What is ChainLink?
ChainLink is the oldest of the projects to provide an oracle- like service . When Ethereum was born in 2015, it revolutionized what blockchain could offer as a solution for companies. Before that, Bitcoin- type cryptocurrencies consisted mainly only of an alternative exchange of value allowing to remove intermediaries from transactions. With his smart contracts , the founder of Ethereum Vitalik Buterin opened a Pandora's box which offers many applications for blockchain technology.
But the big problem with smart contracts is that they can only manage the information present on the blockchain . This therefore greatly limits the interest of these smart contracts because they cannot obtain certain information directly, such as the temperature on a given date, the winner of a sporting event, the result of the vote on a new law, etc.
And that's where ChainLink and its Oracle service come in. With ChainLink, users of smart contracts can use the network of oracles set up by the company in order to retrieve information known as "off-chain", that is to say from outside the network .
How does ChainLink work?
The main purpose of ChainLink is to connect the on-chain world (on the blockchain) and the off-chain world (information that is not on the blockchain). To achieve its objective, the project will be composed of two infrastructures : an on-chain and another off-chain .
On -chain functionalities
The first component of ChainLink is on-chain and consists of a smart contract deployed on the Ethereum blockchain . It is an " oracle contract ", or contract of Oracle, which will deal with the requests of the users who wish to obtain information off-chain . When a user wants to obtain off-chain information , he will submit a request to the ChainLink network via a " user contract ", or blockchain, and the blockchain will process this request through his own " oracle contract ".
This type of smart contract is responsible for matching requests with the appropriate oracles. The Oracle ChainLink contract is actually made up of three different types of contracts:
- The " reputation contract ", or reputation contract: it verifies the integrity of the oracle supplier.
- The " order-matching contract " , or order management contract: it sets a price that suits the user and the supplier to obtain the information.
- The " aggregating contract ", or aggregation contract: it analyzes the data received from the different oracles to try to find the one with the most relevant information.
With these 3 contracts, the on-chain function of ChainLink can start its process in 3 stages:
- The selection of the oracle . When a request is submitted, the user inserts various parameters and certain criteria to be respected. He will then obtain results and he will be able to manually choose the oracles which he considers the most interesting. He will also be able to let ChainLink choose for him.
- The transfer of data . When the oracles are chosen, the information obtained is transmitted on the blockchain.
- The compilation of results . If different oracles give different results, the results are then weighted. If the information is the same or if there is only one oracle, the information is taken as is.
The features off-Chain
The second component of ChainLink is off-chain and consists of " oracle nodes " , or oracle nodes, which are connected on the Ethereum network. For the moment, ChainLink operate only on the Ethereum network, but in the future it will be possible to operate on other networks, the project being intended to be agnostic as to the blockchain used.
The off-chain nodes work as follows:
- They collect data from an off-chain resource as requested by the "user contract" .
- Once the data has been collected, the nodes process this data through the ChainLink Core , the central node which makes it possible to make the link between the off-chain data and the blockchain used by the ChainLink network.
- When the data is processed, the Chainlink Core transmits it to the "oracle contract" . In appreciation of the work done, the off-chain operator behind the Oracle receives LINK tokens as a payment guide for collecting and sending data.
In addition to managing this crucial part of the project, the off-chain nodes also allow developers to integrate what are called " external adapters " . Although it is not a perfect parallel, we can compare these "external adpaters" with the decentralized applications of the Ethereum network.
These "adapters" are plugins that node managers can use to integrate a number of additional programs to improve their operation. In addition, they can perform subordinate tasks that streamline the data collection process.
Decentralization of the ChainLink protocol
Unlike other oracles which are centralized, the ChainLink protocol is completely decentralized . This will solve the problem that centralized oracles who may provide inaccurate data may encounter. For example, if a report on financial results is to be received, this oracle could alter this data if it had a bad intention or was corrupted to provide false data.
To address this concern, ChainLink implements what it calls distributed sources and oracles. If an oracle wants to gain a good reputation, it can extract its data from several sources. Moreover, when a "user contract" submitted an application to the network, this request is contracted by several "oracles nodes" in off-chain .
Thus, each oracle will go to seek its information in different places. The "oracle contract" will then compile these different data and give an average value if the information is not consistent.
The advantage of using such a system is that the different oracles have no interest in falsifying their information. ChainLink will indeed be able to detect those who give false information and it can penalize them by not paying them or by degrading their reputation on the network.
Usefulness of the LINK token
The LINK token is an ERC-677 token (based on the ERC-20) and is used to pay for network operating costs:
- The nodes which will seek off-chain information .
- Transformation of the data format to make it understandable by the blockchain.
- The calculations which are carried out off-chain .
- A smart contract from a network such as Ethereum which will want to use a network node to obtain information.
ICO and distribution of LINK tokens
The project's ICO ended on September 19, 2017 and raised $ 32 million.
LINK tokens have been distributed as follows:
- 35% were sold to the public.
- 35% will be used as a reward for node managers.
- 30% go to society to help with the continuous development of the project.
How to buy ChainLink (LINK)?
To buy LINK, you must go to Binance or COSS . It is also possible to buy LINK on a decentralized exchange such as IDEX .
You also have the option of buying tokens on other more exotic exchange sites, but we do not recommend using these sites.
How to store LINK?
The safest way to store ChainLink tokens is to use a hardware wallet . These are electronic wallets in the form of USB keys. The 2 best known are the Ledger Nano S and the TREZOR .
Since the ChainLink is an Ethereum token, it is also possible to store LINKs on wallets such as MyEtherWallet (MEW) .
Useful links
Ratings and reviews on ChainLink (LINK)
ChainLink is an interesting project that can make the connection between the information off-chain and information on-chain by providing users with easy access to oracles. It also solves one of the major problems of oracles: their reliability.
The design of ChainLink is such that most of the problems that such a project may encounter have already been resolved . It will be possible to improve the efficiency of certain processes thanks to "adapters" , the bad oracles will receive a bad grade and will not be chosen over time, a weighting of the results will be carried out when several oracles will have different information, etc.
However, there is a big downside to the project: the distribution of tokens. Investors who funded the project during the ICO only hold 35% of the total tokens. It is absolutely outrageous and hard to understand why some people accepted this.
If you want to use ChainLink to get off-chain information easily and just buy LINK tokens just for that purpose, this shameful distribution is not necessarily a concern for you. On the other hand, if you wish to invest in the project as a speculator, we advise you to simply go your way in order to mark your disagreement with such a distribution of the tokens. Even, lean towards the competitors of ChainLink, who seem to be making great strides.
⚠️ This does not constitute investment advice. Always do your own research before investing.
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