Chainlink just hit its all-time high and is poised to go to the moon, with no real sign of a pull-back. But what makes Chainlink special? What problems does it solve and what are the speculations regarding the network?
This post has been written by our guest author for the week, Karan Parsnani, front-end developer at ZebPay.
Smart Contracts
Before we dive deep into Chainlink, let’s take a step back. Many consider Bitcoin to be one of the greatest innovations of all time. Arguably, second in line after Bitcoin would be ‘Smart Contracts’.
Smart contracts were proposed by the founder of Ethereum, Vitalik Buterin. In the simplest of terms, they are lines of code that allows two parties to execute an agreement without the need of a third party.
Imagine selling your house to someone you’ve never met before with no real estate agent in the middle, just an algorithm that you can trust not to fail or cheat you.
However, smart contracts exist in isolation on individual blockchains. This would make smart contracts unable to react to real world events because they’re unable to connect with external data feeds. In simple terms, changes in stock prices for a company.
Chainlink solves this issue with its network of decentralized data providers, otherwise known as Oracles. No, not the Oracle from the Matrix movies.
Oracles
In crypto, an oracle is a data feed that connects blockchain to off blockchain data. What this essentially means is information that’s not native to the blockchain, for example, the winner of a football game can be communicated to the blockchain via an oracle.
A decentralized oracle solution actually benefits the use of smart contracts. It can retrieve weather data to help calculate insurance premiums, location data to use in supply chain, retail or bank payment information to trigger a smart contract, and more.
The chainlink oracle will be an open network of nodes where anyone can run their own node, participate in chainlink staking and provide data to smart contracts. This data comes from multiple sources, spread all around the world.
Here’s where it gets a bit technical. Data providers must stake the platform’s native LINK token to participate in the network. From that point on, they can earn rewards by providing accurate information or have their stake slashed if they send false information. You can learn more about how staking works here.
Chainlink Partnerships
Almost every Ethereum based DEFI projects from AAVE to Yearn Finance, relies on Chainlink’s supply of live prices to adjust their lending and borrowing rates. Industry movers like Binance and PolkaDot make use of Chainlink. Other business partnerships include Swift, Google Cloud and Intel.
Chainlink purchased DECO, a project that improves how secure data across the Internet. This suggests that Chainlink could be one of the first blockchain startups to achieve true mainstream adoption in the corporate world.
Within the oracle space, Chainlink actually has a benefit of first-mover advantage and larger amounts of funding. Other notable oracle providers include BAND Protocol, DIA and Tellor.
