ChainLink is a decentralized oracle network that powers smart contracts to interact securely with off-chain data. This network connects isolated blockchains to real-world data while ensuring data inputs and outputs like weather and prices remain untampered and reliable.

LINK is a utility token used to pay the network’s operators.

Oracles in Chainlink are the external data sources that link to smart contracts, causing them to execute after all predefined conditions are met. Network participants are rewarded to provide smart contracts with these external data feeds.

Chainlink was developed by Sergey Nazarov and Steve Ellis, both of SmartContract Chainlink Ltd., a private blockchain firm. In its September 2017 initial coin offering (ICO), Chainlink raised $32 million. The project went live on the Ethereum mainnet on June 1st, 2019, nearly two years after the ICO.

Operations

Smart contracts only execute when the predefined conditions are met, but they are limited to blockchain environments. For real-world applications, smart contracts need a way to connect to off-chain data. This is made possible by oracles, which provide the blockchain with access to off-chain data.

Chainlink’s decentralized network of oracles combines outbound nodes for requesting off-chain data, with inbound nodes for synchronizing the requested off-chain data to the blockchain. This way, smart contracts interact seamlessly with off-chain data.

The process begins when a Request Smart Contract (RSC) initiates the data synchronization process. The RSC activates a corresponding smart contract known as a Service Level Agreement (SLA) which generates three other smart contracts:

  1. The Chainlink Reputation Contract: This contract tracks the performance record of oracle providers to validate the reliability of the off-chain data they supply. Node operators that provide accurate data are rewarded with LINK tokens, while those supplying unreliable data have their tokens deducted. Therefore, providers with more LINK tokens will most likely be awarded larger contracts.
  2. The Chainlink Order-Matching Contract: This contract matches the RSC with the relevant oracles based on the set conditions. The contract will select from the bidding nodes that align with the set parameters.
  3. The Chainlink Aggregating Contract: This contract converts the data received from the various nodes into a single-weighted value, translated and parsed before relaying it to the blockchain that needed the off-chain data. The data aggregation on Chainlink’s Meta Oracle filters the data for the most accurate results.

After this process, the node operators receive LINK tokens as incentives.

Applications

LINK tokens are applied within the Chainlink protocol as currency for paying node operators for their oracle network services.

Node operators need to stake LINK tokens to participate in the Chainlink protocol as data suppliers. Operators who stake higher have a higher probability of being chosen to supply data on-chain.

Chainlink has significant adoption by project developers looking to integrate the protocol into their projects, including some who want to supply data as nodes. Top projects that are involved in Chainlink include Aave, Synthetix, Celsius, Yearn.Finance, and Ampleforth.

The LINK token is an ERC677 token. It adopts ERC20’s functionality and supports token transfers with a data payload. Currently, there are over 417 million of the 1 billion LINK tokens in circulation.

You can buy LINK tokens from top exchanges including, CoinbasePro, Kraken, Huobi Global, and Binance.

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