With a vision to create a decentralized and universal programming language, Chainlink becomes the bridge that enables interoperability across different networks within and outside the blockchain.
Through its groundbreaking technology, it allows smart contracts to get a hold of information such as events, payments and more without compromising security, credibility and decentralization. If you’re interested to know more about Chainlink functions, read all about it here at Cryptoshimbun.
What is Chainlink (LINK)?
Blockchains are their own ecosystem made up of complex mathematical algorithms called ‘cryptography’. This makes the platforms immutable, tamper-free and secure. However, their enclosed nature also brings exclusivity to the services blockchains can provide.
Acquiring information outside the blockchain is difficult because it needs to be written in a programming language the blockchain understands. This issue is what Chainlink aims to solve.
In essence, Chainlink is a decentralized oracle network that creates an avenue for blockchain and legacy technology to exchange information. This is possible because of ‘oracles’ that act as third parties that provide the real-world data the blockchain needs.
The oracles inside Chainlink utilise smart contracts to acquire information without compromising the trust and credibility of the data. Inside the Chainlink ecosystem, its native currency called LINK ensures the seamless transfer of information to and from the oracles.
LINK is an ERC token which means Chainlink is modelled on the Ethereum network. Despite this, it is still functional and can work with other blockchains to ensure interoperability.
Key features of Chainlink
Smart contracts
Smart contracts are virtual contracts bound by algorithms on the blockchain. These are self-executing agreements that can only be facilitated as long as the two parties involved meet all the clauses programmed in the smart contract.
Oracle selection
Oracle selection is a process that matches a user to the oracle fit to carry out the task. Once a user drafts a Service Level Agreement or SLA, the Chainlink software will run it and look for the oracle that matches the requirements needed to be fulfilled. After the agreement has been set, Chainlink will accept the LINK deposits and run the SLA of the users and execute the transaction.
Data Reporting
Data reporting happens when the oracle connects to the outside source to gather information or fulfil the request on the Chainlink. The data will then be processed or translated by the oracles back to the Chainlink system.
Result aggregation
The result is the last stage in a Chainlink transaction where the oracles tally or count the results of the data they gathered. Once calculated, they will make it into an ‘Aggregation contract’ which will take the data points and compute the returns and transactions. Afterwards, it is sent back to the user.
How does Chainlink work?
Chainlink is a digital infrastructure that connects blockchain and off-blockchain sources. Inside the Chainlink ecosystem, various nodes are present to facilitate the transactions between the inside and outside parties.
Blockchains are designed to have a single point of failure origin in their system, which means that they can be destabilized if a part of the system collapses. What makes Chainlink unique is that each node present in the system acts as a point of failure, making it more resistant to malfunctions.
Additionally, each node is expected to maintain a reputation. If a node is able to deliver promising results, they will be given larger contracts, which means they can end up having more LINK tokens as payments. Similarly, if a node’s performance is unsatisfactory, it can end up losing LINK tokens.
The Chainlink system is the one responsible for matching up the users and oracles. A transaction begins when a user files a ‘Request of Contract’ on the system. Then, the system will assess the request and file for an SLA that will create three (3) subcontracts, namely: reputation contract, order-matching contract and aggregating contract.
Each contract has its unique function in facilitating transactions. The ‘Request of Contract’ is the one responsible for overseeing the performance of the oracles to check their service history.
Oracles with dubious and unsatisfactory backgrounds are weeded out and rejected by the system before moving forward to the next oracle. This process removes the subpar members of the system and ensures that only reliable ones are chosen for transactions.
After a reliable oracle is chosen, the system will now run the ‘Order-Matching Contract’ to select which node will process the request. Once this stage is achieved, the ‘Aggregate contract’ will gather all the details and information of the transactions and compute them until they come up with accurate results. If the results yield satisfying numbers, the oracles will get paid with LINK tokens.
Who founded Chainlink?
Chainlink is the brainchild of Sergey Nazarov. It was first known as ‘SmartContract.com’ when it launched in 2014. However, the founder changed the name to Chainlink shortly after it was released to better embody the essence of the system’s technology and purpose.
Backed by a San Francisco-based startup called the Data Collective, Chainlink’s ICO amounted to $32 million USD which is equivalent to a 1 billion supply of the LINK tokens.
Prior to creating Chainlink, Sergey already had experience in blockchain technology and cryptocurrency. He founded Secure Asset Exchange, a digital asset exchange and a decentralized email service called CryptoMail.
Meanwhile, the CTO of the company is Steve Ellis, who worked closely with Nazarov on the Secure Asset Exchange platform. He’s an established software engineer who used to work at Pivotal Labs before making his name in the crypto space.
Another core member of Chainlink is Ari Juels, who co-wrote the whitepaper along with Nazarov and Ellis. He’s currently working as a professor at Cornell University in the US, the director of IC3 and the advisor of the Chainlink team.
For more information on all things cryptocurrency and blockchain technology, check out the rest of what Cryptoshimbun has to offer.