Exciting Chainlink (LINK) The Bridge of Cryptocurrencies (Review)
In the real world unlike on blockchains, data is dynamic. It changes and moves at rates that most people won’t be able to catch up with.
Subjecting data from real-world events onto blockchains for the execution of certain conditions such as smart contracts is one of the core purposes of the Chainlink blockchain.
They are working to create an oracle connecting real-world data with blockchain smart contracts.
In recent times they have grabbed a lot of attention in the past year. Due to their ambitious plans of creating connections between what is happening on the blockchain with data that exists outside of the blockchain.
And the latter could be any type of data, from payments to insurance, documentation and legal information, to supply chain and government.
In reality, if Chainlink manages to successfully create these connections or so-called bridges then the potentials are endless. This, of course, makes Chainlink and its LINK token incredibly interesting.
In this review we will explore:
Table of contents:
- A Whole New World
- Smart Contracts Great Innovation – one fundamental Flaw
- LINK the Currency of the Chainlink Blockchain
- Recent Updates to Chainlink
- Chainlink Partners with Heavy Weights
With this kind of application of the above-described scenario, a whole world of possibilities is possible.
A Whole New World
Imagine a world where the following was possible:
- Data can be exchanged across different types of systems both centralized and decentralized
- Different Blockchains can actually “talk” to each other (that is to exchange data seamlessly)
- Different kinds of blockchains can be created and updated in real-time without human interaction
- New Smart Contracts governing all kinds of activities can be created on the fly making it virtually possible to interact with ANY event
- Based on data from the real world, conditions for interactions between entities can be defined and executed simultaneously without the need for any middleman so to speak
If you consider the reality being able to leap across blockchains and other data systems, you will begin to understand the power of Chainlink both as a token and as a concept.
From its official whitepaper, they are defining what they are working on as a system of decentralized oracle systems that link application programming interfaces (APIs) to each other. Centralized oracle systems come with their own set of challenges that cannot be overcome in a single stroke.
The genius of having multiple oracles that can link APIs to various data systems both on-chain and off-chain is what the founders of Chainlink have been able to achieve using the multi-oracle perspective.
Smart Contracts are a Great Innovation But have one fundamental Flaw
Smart contracts that depend on basic instructions defining specific conditions have been touted as one of the major innovations for the financial world in the twenty-first century. However, when they exist in the context of a blockchain can’t work without the right access to the data required for the contract itself to be executed.
If the data exist off-chain (that is in the real world), a connecting mechanism referred to as an oracle will be the link between the Smart Contract and the data needed. The problem before now was the fact that most oracles were (and are) centralized. As such, the integrity of the data obtained could not be verified using other sources as the singular oracle in question could be the only data source.
In the Chainlink scenario, however, several options as per oracles create multiple options for the verification of information and the most qualified of the oracles is then allowed to link the smart contracts to APIs from where they can now access the data required for the execution of the contract.
This is the uniqueness of this new blockchain.
For the network to function effectively, operators called nodes that provide the chain access to external data sources are given incentives based on several factors in the cryptocurrency of the Blockchain.
LINK the Cryptocurrency of the Chainlink Blockchain
LINK is the cryptocurrency used in the network. It is used for a wide variety of transactions; the primary of them being the reward for access to external data sources for the oracles to be able to execute their programmed conditions.
Another function of the LINK tokens is that they are used on chain based on the terms of settlement of the smart contracts that function in question. LINK runs off the Ethereum blockchain and is an ERC20 token. They also have ERC 223 “transfer and call” (address, unit 256 bytes) functionality which allows for token processing and contract execution at the same time.
Similarly, nodes are also rewarded for executing instructions passed from the oracles to them. Contract transaction logs will also be available to give the requesting smart contract the option of choosing nodes with better fidelity.
Nodes with larger holdings of LINK will be deemed fit to gain access to smart contracts of a higher amount. However, tokens shall be deducted from them if the process is breached if inaccurate information is supplied by such a node.
This allows for fairness in the system and a high-value token which will always have some form of demand due to the constant use of real-time data by smart contracts.
There is a total supply of 1,000,000,000 LINK with a total circulating supply of 350,000,000 LINK which is about 35% of the total supply.
A Scenario That Works
Let us say that a Smart Contract exists for a certain stock not to go above $5 per stock and the user who initiated the contract is seeking to execute because the stock itself is already reaching $4.95. The following will occur almost simultaneously.
- What is known as a user selection contract will be submitted with data specifics, oracle reputation, several oracles to be contacted, the time frame of execution with other required metrics to execute the original smart contract. This is done using a Service Level Agreement (SLA) which is a contract between the user and the Chainlink network.
- The user can then search for the oracles available for execution or an automatic search will be made available with different oracles bidding for execution. Contracts can also include a penalty for inappropriate behavior as well. Once the right amount of bids that fit the criteria exist they are selected and the SLA now goes into operation.
- The oracles now execute the agreement and then send the data and all the requirements back to the blockchain for processing.
- A weighted measurement of the data sent back by each of the oracles is done. This occurs to ensure the integrity of the results obtained. Though not all results can be weighted, the line of best fit always applies to ensure the integrity of the results obtained.
- Once that is done the oracle operators (nodes) are then given their appropriate rewards in LINK.
Due to the innovative nature of the Chainlink idea, several recent developments point to the fact that it is a one-of-a-kind system that will revolutionize completely how systems interact with each other; both blockchain-based solutions and non-blockchain based ones as well.
Partnering with Some Heavy Weights
The team has already the attention of many corporate and financial heavyweights. Already, an oracle is hosted at SWIFT which is the clearinghouse of all major financial transactions globally. Other partners such as Google, Oracle, Gartner, and IC3 are looking into the different ways that this new technology can work together.
This points to a definite direction in which the company is heading towards.
Besides all this, Chainlink’s acquisition of Towncrier gives credence to the commitment that the founders have made towards better privacy, the accuracy of data and security of the smart contracts in play on the network.
Towncrier is the hardware security and data verification component that works in sync with all the transactions. It also authenticates the data feeds which serves as an overall protection feature for everyone who uses the system.
Also, to enhance transaction scaling and improve the robustness of the blockchain, Celer which is a second layer scaling system is also a part of the ecosystem. This allows for the scaling of off-chain solutions so that transactions will occur faster and smoother at the same time.
Chainlink also in partnership with robust financial network Katallassos which enables real-time execution of high-performance financial applications.
The partnership with Mobilum who is a high-performance digital asset matching platform also speaks volumes of the ability of the Mainnet to be able to settle digital asset trade contracts in realtime.
This, however, shouldn’t be a problem. Though the Mainnet Links only Bitcoin, Ethereum and Hyperledger at the moment, it is expected that other blockchains will be added to the Mainnet soon.
If Chainlink is successful in delivering on their lofty goals then the potential of their opportunities is endless.
The greatest strengths of blockchain technology are the convergence of decentralised technology merged with smart contracts. In this new reality products and services could operate automatically. And they would be able to ‘take over’ from existing service and product models to newer and more efficient ones.
But little of this is possible if still data outside of blockchains can’t connect without frictions with data that exist on the blockchain.
So if Chainlink is successful in creating bridges that make those connections possible. Then we have a new era of possibilities ahead of us. And one with them firmly in the centre of all these new connections.
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Christopher is a Freelance content developer, Crypto-Enthusiast and tech-savvy individual. He is also a Superstar Content Developer, Strategy Demigod, and Standup Guy. You can connect with him on LinkedIn.