Chainlink: An Overview

Chainlink: An Overview

June 14, 2024

Overview

Chainlink (LINK) connects blockchains to external systems via oracles, enabling smart contracts to access real-world data. LINK tokens reward data providers. Recent milestone: cross-chain interoperability protocol (CCIP) is now available to all developers.

4 min. read

4 min. read

4 min. read

What is Chainlink?

Chainlink (LINK) is a blockchain project created to connect different networks and protocols together through blockchain oracles (entities that connect blockchains to external systems, letting smart contracts operate based on real-world inputs and outputs.). 

Imagine smart contracts as a program that runs independently but can't get real-world information by itself. Chainlink acts like a bridge, allowing smart contracts to connect to the real-world and get the data they need.

Important Metrics of the Project

When a user needs off-chain data for their smart contract, they submit a request via Chainlink’s protocol, which would trigger the creation of a service-level agreement (SLA) with three sub-contracts: the Reputation Contract filters out unreliable oracles, the Order-Matching Contract selects oracles to handle the request, and the Aggregating Contract validates the data from chosen oracles, ensuring accuracy by discarding outlier responses.

Their native token, LINK would serve as token rewards to network operators for fetching external data and performing off-chain calculations. Operators must stake LINK tokens and can set their own fees, creating an efficient data marketplace while preserving the network's decentralized structure.

A good example is a sensor system at a grocery store. Once the sensor detects the specific product going inside the building, Chainlink securely relays this information to the smart contract. The contract verifies the data and, if everything checks out, automatically releases payment to the product owner. Chainlink can also be used in sports betting. Oracles provides reliable sports data and results to blockchain-based sports betting platforms, ensuring transparency and trust in the outcome of bets, along with the security of payouts.

Recent Chainlink News and Milestones

On April 24 Chainlink announced that its cross-chain interoperability protocol (CCIP) is now available to all developers, bringing the protocol's development out of the early access stage. The move is intended to make it easier for developers to create cross-chain smart contracts.

Disclaimer: The information provided in this research paper is for educational and informational purposes only. It does not constitute financial advice, investment guidance, or any solicitation to buy or sell financial instruments. The views expressed herein are those of the authors and do not necessarily reflect the opinions of Kollectiv.

2024