Chainlink and LINK
Chainlink, developed by SMARTCONTRACT CHAINLINK LTD.(co-founded by Sergey Nazarov and Steve Ellis) is a de-centralized platform on the Oracle network, that is built on top of Ethereum blockchain, the aim is to ensure that the external data fed to smart-contracts stays unaltered and thereby brings off-chain data into an on-chain format which in turn, bridges the gap between the isolated blockchain and real-world data.
Chainlink or LINK is the native token of this protocol and is used to pay Chainlink network operators for their services.
Chainlink is used mainly by project developers who want to integrate Chainlink into their projects or those who want to sell their data and become part of the participating nodes.
To better understand how Chainlink works, we can divide it into 2 parts :
1. Chainlink, the protocol
2. Chainlink (LINK), the token
1. Chainlink, the protocol
Smart contracts are nothing but the software code that follows certain "if-then, then-this' instructions completed step by step when certain conditions are met and are read only on-chain data. For these contracts to read the real-world data, they should connect and synchronize with external data sources. To bridge this off-chain data to be made available on-chain, oracles are used.
Chainlink protocol is a de-centralized network of nodes that makes real-world data available on-chain. This protocol has 2 components: Outbound nodes (to request off-chain data) and Inbound nodes ( to synchronize the requested off-chain data back on-chain)
How does it work?
Chainlink requests external data via smart contracts. This requested smart contract triggers the corresponding SLA smart contract which then triggers three sub-contracts:
Reputation Contract: Is used to keep track of the oracles provider record and performance to authenticate the reliability of the data supplied.
Order-match contract: Is used to match the request made by the smart contracts based on the set parameters and also to choose the nodes based on the bids made, which then fulfill the requests made by the smart contracts.
Aggregating Contract: Once matching is done, the data received from the chosen nodes are aggregated on the Aggregating Contract. The data, once received, will then be converted to a single weighted value and is then sent to the smart contract that requested the data.
Once the Aggregating contract returns the requested data to the smart contract that requested the data. The data will be translated and passed on the blockchain and the participated nodes are rewarded with LINK.
2. Chainlink (LINK), The Token
ChainLink has 2 use cases:
Internal Payment (is used to pay the participating nodes, for their work)
Staking is (the stakes used by nodes to take part in the process and to provide data services. Nodes with higher stake have higher chances of being selected to provide the requested data or validate the transaction)
Special Term Used:
Blockchain Oracle: Blockchain expands with their own data but if some external data is needed, it must be entered manually to interact with a blockchain. This is a slow process and manual entries are subject to errors and sometimes biased. Oracles help blockchains to interact in real-time with smart contracts and other digital data.
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