Chainlink app review

Chainlink

Chainlink app review

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Open Dapp

Katya Stormina

Last updated: Jun 25, 2022

What is Chainlink

Chainlink is a decentralized oracle network, aimed to bring real-world data to on-chain smart contracts. Chainlink was originally built on Ethereum but was initially planned as a chain-agnostic network service which may run on any blockchain. 

Chainlink is a direct descendant of its founders’ previous project, SmartContract, which started in 2014. Its parent company intended to establish a middle-layer infrastructure, essential to connect blockchains and the real world. The need to rely on centralized oracles’ data entirely gave the team an idea of creating a decentralized analog.

After a $32 million ICO round held in September 2017, Chainlink launched its mainnet in June 2019. 

How does Chainlink work

Chainlink was created as an answer to the Blockchain Oracle Problem. Long story short, as long as blockchains are completely isolated from real-world data and have limited input/output capability, these networks cannot access off-chain data by their own means. And while it is still technically possible to rely on centralized oracles, such services present serious risks to privacy and negate the benefit of smart contracts. Chainlink solves the problem by using a decentralized network of nodes to verify input and output data before it triggers smart contracts. 

Chainlink has a structure similar to any blockchain, except it operates as an undercover meta-layer that connects existing smart contracts with various types of external data. For that, the project uses a vast network of reliable node operators and data providers. 

Data providers can monetize their existing infrastructure by feeding off information to the Chainlink Network through APIs, solely focusing on data quality without a need to run a node. Binance, Brave New Coin, Alpha Vantage, and Huobi are currently on the list of Chainlink’s data providers.

Node operators are the backbone of the Chainlink Network. They are responsible for running and maintaining oracle infrastructure and earn rewards when they aggregate oracle data from external sources, validate it, and feed it directly to smart contracts. Each fulfilled request is later deployed on the blockchain via a smart contract. LINK token is used to pay the fees for the data provided, depending on its complexity and value. 

Chainlink managed to combine on-chain and off-chain infrastructure by means of the so-called hybrid smart contracts. Different types of oracles run on the Chainlink network in parallel, providing price data across a wide range of assets, weather data, or location data. There is also a long list of Chainlink External Adapters whose job is to wrap off-chain data into a format smart contracts may recognize. 

All Chainlink nodes are trustworthy, Sybil-resistant, and verified. Chainlink Market is a community-run data hub enlisting all the nodes and data providers.