain. 
• Node Operators: Node operators of the Chainlink decentralized oracle network (DON) make up the second layer. This layer helps in the attestation and verification of the data between off-chain data and blockchain. In the above image, T-Systems, ChainLayer, etc., act as node operators for Chainlink DON. 
• Oracle Network Aggregation: When node operators verify data from off-chain data sources, the next layer activates. Oracle network aggregation is when the DON decides to provide accurate and verified data to the smart contract of the blockchain. Ethereum, Polygon, Solana, etc., are the Oracle network aggregators. 

Key Features of Chainlink Oracles

Chainlink is a prominent player in the web3 and blockchain ecosystems. The connectivity it offers facilitates trustworthiness, security, reliability, and scalability to web3 and blockchain. Given these productive and essential services of Chainlink, it has grown in popularity and usability. 

We have mentioned a few key features of the Chainlink Decentralized Oracle Network. 

1. Unmatched Security

Chainlink Crypto is a top brand in the cryptocurrency market due to its long track record of time-tested security. Oracle as a middleware between data sources and blockchain technology ensures the availability of trusted and reliable data. 

Since smart contracts can execute actions based on the data developers feed them, Chainlink DONs pave the way for accurate functions of blockchain. 

2. Enhanced Reliability

Chainlink has become the go-to choice for crypto enthusiasts and developers due to its enhanced reliability. The decentralization is the core cause of Chainlink’s reliability. From data retrieval to smart contract creation, Chainlink has placed nodes for verification and aggregation. 

You can explore the decentralized data storage network, Filecoin in this guide. 

The purpose of this infrastructure is to avoid a single point of failure in the process. Thus, Chainlink is resilient to the risks of malicious actors such as hackers and scammers. 

3. Competitive Scalability

Chainlink is one of a few crypto platforms with multi-cloud and multi-region infrastructure. It is due to this reason that LINK crypto offers unmatched uptime. The efforts to reduce downtime pave the way for handling data verification without calling it a day. 

Moreover, Chainlink supports external adapters for high performance. This offers scalable operation to enterprises and individuals by connecting them to multiple systems outside the blockchain. However, LINK never compromises the security of the operation. 

Multiple Applications and Use Cases of Chainlink

Chainlink crypto has helped a wide range of enterprises and individuals with its services and products. According to its official website, Chainlink has more than 77 use cases and applications so far, which is evolving every passing day. 

Here are some of the most notable use cases in top-notch industries that you need to understand. 

1. Decentralized Finance (DeFi)

DeFi is the foremost application of blockchain technology. Have you ever considered that traditional applications can benefit from blockchain? Chainlink and DeFi have made this possible. 

Loans, financial transactions, derivatives, stocks, asset equities, etc., are some of the top conventional finance products. Chainlink Oracle network allows the creation of these products on top of blockchain technology for enhanced security, faster speed, and minimal cost. 

2. Gaming

Video games are the products of a billion-dollar industry. Research suggests that the video game industry is growing at an 8.76% annual rate, forecasting to reach $363.20 billion by 2027. This forecast compels game developers to consider smart contracts and blockchain. 

Chainlink LINK network offers the right playground for developers to launch smart contract-based games. These games will pave the way for the advancement of non-fungible tokens (NFTs) as well. 

The best thing about these games is the randomness that blockchain can help developers with. For instance, Chainlink smart contract creates random scenarios for players. This elevates game difficulty, resulting in enhanced engagement and retention. 

3. Traditional Systems

Chainlink bridges the gap between traditional systems and blockchain. It offers a way for data providers, Internet-of-Things (IoT) networks, and businesses to retrieve and upload their data on any blockchain. 

The decentralized oracle network of Chainlink serves as an integration gateway between the traditional system and the blockchain network. This interoperability helps the crypto and blockchain to go mainstream with global adoption. 

4. Supply Chain Management

Supply chain management is the process that ensures the safe dispatch and arrival of products, logistics, and goods from one point to another. LINK blockchain has helped supply chain management systems by connecting them to the blockchain network for authenticity and real-time updates about goods’ location, monitoring, etc. 

Chainlink Oracle network offers the following advantages to a supply chain management system: 

• Enhanced transparency, 
• Less fraudulent activities and risks,
• Better traceability of goods,
• Smooth logistics processes, etc. 

5. Insurance and Real-World Data

Chainlink Oracle network has helped in crafting efficient and self-executing parametric insurance contracts. The success of Chainlink in the insurance industry is due to its power to leverage the abilities of smart contracts for insurance. 

Parametric insurance is an agreement for payments in case of the occurrence of an event or the exceeding of a deadline for a task. With Chainlink’s smart contract, the execution of automated payments benefits both policymakers and stakeholders in an insurance contract. 

What is Chainlink Token (LINK)?

Just like any other blockchain, Chainlink has also developed its native crypto token, Chainlink (LINK). LINK token is the utility token for the Chainlink network that has multiple functions. A few notable uses of LINK are: 

• Incentivizes data accuracy on the network, 
• Stabilizing smart contracts, 
• Rewarding validators on the Chainlink DON, 
• A token for trading, investing, staking, etc. 

The consensus mechanism of Chainlink crypto is based on the Proof-of-Stake (PoS) protocol. Thus, users with more LINK tokens can enjoy higher rewards and major roles in governance of the network. 

Furthermore, as a popular cryptocurrency, you can trade and stake LINK on top crypto exchanges. That includes: 

• Binance
• Coinbase
• Kraken
• HTX (Huobi), etc. 

LINK Tokenomics

Tokenomics of Chainlink crypto is highlighting the total and circulating supply of LINK tokens. Moreover, it covers the market capitalization and performance of the LINK coin. According to CoinMarketCap, the total supply of LINK is one billion tokens. 

The circulating LINK supply is around 608.1 million tokens. With a $8.09 billion market cap and $172.31 million 24-hour trading volume, Chainlink LINK is among the top-tier cryptocurrencies in the market. 

Supply and Distribution

The total distribution of the LINK supply goes this way: 

• 35% LINK tokens are for public sales
• 30% LINK tokens are for the company
• 35% LINK tokens are for node operators and ecosystems of the network

The noninflationary nature of the Chainlink token is the reason for its price growth and demand hike, making it a top choice for investors and day traders. 

Where to Buy Chainlink Token (LINK)?

If you want to earn revenue through trading or investing in LINK, various crypto exchanges enable you to do so. With a higher number of top-notch crypto exchanges, selecting the right one to start trading can be daunting for you. 

Thus, we have enlisted the top three crypto marketplaces to invest your assets and buy or trade LINK tokens. The best selling points of our listed exchanges are:

• Low platform fees
• Tamper-proof security
• Convenient accessibility
• High volume and liquidity

1. Binance

Binance is one of the leading crypto exchanges with the highest trading volume. Started in June 2017, it has transformed crypto trading and investing with higher accessibility and lower platform fees. 

You can buy, sell or trade Chainlink LINK tokens on Binance. Whether you want to spot trade LINK or leverage trade, Binance offers you the option to do so. 

In spot trading, you invest in LINK tokens and wait for their price hike. On the other hand, leverage trading can provide you with returns on investment in both short and long positions. 

2. Coinbase

Though Coinbase is picky in listing crypto assets, it offers trading, investing, and staking Chainlink token, LINK. Because of LINK’s reliability and high popularity among enterprises and crypto enthusiasts, it is available for trade on Coinbase. 

Coinbase has a premium version, Coinbase Pro. This platform provides consumers with multiple tools and trading assistants for higher gains. Moreover, the educational content and beginner-friendly user interface make Coinbase a top choice for day traders interested in LINK. 

3. Kraken

Last but not least, Kraken is another excellent crypto exchange with reliable security and a user-friendly interface. It offers additional perks with its premium version, Kraken Pro. Crypto enthusiasts can register on Kraken and start trading LINK on the go. 

When it comes to showing resistance to hackers and malicious activities, Kraken has a reputation for it. Thus, you can rest assured knowing that your Chainlink assets are secured with this crypto exchange. 

Chainlink Economics 2.0

The secret behind the success and substantial growth of Chainlink Decentralized Oracle Network is its tireless efforts to upgrade and level up its ecosystem. Chainlink Economics 2.0 is a testament to the long-term sustainability of Chainlink in the blockchain space. 

In Chainlink Economics 2.0, a few notable initiatives provide a roadmap of success for consumers and businesses. A quick overview of the initiatives in the economic advancement of Chainlink includes: 

1. Chainlink Staking

Crypto staking is an important area for crypto enthusiasts. Staking allows stakeholders to make revenue from their assets. On top of that, they get a license to participate in the governance of the blockchain platform. 

Chainlink Oracle network offers users the ability to stake LINK tokens. The purpose of the Chainlink staking program is to add an extra layer of crypto-economic security. Stakeholders of LINK can participate in strengthening the safeguarding and user assurance of the Chainlink network. 

Staking LINK offers several perks to stakeholders, such as: 

• Enhancing the protection of the network,
• Incentives and rewards in crypto
• Supporting the truth machine of the Oracle network

2. Chainlink Build Program

If you want to get additional support and growth for your web3 projects on the Chainlink network, the Chainlink Build Program is the solution. Chainlink Labs started this initiative to offer technical support and priority access to Chainlink services for early and established projects on the network. 

The benefits of joining the Build Program are plenty. For instance, you can get engineering and product experts on your projects with this program. Additional perks of this program are: 

• Comprehensive support from industry-standard experts
• On-time access to the right service for your project
• Unparalleled security protocols for decentralized applications (dApps)
• Timely monitoring and maintenance

3. Technical Innovations

Another effective initiative in the Chainlink Economics 2.0 is technical innovations. In this program, the developing team of Chainlink aims to level up the functionality of existing Oracle services. 

For instance, Off-Chain Reporting (OCR) 2.0 is the initiative to integrate off-chain data into the blockchain and smart contract more efficiently. In addition, Data feed optimization will offer increased incentives for the cost-effective adoption of blockchain and web3 services. 

Conclusion: The Future of Chainlink

Chainlink blockchain with its native crypto token LINK is the dawn of a new era in the crypto ecosystem. The fundamental objective of this crypto initiative is to connect traditional financial systems to the most secure and transparent decentralized ledger system. Chainlink employs the Oracle network for this purpose. 

The future of Chainlink Decentralized Oracle Network is promising due to the increased functionality and scope of the Oracle system. Chainlink Economics 2.0 is the reflection of blockchain and crypto’s future. 

Furthermore, Chainlink continues to make partnerships with top names, such as the Australia and New Zealand Banking Group (ANZ) and SWIFT to offer Cross-Chain Interoperability Protocol (CCIP) and tokenized asset adoption to consumers. These partnerships will enhance the value of LINK tokens, enhancing its demand among traders and investors. 

FAQs

Can LINK tokens be purchased with a credit card?

Yes, you can buy LINK tokens on various crypto exchanges with credit or debit cards. You can use exchanges like Binance, Kraken, etc., or use a third-party payment gateway, such as CoinGate, BitPay, etc., to buy LINK with a credit card. 

What are LINK tokens used for?

LINK tokens have multiple use cases. LINK is a tradeable utility token that allows you to earn crypto by trading and staking Chainlink LINK tokens. Moreover, owning LINK allows you to participate in the governance of the Chainlink Oracle network. 

Can we trust the Chainlink (LINK) crypto?

Yes, Chainlink Oracle network is one of the most trustworthy networks in the crypto space. This makes its native token a trusted investment tool for traders and node operators as well. 

How does Chainlink handle privacy concerns?

Despite the transparent process of the Chainlink oracle network, it uses enclaves to handle confidential and sensitive user data. Enclaves are off-chain computation zones for privacy regulations and secure data handling. 

Can anyone become a Chainlink node operator?

Becoming a node operator requires learnable skills and experience in node operation and validation of blockchain. With adequate LINK tokens and skills, you can become a Chainlink node operator and earn rewards. However, not everyone can become a node operator.