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What is Chainlink?
Chainlink is the decentralized oracle network based on the Ethereum platform, it plays a very important role in the implementation of blockchain technology in the physical world. It is a link between the blockchain and the real-world factors that influence the function of the blockchain.
Such external forces which influence the blockchain are called “off-chain” forces. These off-chain forces are very diverse, magnanimous in magnitude and too bulky to deal with them manually.
These off-chain forces could be the values of Fiat currencies, market forces, Political happenings, weather, sports and even something as simple as a news headline.
The “Butterfly Effect” of these inconspicuous external forces could create a huge impact on the blockchain. So such factors and the magnitude of their impact on Blockchain should be carefully assessed with the help of a decentralized oracle network and that is Chainlink. LINK cryptocurrency also works based on Chain LInk and LINK coins are used for making smart contracts via Chainlink.
Who are the founders of Chainlink?
ChainLink was founded by Sergey Nazarov and Steve Ellis in September of 2014 with the parent company being the Smartcontract.
How does Chainlink work?
Chainlink provides input to chunks of programmes known as Smart contracts. The smart contracts subsequently help Blockchain to work on a very wide range of inputs and thus help the blockchain to calculate the cumulative impact of all the off-chain links on the blockchain and give out the most accurate output.
A smart contract can be also regarded as a blockchain-backed digital agreement between two parties, such that the transaction or operation gets completed, only when all the conditions of that smart contract are fulfilled.
For example, if Sam wants to buy the car of John for 0.5 Bitcoin, smart contracts make sure that only when Sam pays 0.5 Bitcoin to John, ownership of the car gets transferred from John to Sam. As there are no third parties involved and the transaction happens only when all the conditions are met, smart contracts help in maintaining fairness and transparency in 100% of transactions made via them.
How to use Chainlink?
Steps in the functioning of Chainlin
Oracle selection
Chain Link users draft a Service Level Agreement (SLA), which is a set of all the data requirements for a specific transaction/agreement. The SLA then matches the user with a specific database that can provide the required data. Then the chain accepts payments from users in the form of LINK and puts the payments into bids matching the requirements of the order.
Data Reporting
This is the step where oracles connect with the external sources and receive real-world information from them, which is required in SLA. The oracles process this data and send it back to the smart contracts to finish the transactions.
Result Aggregation
The last step of the process involves oracles tallying the results and returning them to contracts.
Architecture Of The Chainlink
Chainlink blockchain constitutes three types of smart contracts.
Aggregating Contracts
collect data from oracles and match them with appropriate smart contracts, so that all the needs of the smart contracts are fulfilled.
Order Matching Contracts
This step matches the smart contracts with bids of various oracles.
Reputation Contracts
Checks the authenticity of an oracle by observing its track record.
The nodes associated with chainlinks have two components:
Chainlink Core: Chainlink core is responsible for reading the newly created contracts and redirecting them to the chain link adapter.
Chainlink Adapter: it acts as a bridge between nodes and external data.
Smart contracts are not just confined to financial transactions, they are also used in securing legal contracts & agreements, Credits authorization, legal processes, signing contracts, insurance and other public services as well. The fail-safe working of these smart contracts can be exploited by all the industries on Earth to ensure safety, accuracy, transparency and authenticity.
Similarly, smart contracts have completely transformed the way of information exchange in the Health care sector. Now with the help of smart contracts, patients can control third parties from accessing their personal medical history, unless they agree to data revelation and get paid for the same. Smart contracts can also be used in the business management sector, for automating payrolls.
Automating payrolls will save lots of time and human resources for businesses. The most important use of smart contracts is their assistance in ICO / Initial coin offering, where new cryptocurrencies enter the market by opening public buying and therefore public intervention. ICO is a crowdfunding platform used to pool coin buyers and facilitate their buying activity. For example, let’s assume you are creating a new crypto token called XYZ and you need 10 Million dollars.
Let’s say 10 Million USD is equal to 10,000 ETHER and 1 XYZ token = 0.1 ETHER, then you will issue 100,000 XYZ tokens to raise the required 10,000 ETHER. Now a smart contract can be made to protect the sellers, buyers and transactions, such that, if 0.1 ether is paid by the buyer to the company, then the company issues 1 XYZ token to the buyer. These are just some of the applications of smart contracts which have a much higher significance in the functioning of Chain Link.
How are smart contracts created?
Smart contracts are created on multiple blockchain platforms, for example, NEO and Ethereum. Smart contracts are formed using Ethereum’s original coding language called
“Solidity”.
What makes Chainlink unique?
The key feature that made Chainlink different is, for Chainlink to obtain the requested data it makes use of different nodes that return the data to the smart contract upon forming a consensus. Not depending entirely on a single oracle and possessing nodes that can handle the task of data retrieval a single time as well as multiple times with the same ease made Chainlink stood out.
How many Chainlink coins are in circulation?
It is estimated that there are 419,009,556 LINK tokens in circulation currently, with a maximum supply being 1,000,000,000 LINK tokens.
Conclusion
The technology associated with Chainlink has proven to be one of the significant pillars of the Defi and crypto ecosystem. Chainlink, as a well thought out network, doesn’t have a competitor yet, that comes close to the functionality offered by it.
To know more about various cryptocurrencies, refer to Zeen blog.
