Chainlink LINK

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About Chainlink

Chainlink is a decentralised network of oracle services. It’s been designed in such a way that smart contracts can incorporate reliable data from sources that aren’t a part of the blockchain. Chainlink effectively acts as an intermediary layer between blockchains, and the outside world, in which oracles are incentivised using the currency LINK.

  • Chainlink’s founder, Sergey Narazov is the son of Russian immigrants to the US
  • LINK is built on Ethereum, and uses the ERC-20 standard.
  • The currency is built to incentivise node operators, who must use the currency to make a stake and participate in the network.
What is a oracle service?

A blockchain oracle is an intermediary service between a blockchain and the outside world. In the case of many blockchains and smart contracts, relevant information from beyond the network plays an essential role in making the agreement make sense.

We shouldn’t confuse the oracle with the source of the information that it relays. The oracle is a layer of security software that asks for information, gets it, and then performs a few checks to make sure that it’s accurate. The information in question could be anything; from the price of a given product or commodity to the reading given off by a pressure sensor in the physical world.

Why does this matter?

Restricting smart contracts to incorporate only data internal to a given blockchain is extremely restrictive. Thus, the use of oracles is vital in expanding the scope of what’s available. If an oracle is a centralised service, however, then a single point of failure is introduced. Smart contracts become not-so-smart after all. If the oracle used to source the data cannot be relied upon, then neither can the contract. This is a problem so pervasive that it actually has a name: The Oracle Problem.

A decentralised network of oracles solves this problem through redundancy. Multiple oracles retrieve the data requested by the smart contract, and thus the network isn’t reliant on any one oracle. Moreover, the data can be retrieved multiple times, effectively creating a feed within the smart contract.

How does it work in practice?

The process works with a succession of digital contracts. The first, the Requesting Contract, will create a Service Level Agreement Contract, and in turn three more. A Reputation Contract is there to verify a given oracle based on its past performance. This is followed by an Order-Matching Contract, whose job it is to deliver the Requesting Contract to the chosen nodes. These nodes will then bid on the contract. Finally, there’s the aggregating contract, which sorts out the incorrect data and disregards everything that doesn’t match with the consensus.

Several factors are at work in settling the Chainlink price. Fundamentally, these all work their effects via traditional supply and demand.

The most obvious of these is arguably the state of cryptocurrency in general, and of Bitcoin in particular. If BTC is on a bull run of the sort that it enjoyed in late 2017 and in 2021, you can be fairly sure that altcoins, including LINK, will embark on bull runs of their own. Conversely, were the price of BTC to stall, we would see the trend reflected in the Chainlink value. Given the dominance of BTC, it’s difficult to disentangle this factor from other effects.

The relative novelty of LINK is something that lends it volatility. Awareness of the coin and its application is not yet widespread, and this can lead to disproportionate swings in its value. As the currency matures, we might expect swings in price to be markedly less dramatic.

Following the launch of the currency, it settled on a trading price of around £0.20 before rapidly shifting up beyond the dollar mark in time for the turn of 2018. It would not reach this high again until 2019, when a sustained rise took it up to $3.41 by the middle of the year.

In February 2020, the company announced partnerships with a string of other big names in the world of crypto, including Polkadot and Ethereum Classic. This was succeeded by a steady bull run, culminating in a trading price of around $4.70 at the end of that month.

In August 2020, LINK overtook Bitcoin Cash (not to be confused with Bitcoin) to become the fifth-largest cryptocurrency by market capitalisation. This came about as a result of a bull run which took the price up to $16.

As of April 2021, the Market Cap sits at around $15 billion, with a single LINK trading for more than $40 for the first time in its history. You can see a detailed history in the Chainlink chart above.

Before we speculate on what’s going to happen to LINK in the future, we should attach a warning. We don’t really know the answer; no-one does. What follows should therefore not be interpreted as investment advice. It is the responsibility of the individual investor to research a given commodity before purchasing it. If it doesn’t work out the way you expected, then there’s no way to turn back the clock. Moreover, in the case of a digital currency like this one, there is a non-negligible possibility that the value will slump all the way down to zero.

With that said, there’s reason to be bullish about the future prospects of LINK. For one thing, the Chainlink project provides the market with a functional and elegant solution to a problem that’s been long in the making, and vastly expands the potential of blockchain technology by allowing it to seamlessly link with others. A Chainlink price prediction which put the currency above $100 over the next few years would not be unrealistic.

LINK is available through a range of reputable exchanges. To sign up for an exchange, you’ll need to prove your identity and link a debit card or bank account. From there, you can use a fiat currency (USD, GBP, or YEN) to begin trading.

Participating in an exchange isn’t mandatory. You might instead buy from, or sell to, a broker. Rather than linking you with other traders looking to buy or sell, these are effective single traders with access to large amount of currency. On the other hand, you might trade directly with other traders without involving any intermediary. While this will save you money in exchange fees, it will also confer a great deal of extra risk.

It’s a good idea to keep a small amount of crypto on the wallet the exchange gives you, and store the rest somewhere more secure. This might be a hardware wallet, a desktop wallet, or even a physical, printed wallet.

Frequently asked questions

Yes, you can view the code on GitHub, where it is published under the MIT licence.

Like most digital currencies, LINK is hugely divisible, down to eighteen decimal places.

Chainlink is divisible up to eighteen decimal places, which, for most purposes, is close to infinite divisibility.

Chainlink is a decentralized network that connects off-blockchain data with on-blockchain smart contracts. Smart contracts are agreements on the blockchain that evaluate information and execute when certain conditions are met.

On exchanges, Chainlink is often referred to with a four-letter abbreviation: LINK.

This is a term which refers to every decentralised network using the protocol.

Chainlink's price is a market price determined by exchanges. It's actually pretty easy: if there are more buyers than sellers, Chalink's price will increaase.

That said, the value of the cryptocurrency also depends on the broader crypto market and the adoption of the Chainlink network: the more people use it, the more valuable it will get.

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