What is Chainlink (LINK)?
Chainlink is a decentralized oracle network. The external data providers that share the work on the network are what are dubbed “oracles”. These oracles allow Chainlink smart contracts to receive accurate data from external (non-blockchain) sources, such as any kind of API and some other types of external data feeds. LINK is an ERC-20 token that’s used to pay for and ensure the accuracy of this oracle service on the Chainlink network.
Bitcoin (BTC) value is relative to its usefulness as a general-purpose currency. Chainlink value is set in quite a different way.
Chainlink takes the capabilities of smart contracts to the next level, by enabling access to real-world data, events, payments, and more without sacrificing the security and reliability that are inherent to blockchain technology.
Part of LINK’s value in the marketplace is really Ethereum (ETH) value, because Chainlink runs on the Ethereum blockchain and relies on Ethereum smart contracts to earn money.
First created in 2017, the Chainlink team has so far been able to deliver on its vision of providing accurate external data to blockchains. Though originating on Ethereum, Chainlink has been designed to work across any blockchain that has smart contract functionality. Chainlink does not operate its own blockchain – instead, it is interoperable and running on many different blockchains simultaneously.
How does Chainlink Work?
In order to allow communication between the blockchain-based smart contracts it services and external data sources, Chainlink follows an innovative three-step process:
- Oracle Selection: a Chainlink user drafts a Service Level Agreement (SLA) specifying a certain set of data requirements. The Chainlink software then uses this SLA to match the user with the most appropriate oracles that can provide the data. Once the parameters are set, the user submits the SLA and deposits their Chainlink (LINK) cryptocurrency in an Order-Matching contract, which accepts bids from oracles.
- Data Reporting: this step is where the oracles actually connect with the external data sources to obtain the real-world data requested in the Chainlink SLA. The data is then processed by the oracles and sent back to the contracts utilizing the Chainlink service.
- Result Aggregation: the final step of the process is to tally the results of the data collected by the oracles and return it to what’s known as an Aggregation contract. The Aggregation contract takes the data points, assesses the validity of each and returns a weighted score, using the sum of all the data received, to the user (smart contract).
What makes this process especially powerful is how it enables Chainlink to validate data from multiple different sources. Thanks to its internal reputation system, Chainlink can determine with a relatively high accuracy which sources are trustworthy – greatly increasing the accuracy of the results and protecting smart contracts from various kinds of malicious attacks.
What part does LINK play in all of this? The smart contracts that request the data pay Chainlink node operators in LINK for their service. The prices are set by the node operators based on the market conditions and demand for that data.
Node operators also stake LINK to ensure long-term commitment to the project. Similarly to a Proof of Stake (PoS) consensus mechanism, Chainlink operators are incentivized with LINK rewards to encourage acting in a trustworthy manner rather than being malicious.
Who Are The Founders of Chainlink?
Chainlink is the product of a blockchain-focused technology startup called SmartContract. Founded in 2014, the company’s aim is to harness blockchain technology – specifically smart contracts – to make contractual agreements that can be used by all participants in the industry, regardless of their skill level and expertise.
Backed by San Francisco-based investment group Data Collective, Smart Contract set about making its vision a reality with a team of industry-leading innovators.
Sergey Nazarov is the CEO and co-founder of the company. Prior to SmartContract and Chainlink, Sergey had history in the space as the founder of Secure Asset Exchange, a cryptocurrency exchange. He also founded a completely decentralized email service, dubbed CryptoMail.
Steve Ellis is CTO and co-founder of the company. Ellis worked with Nazarov before, on the Secure Asset Exchange platform, before joining this venture. He is also an experienced software engineer, having worked at Pivotal Labs prior to joining the blockchain sector.
Another important founding member of the Chainlink team is Ari Juels, who along with Nazarov and Ellis, wrote Chainlink’s whitepaper. A computer science professor at Cornell Tech and the director of IC3, Juels is currently an advisor to the Chainlink team.
As you can see, Chainlink is fully international. The value of the LINK cryptocurrency does not arise from its worldwide use alone, however. LINK value comes from what the token does – it provides oracle services for blockchain apps. Its valuation is like Ripple (XRP) value: In both cases, the valuation comes from what coins and blockchains empower users to do.
Chainlink held an Initial Coin Offering (ICO) in September 2017, raising $32 million USD, with a total supply of 1 billion LINK tokens. Following the Chainlink ICO, 35% of LINK tokens were sent to node operators to jump-start the incentivization of this decentralized oracle network and 30% stayed with the Chainlink team to fund future development.
What Makes Chainlink Unique?
There are many unique aspects to the Chainlink project.
One of the most interesting of these unique aspects is Chainlink’s off-chain architecture. The ChainLink network is a part of this architecture, which connects all nodes together. Each of these nodes is then connected to reserves via APIs to gather responses for every contract using the Chainlink service.
Chainlink nodes may also have external adaptors, helping to extend their connections to nearly any 3rd party API endpoint.
All off-chain data is translated via the ChainLink Core software. It is done in such a way that it can also be read on-chain, with no kind of translation needed. The sub-tasks of the SLAs are also processed by this software, meaning that the entire operation has the ability of taking place either on-chain or off. The external adaptors mentioned above are critical in making this kind of architecture possible.
These external adaptors allow interaction with 3rd party API endpoints, bridging the gap between blockchain and real-world applications. All adaptors are written in Chainlink’s schema, ensuring complete interoperability.
What Gives Chainlink Value?
Chainlink node operators can stake LINK as a way to offer a bid to the intended buyer of the data. The node operator must then provide the information to the contract making the request. Every payout for operators happens in the form of LINK tokens.
This approach incentivizes node operators to keep accumulating LINK. Why? Owning more tokens means access to bigger and more rewarding data contracts. If an operator decides to break the rules, they’ll have their LINK tokens removed as a result.
As we can see, the LINK token helps in paying operators on the network. The value and the demand for these LINK tokens are largely dependent on the number of operators that work to secure the network, but the token also derives its value from the other various use cases of the decentralized oracle network. The more use cases the Chainlink platform can be put to, the more valuable the LINK token will be.
This is quite different from the Bitcoin price, which is based on its utility as a general-purpose currency. And from the Ethereum price, which is based on the coin’s role in supporting the Ethereum blockchain, which is essential to decentralized applications and NFTs. The XRP price is supported by the usefulness of the underlying XRP Ledger blockchain, which is tuned to support international person-to-person and bank-to-bank fund transfers.
How Many Chainlink (LINK) Coins Are In Circulation?
Chainlink (LINK) is currently ranked #9 of all crypto projects by market cap, with a total market cap at time of writing of $10,874,639,775 USD. This market cap may fluctuate wildly as with any other cryptocurrency.
Chainlink has a maximum supply of 1 billion LINK tokens. 35% of the supply was sold during the ICO in 2017. The rest has either been allocated to the team for future development, or sent to the network nodes to incentivize the decentralized oracle network. The circulating supply is 410,009,556 LINK.
In contrast to many other crypto assets, LINK has no process that increases its circulating supply.
Other Technical Data
Chainlink is a platform packed with features, and its native cryptocurrency follows suit.
Chainlink (LINK) developed their LINK contract as an ERC20 token implementation – this allows it to offer the standard operations like transfer, approve and transferFrom.
In a stroke of innovation, the LINK token contract also implements the ERC677 interface. This allows it to provide a transferAndCall function in order to allow payment and invocation to be done with a single transaction.
LINK is a token taking the latest technologies and merging them in an effort to bolster its efficiency, as we can see.
How Is the Chainlink Network Secured?
The Chainlink network is secured by a similar concept to Proof of Stake (PoS), where its validator nodes stake LINK in order to obtain data contracts and be rewarded by the network. The incentivized rewards system dissuades network nodes against malicious or unscrupulous behavior, as does the risk of losing the LINK they have staked.
The Chainlink decentralized oracle network is powered and secured by three types of custom-designed smart contracts as well:
- Aggregation Contract: this is what collects the data from oracles and matches the most accurate results with the smart contract that needs them.
- Order-Matching Contract: these contracts are in charge of matching the best possible oracle with the smart contract’s service level agreement (SLA) needs.
- Reputation Contract: verifies the integrity of an oracle by checking its statistics, including the total number of completed requests, average response time, and amount of LINK tokens staked by the oracle.
How to Use Chainlink?
LINK is the ERC-20 token used to pay for services on the Chainlink oracle network. It essentially powers the architecture of Chainlink itself.
Requesting Contract holders use LINK to pay node operators for their work providing the data needed. Prices are set by the Chainlink node operator based on demand for the data they can provide and the current market for that data.
Chainlink node operators also use LINK as their stake in the network – node operators deposit LINK to demonstrate their commitment to the network and incentivize good service, while also ensuring they will be penalized for malicious or inaccurate service (in the form of losing their staked LINK).
The Chainlink Reputation Contract uses the size of a node’s LINK stake (along with other factors) when shopping for data to fulfill a contract. The nodes with greater stakes are more likely to be chosen to fulfill requests (earning LINK tokens for their services).
How to Choose a Chainlink Wallet?
The type of Chainlink (LINK) wallet you choose will likely depend on what you want to use it for and how much you need to store.
Hardware wallets or cold wallets provide the most secure option with offline storage and backup. Ledger is currently the only recommended hardware wallet option for LINK – Trezor offers LINK storage but it is in beta. Hardware wallets can involve a bit more of a learning curve and are a more expensive option, however. As such, they may be better suited to storing larger amounts of LINK for more experienced users.
Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of LINK or more novice users.
Online wallets or web wallets are also free and easy to use, accessible from multiple devices using a web browser. They are considered hot wallets and can be less secure than hardware or software alternatives, however. As you are likely trusting the platform to manage your LINK, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts or for more experienced frequent traders.
Kriptomat offers a secure storage solution, allowing you to both store and trade your LINK tokens without hassle. Storing your LINK with Kriptomat provides you with enterprise-grade security and user-friendly functionality.
Buying and selling LINK, or exchanging them for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.
Chainlink validator nodes act as blockchain oracles, performing a greater range of tasks than the nodes of many other decentralized platforms. These oracles interact with smart contracts and transmit data from external sources to them. Validators are incentivized by receiving LINK tokens for performing these tasks. Validator nodes must stake LINK, and the bigger their stake, the more (and better) contracts they get.
Staking is not yet enabled in the Chainlink Network for non-validator nodes. Currently, only validators are able to earn LINK tokens by staking and then performing tasks in order to complete data requests made on the network.
Chainlink has solved what was known as the “oracle problem”. The oracle problem originates from an issue with smart contracts on blockchain networks and how they are completely isolated from the outside world. The smart contracts typically obtain their external data from “Oracles” (data points, APIs) – and this is where the problem lies. Smart contracts are only as “smart” as the information delivered to them by the oracles. If a smart contract is provided with malicious code or inaccurate data, the contract will still process it anyway because it is just code – and what comes out would be unpredictable, wrong, or worse.
Chainlink completely solved the oracle problem when the team worked out how to retrieve and share information from oracles without putting the security of the blockchain the smart contracts are running on at risk.
This was done by creating a decentralized network which acts as a bridge between the oracles and the smart contracts. This system is built from a nexus of individual nodes, each acting as smart contracts in their own right, gathering information and providing it as needed. Now, instead of having to blindly trust a source, smart contracts run through the Chainlink network have unfettered access to resources like data feeds, traditional bank account payments, and web APIs.
Most of the frequently asked questions about the Chainlink oracle network were answered above. There are a handful left to focus on:
Is Chainlink Open Source? Where Can I Look at Chainlink’s Code?
Yes, Chainlink is a completely open-source project and publishes its code under the MIT License on GitHub.
What Exactly Affects an Oracle’s Reputation Score?
An oracle’s reputation is affected by the following factors: total number of assigned requests, total number of completed requests, total number of accepted requests, average time to respond, and amount of penalty payments.
The Chainlink Oracle Reputation system collects and tracks every one of these parameters in order to rate nodes: total transactions, job completion ratio, average gas price per transaction, sum of gas prices within a 10-minute window, average gas used per transaction, total gas used in a 10-minute window, average response time in blocks, total response time in a 10-minute window, average response time in seconds, and total response time in seconds within a 10-minute window. The system is consistently being enhanced with new services and features.
How to Buy Chainlink (LINK)?
Buying LINK is as easy as visiting Kriptomat’s how to buy Chainlink (LINK) page and choosing your preferred method of payment.
How to Sell Chainlink (LINK)?
If you already own Chainlink (LINK) and hold it on a Kriptomat exchange wallet, you can easily sell it by navigating the interface and choosing your desired payment option.
Several factors influence Chainlink price, including exchange inflows and outflows, sentiment, technical and fundamental developments, the news cycle, and the general economic environment.
Chainlink price is also directly impacted by the demand for it by those using the network.
Ultimately though, the price is decided at any given moment by the cumulative buying and selling of millions of participants worldwide. You can keep up to date on the latest price action and news using crypto exchanges like Kriptomat or one of the many different cryptocurrency tracking services.
The current Chainlink price is EUR.
The 24-hour trading volume of LINK is EUR. LINK is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of EUR. It has a circulating supply of LINK.
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