Chainlink ( LINK ) – History, Use, How It Works, Buying, and Mining

What is Chainlink ( LINK )?

Chainlink is a decentralized oracle network that will play a crucial role in realizing the potential of blockchain. It provides information about a wide range of external data sources.

It isn’t so great at taking input for things that happen outside of the blockchain, even though blockchain provides a decentralized, secure ledger for digital transactions. Fiat currencies, credit cards, weather, and sports scores are just some of the off-chain forces that impact the markets. LINK can be used as an input for smart contracts because it has a decentralized oracle.

History of chainlink:

Chainlink was launched in 2017 after being created in 2014. The company’s founder is Sergey Nazarov, 32, a prominent figure in the crypto industry. It was originally intended that LINK would act as a centralized oracle that could verify incoming data. Today, it consists of a decentralized oracle network paired with smart contracts to present secure transactions utilizing external public data sources and APIs.

Chainlink is a system that favors openness. By helping operate its affiliated nodes and oracles, anyone can join the network, provide data to it, and complete Chainlink jobs. 

A LINK operator is paid with chainlink tokens, a cryptocurrency used by the  LINK network.  The LINK token can also be staked for extra payment when servicing smart contracts.

The chainlink and its use:

In addition to ERC-20 tokens, LINK can be transferred and called through ERC223 protocols. In one single transaction, smart contracts can both receive and process the tokens.

Chainlink Node operators are paid with the LINK token for retrieving data from external sources, transforming it to blockchain readable format, off-chain computation, and guaranteeing uptime.

LINK tokens are required for the use of a smart contract enhanced with a Chainlink node. Depending on the supply and demand of similar information, the LINK node operator determines the final price.

Some have questioned the utility of a model of token usage such as this. Several commentators contend that other cryptocurrencies will prove more suitable for making payments.

 How Does Chainlink Work?

The data requested by LINK is obtained from various nodes. A consensus must be reached before the data is put back into the smart contract. By doing this, the smart contract won’t be dependent on one single oracle. In addition, LINK nodes can be used for one-time and multiple-time data retrieval. This makes LINK nodes into a kind of “data feed” for smart contracts since the reception of data can be scheduled.

There are three forms of Chainlink contracts: reputation, order matching, and aggregating.

Aggregating Contracts – Consist of gathering data from oracles and matching it with the smart contract that would benefit from it. 

Order-Matching Contract – Matches the service level agreements (SLAs) of smart contracts with the best bidding oracles. 

Reputation Contract – Checks the track record of an oracle to determine its integrity. Chainlink cryptocurrency stake includes factors such as several completed requests, average response time, and the amount staked by the oracle. 

How to Buy Chainlink

It is relatively easy to buy LINK tokens. Cryptocurrency exchanges such as Coinbase, Gemini, Kraken, and Binance list them as popular cryptocurrencies. You can exchange cryptocurrency for link tokens, or you can use a brokerage service to get a USD equivalent from a fiat currency like USD. You can deposit funds on many exchanges using a credit or debit card.

The most secure place to store your LINK is on an exchange, but that may not be the best option. The best way to keep your LINK and other cryptocurrencies secure is to use a cryptocurrency wallet.

There are, however, risks associated with crypto wallets. In addition, if you forget how to access your wallet because it is locked with a unique password or code, you may lose access to its contents. You must keep your access codes somewhere safe to prevent this from happening.

Due to LINK tokens’ fractional shares, investors can purchase them at a lower price. It is, however, not a particularly expensive crypto-token, since its price per token is around $30.

Chainlink Mining

The Chainlink cryptocurrency cannot be mined in the same manner as coins like  Bitcoin. LINK’s Proof of Stake (PoS) algorithm secures the network through node operators’ approval of transactions instead of Proof of Work (PoW) algorithms.

On-chain validation also requires validation token holders to stake their tokens to connect external data sources. Chainlink rewards its nodes with LINK in return for their participation in the network.

Additionally, nodes earn from fees set by contracts for off-chain data transmission. Ethereum network gas is used to pay for this.

DeFi’s role for Chainlink?

In addition to smart contract risk – posed by agreements that automatically activate when certain conditions are met – one of the biggest threats facing DeFi users is malware. With multiple checks for accuracy, Chainlink argues its infrastructure helps ensure that the data underpinning smart contracts is trustworthy. The value of old pricing information can be protected so crypto enthusiasts will not lose money when entering transactions based on it.

Many major protocols use Chainlink, and its usage in the DeFi sector might provide insight as to whether Chainlink is a good investment in 2021. Although this sector was relatively unheard of in 2019, it surged in popularity throughout 2020. This success has been welcome news for cryptocurrencies, which have surged to new highs.

A multitude of oracles can also be used to verify data from the platform. For example, a smart contract needs to know the price that Bitcoin closed at yesterday. An aggregating contract can average five potential answers provided by Chainlink’s oracles – each a dollar or two apart.