What is Chainlink (LINK)?

The blockchain industry has grown rapidly in recent years, with companies and institutions from different sectors adopting blockchain technology. Blockchain has numerous use cases and aims to improve efficiency and automate specific processes.

To achieve this, smart contracts come into play. Smart contracts allow two or more parties to enter into specific agreements or contracts without intermediaries, ensuring transparency, reliability, and lower costs. They are widely used in finance, public administration, and many other sectors. However, smart contracts cannot access external information; they can only execute predetermined operations. So, how do smart contracts interact with the real world? This is where Oracles come in—decentralized entities that translate real-world data into a format that smart contracts can understand. Chainlink is widely regarded as the leading Oracle, maximizing the potential of smart contracts.

Chainlink is a product of SmartContract, now known as Chainlink Labs. Founded in 2014 by Steve Ellis and Sergey Nazarov, SmartContract is a blockchain-focused tech startup. In June 2017, Nazarov and Ellis, with the help of advisor Ari Jules, launched the Chainlink project and published its whitepaper. Shortly after the whitepaper’s release, the project team raised $32 million through an ICO, representing about 35% of Chainlink’s native token (LINK) supply. The Chainlink network officially launched in 2019, becoming one of the key pillars of today’s DeFi ecosystem.

As mentioned, Chainlink is a decentralized Oracle network, connecting the digital world of smart contracts with real-world data. The network controls and verifies the data and its sources. Since Oracles must be decentralized, they ensure that data from various sources is verified and that false information is filtered out. External data needed for smart contract applications (also called “off-chain” data) can come from sources such as supply chain tracking or cryptocurrency price tracking, which helps run dApps (decentralized applications). To ensure impartial data, Oracles cannot be centralized or rely on a single data source. Centralization risks inaccurate data and increases vulnerability to network attacks. Chainlink meets all the requirements for a decentralized Oracle by providing reliable, censorship-resistant, and fair data.

How Chainlink Works—Communication Mechanism

As discussed, Chainlink solves the communication problem between the real world (off-chain) and smart contracts (on-chain). In August 2021, Chainlink introduced a key feature that enhances interoperability between blockchains, allowing smart contracts on different chains to communicate. Chainlink verifies data from multiple sources and distributes it across different protocols.

Chainlink’s interaction with smart contracts happens in three main steps:

1. Chainlink users (developers or project teams) need specific data to provide to smart contracts. Users use the Chainlink Service Level Agreement (SLA) to access this data, which matches them with oracles based on their needs. Oracles provide data by selecting suitable information from available sources. Users initiating the data request must deposit some Chainlink (LINK) tokens in the contract to pay for the Oracle services.
2. The oracle connects to external data sources, gathers the real-world data requested by the SLA, verifies it, and then inputs it into the Chainlink network.
3. The oracle aggregates the collected data and returns the results to the so-called aggregation contract, which returns the packaged information to the requester’s blockchain.

This process can continue indefinitely. Chainlink pulls data from multiple sources and provides the most accurate result. If a data source deviates from others, the oracle flags it as unreliable, lowering its reputation score, and making it less likely to be selected for future requests.

What is the LINK token?

LINK is the native token of Chainlink, built on the Ethereum protocol. It’s used for transactions and payments within the Chainlink network, with a maximum supply of 1 billion. As of October 2022, 491.6 million LINK tokens are in circulation (49% of the total supply). The initial distribution of LINK tokens was as follows:

• 30% to the project team for ongoing upgrades and network maintenance.
• 35% sold to the public.
• 35% allocated for maintaining the Oracle system and network security.

LINK has two main functions: it acts as a payment token and a work token. Users use LINK to pay node operators for Oracle services. Nodes, in turn, must stake LINK as collateral in the Chainlink network to qualify for providing Oracle services. Node operators set their prices based on the demand for the data they provide and market conditions. Staking LINK also serves as proof of a node operator’s commitment to the network. The more LINK a node stakes, the higher the chance it will be selected to provide oracle services, earning LINK in the process. If a node fails or behaves dishonestly, the Chainlink network will confiscate its staked LINK.

Chainlink Ecosystem

Since its launch, Chainlink has earned an excellent reputation. Many top companies use its Oracle services to solve various challenges.

Currently, Chainlink is collaborating with SWIFT on a smart oracle project to enable smart contracts across different networks to make payments, send governance instructions, and distribute collateral to traditional banks.

Smart bonds help bridge market data (like bank interest rates) with SWIFT, integrating Standard & Poor’s rating data.

Chainlink’s ecosystem has a wide range of applications. Over 1,500 projects—from startups to large enterprises—are using Chainlink’s oracles to securely connect smart contracts with off-chain data and services. These projects span across industries such as data provision, real estate, payment platforms, DeFi, and CeFi. Chainlink is especially crucial in the DeFi sector, where major platforms like Aave, Synthetix, and Trader Joe use Chainlink’s Price Feeds to ensure accurate pricing, avoiding operational errors.

As we can see, Chainlink is a network capable of meeting various requests, further enhancing the possibilities that blockchain technology can create.

Other Use Cases

Chainlink has many real-world applications, demonstrating how essential blockchain technology has become today. Some notable use cases of Chainlink smart contracts include:

• Supply Chain: This covers all the steps in delivering a finished product or service to customers, from sourcing raw materials to delivering goods to distribution centers or retail stores. Data from each step is logged on the blockchain, triggering smart contracts between entities, such as payment contracts. When paired with IoT sensors, Chainlink smart contracts can monitor key factors like product quality (especially for food and pharmaceuticals), storage temperature, and air quality. These contracts are essential for ensuring quality and resolving disputes.
• Utilities: Utilities such as electricity, gas, cable, and internet typically charge customers a fixed weekly or monthly fee. However, if services are interrupted, users don’t usually receive compensation. IoT sensors can track utility uptime, and Chainlink can feed this data into smart contracts, ensuring customers are charged fairly or compensated based on the length of service interruptions.
• Insurance: Insurance companies promise compensation for losses, damages, illnesses, or deaths in exchange for premiums. Chainlink’s smart contracts can streamline this process. Today’s insurance industry is often mistrusted since companies control the claims process. Smart contracts automatically trigger claims, reducing costs for insurers and restoring trust between companies and consumers.

Chainlink CCIP

Chainlink’s Cross-Chain Interoperability Protocol (CCIP) is an innovative solution that enables seamless asset transfers and communication between blockchains. CCIP allows developers to perform secure token transfers and send arbitrary smart contract messages across multiple blockchains, ensuring interoperability between smart contracts on different chains. One of its key features is programmable token transfers, allowing developers to transfer both tokens and data in a single transaction and trigger other on-chain contract functions.

Security

CCIP’s security is reinforced by Chainlink’s decentralized oracle network, which has successfully secured billions of dollars in transactions. Its architecture includes message transfer routes, a Risk Management Network, Decentralized Oracle Networks (DON), and bilateral blockchain networks. With CCIP now live, the protocol is available on major blockchains and is expected to become a foundational infrastructure for cross-chain financial markets, unlocking trillions of dollars in tokenized assets for financial institutions.

This architecture provides the backbone of CCIP’s security:

• Decentralized Oracle Network: CCIP uses multiple independent decentralized Oracle networks, each with its key, ensuring no single failure point exists.
• Independent Risk Management Network: CCIP features an independent Risk Management Network built by different teams using different programming languages, allowing full, independent monitoring and verification of the CCIP network.
• Customizable Transfer Rate Limits: CCIP’s transfer mechanism allows project teams to set custom transfer rate limits, restricting the total value transferred across chains within a given time, and reducing the impact of worst-case scenarios.

Chainlink Transporter

Chainlink has launched a cross-chain bridging application called Transporter, providing users a secure and reliable platform for transferring crypto assets and data between different blockchain networks. Transporter’s user-friendly interface allows users to seamlessly move tokens and information between major networks like Ethereum, Arbitrum, and Avalanche. This release marks a major advancement for Chainlink in cross-chain interoperability, offering users enhanced security.

Leveraging Chainlink’s extensive experience in decentralized Oracles, Transporter implements several layers of security, including multiple decentralized Oracle networks, an independent risk management system, and configurable transfer rate limits to ensure asset security. Additionally, Transporter provides real-time transaction tracking, allowing users to monitor the progress of cross-chain transfers, greatly increasing transparency.

Transporter is a front-end interface based on the CCIP cross-chain bridge

The key feature of cross-chain bridges is security. Transporter acts as the user-facing interface, while its underlying technology is built on Chainlink’s CCIP and Oracle network infrastructure. All Transporter transfers are secured by Chainlink CCIP, which has a strong safety track record. Since its launch, CCIP has had no major security incidents, giving Chainlink a considerable advantage in launching its Transporter cross-chain bridge.

LINK Price History

At the time of writing, LINK is priced at $7.69, down 1.48% over the last 24 hours, with a market capitalization of $7.69 billion. LINK has dropped 60.39% so far this year. On November 29, 2017, LINK hit an all-time low of $0.148, reaching an all-time high of $52.7 on May 10, 2021. LINK’s price didn’t surpass $1.3 for the first two years after its launch, but in 2019, it skyrocketed to $5—a 489% increase. In August 2020, following Chainlink’s announcement of several strategic partnerships, LINK’s price exceeded $20 for the first time. Between December 2020 and May 2021, LINK surged to a record high of $52.88.

Is Chainlink a Good Investment?

As mentioned earlier, LINK is primarily used to pay for Oracle services and is staked by users in the Chainlink network to participate in SLA agreements. It is the only token in the network’s main operations. Since the amount of LINK held by an oracle influences its reputation, oracles are incentivized to accumulate more tokens to prove their commitment to the network. With a maximum supply of 1 billion LINK, this could attract more node operators and investors to the Chainlink ecosystem. Chainlink is undoubtedly the most prominent decentralized oracle, and its utility across various sectors of the blockchain industry has been proven. Chainlink is an efficient network designed to solve real-world problems. If blockchain continues to merge with the real world, the demand for bridges between on-chain and off-chain systems will significantly increase.

How to Buy LINK?

You can purchase LINK on cryptocurrency exchanges like Gate.io.

1. Log in to your Gate.io account, navigate to [Trade], and click [Spot Trading].
2. In the search box, enter “LINK,” and the platform will show the available trading pairs.
3. Gate.io supports various order types. For instance, with a limit order, you can set your desired buy price and quantity, then click [Buy LINK]. Once your order is matched, the LINK tokens will be deposited into your spot wallet.

You can also buy LINK using a credit card, debit card, or bank transfer on Gate.io.

After purchasing LINK, you can transfer it to a non-custodial wallet or leave it in your Gate.io account. If you choose the latter, you can earn passive income through services like savings and lending. LINK tokens currently support earning income through both methods.

Chainlink News

According to the recently released Chainlink Economics 2.0, the Chainlink team announced the long-awaited launch of staking for LINK holders, allowing them to help secure the Chainlink network and earn rewards. The decision comes as the number of blockchain applications partnering with Chainlink grows, making enhanced protocol security more crucial than ever.

Chainlink’s announcement states that the primary goal of staking is “to provide ecosystem participants, including node operators and community members, with the ability to strengthen the security of Oracle services and user protections by staking LINK tokens.” The community has welcomed this feature, as it introduces a strong reward and penalty system for Chainlink nodes, ensuring accurate Oracle reporting.

Chainlink has been developing staking solutions for several years and is finally launching. Once staking begins, LINK holders can earn rewards, further decentralizing the network.

Useful References

For the latest updates on Chainlink, you can visit:

• Chinklink Official Website
• Twitter
• Discord
• GitHub
• Telegram
• Reddit

Take Action on LINK

Click to view the current LINK price and choose your preferred trading pair to start trading.