Smart Contracts are the talk of the town ever since the Ethereum blockchain was introduced to the crypto industry. It took the application of blockchain technology to a whole new level which was limited to financial transactions after the launch of Bitcoin. Smart contracts are digital agreements that have the capability of auto-execution once the conditions are met as per the code. Everything looked perfect, however, there was one critical gap that was preventing the tech from advancing.
The gap was a missing oracle. An oracle that can connect on-chain smart contracts with off-chain data providing real-world data for better processing. The founders saw the gap and launched Chainlink, an oracle that helps connect on-chain smart contracts with off-chain using oracle nodes and smart API. Hence, bridging the gap between the blockchain network and the real world.
In this post, I will take you through an in-depth review of Chainlink crypto, its plan to build DON (Decentralized Oracle Network) and explain its use case along with future price prediction. Is LINK worth investing in? Let’s find out today –
What is Chainlink Crypto?
Chainlink Crypto is an open-source decentralized blockchain oracle initially built on the Ethereum blockchain that feeds real-world data from off-chain sources to on-chain smart contracts created on the blockchains.
Chainlink was founded in 2017 by Sergey Nazarov (CEO) and Steve Ellis. It is a “bridge” between on-chain (blockchain) & off-chain (real world). Before diving into Chainlink architecture and functionality, it’s important to put some light on smart contracts and why they are created on the blockchain.
What are Smart Contracts?
In layman terms, smart contracts are the digital agreements created on the blockchain. They are automatically executed when the said conditions are met as per the code without the involvement of third party. Being built on blockchain makes them secure and reliable.
Take for example, An ICO launched as a smart contract is accepting ETH tokens with a cap of 1 million token sales for a period of 3 days at $1.00 USD per token. The smart contract will be created with these conditions – The ICO will stop if 1 million tokens are sold within 3 days or the time period of the token sale is over.
Once the conditions are met, the smart contract will automatically execute itself and perform the said operation without manual intervention. That’s the beauty of smart contracts, create it and forget it.
Although smart contracts do an amazing job in on-chain analysis, it fails to take into consideration the off-chain data. It limited its efficiency to process real-world data until Chainlink arrived as middleware and solved this issue by providing a decentralized oracle network that connects with smart contracts & DAPPS and help them provide the requested off-chain data using external API’s.
Chainlink Mainnet went live in May 2019
What is Chainlink LINK Coin?
LINK coin is the native currency of Chainlink oracle. It’s an ERC20 token with ERC223 “transfer and call” functionality that Chainlink uses to incentivise the node operators for their work in providing the off-chain data to the on-chain smart contract. ERC223 functionality enables the tokens to be received and processed by smart contracts in a single transaction.
In layman terms, if a smart contract wants to access the Chainlink node, it has to pay the chosen chainlink node operator using LINK tokens. The prices are then set by the node operator depending upon the demand of off-chain data and the resources required in achieving the desired result.
LINK is also used for staking on the Chainlink network. Nodes must deposit LINK tokens to Chainlink to establish their trustworthiness towards the network and get incentivised accordingly. This is part of Chainlink’s reputation contract which will be discussed next in the post.
The total supply of LINK token is 1 billion
How does Chainlink Work?
Chainlink is a bridge between the blockchain with smart contracts (On-Chain) and the real-world environment (Off-Chain). Clearly, the architecture has two ends enabling its functionality. Let’s discover and understand each one of them –
The on-chain is connected to the blockchain that runs various smart contracts on its network. If a smart contract requires off-chain data it will contact Chainlink by putting a request to the on-chain functions in a Requesting Contract.
Once the requesting contract is received by Chainlink, it will generate it’s own SLA (Service Level Agreement Contract) containing three sub-contracts.
- Chainlink Reputation Contract
- Chainlink Order-Matching Contract
- Chainlink Aggregating Contract
Chainlink Reputation Contract:
The reputation contract checks the history and performance records of Chainlink node operators. It will filter the reputed nodes from the faulty ones. This is necessary to maintain the hygiene of the network and make Chainlink a reliable partner in providing off-chain data.
Chainlink network punishes the faulty nodes by deducting LINK tokens from their stake.
Chainlink Order-Matching Contract:
The name of the contract speaks for itself. The order matching contract takes the request from the smart contract and passes it on to the Chainlink’s nodes. The eligible nodes that can provide the relevant data to the smart contract are picked by the smart contract to proceed further.
If the requesting contract does not choose the nodes then the nodes submit bids to participate in fulfilling the request.
Nodes with higher LINK stake are chosen to serve requests.
Chainlink Aggregating Contract:
Aggregating contract plays the same role in the Chainlink network as played by a proofreader during content creation. It aggregates, verifies, validates and compiles the complete data received from the off-chain before sending it to the smart contract.
The aggregator contract can validate data either from a single source or multiple sources using different sets of nodes. This helps to authenticate the data and pinpoint the faulty nodes broadcasting incorrect data.
Off-Chain is the other side of the bridge that does the heavy work. It connects with the real world and collects the required data as requested by the smart contract. After collecting the data, it passes to the Chainlink core for processing which is later submitted to the on-chain oracle to fulfil the request.
The off-chain has an Adapter that serves as a platform for developers to build and test APIs ( Application Programmable Interface). It allows applications to run API and serve as a host to build applications that can connect with the real world.
Chainlink Decentralization Approach–
In case you’re wondering why decentralization is necessary in the Chainlink network? The simple answer is, to provide accurate data by keeping check of faulty nodes and to maintain a stable and secure system.
Chainlink uses two decentralized approaches –
- Distribution of Data Sources
- Distribution of Oracle
Distribution of Data Sources:
The concept of source distribution helps the oracle collect data from different sources. Rather than relying on one single source S, it collects the data from different sources S1, S2, S3….Sn and then aggregate it before fulfilling the requesting contract. This process is crucial in comparing the data received d1,d2,d3…..dn from difference sources.
Once the data is obtained from the sources, the oracle will aggregate them into a single answer A= agg(d1,d2,d3…..dn). The aggregation can be done in many ways. One of the ways is identifying the most common data response, let’s say d. The aggregation will then return d, otherwise it returns an error.
Distribution of Oracle:
Just like source can be distributed, the oracle can also be distributed. Rather than relying on a single oracle node O. The system can have a collection of n different oracle nodes (O1,O2,O3…..On). Each oracle then contacts its own set of data sources and generate aggregator responses. In this the data sources may or may nor overlap with other oracles.
Since it’s inception in 2017, the project has come a long way and offers a variety of services through its product offering –
Market and Data Feeds:
The data feeds provides high quality and decentralized data from the real world to the DeFi applications built on the blockchain.
VRF stands for Verifiable Random Function that provides cryptographically secure random numbers for the blockchain based gaming apps. One application that uses VRF is Pancakeswap Crypto lottery that generates random numbers to announce the winners.
Chainlink use Keepers to automate the smart contract in order to minimizing manual intervention. Keepers help bring down the cost of automation and perform off-chain computation task for smart contracts.
Proof of Reserve:
Proof of Reserve monitor reserve assets as per schedule using automated audits. It brings transparency by publishing the audit report on-chain in a timely manner.
Bridging uses CCIP (Cross Chain Interoperability Protocol) that help developers build secure services and applications that can send messages, transfer tokens and initiate desired actions across networks.
Although not much vocal on the marketing front, Chainlink was quick to establish partnership among renowned players. The major one’s are listed below –
If you have ever received payments in your bank account from outside the country, probably it’s done through SWIFT. SWIFT is the world’s largest financial network that is taking the help of Chainlink expertise to build SWIFT Smart Oracle. This is one of the major partnership announcing the entry of Chainlink into the global organization.
Chainlink is working with Google Cloud to enable smart contracts for weather data that will help mitigate business risk by bringing economic efficiencies through accurate forecasting using blockchain technology in combination with the oracle.
AAVE is an open-source, decentralized money lending platform built on the Ethereum blockchain. Chainlink has integrated with AAVE Crypto project to provide the off-chain pricing data that will help the platform calculate the lending rates using decentralized pricing oracles.
You can view every Chainlink partnership and collaboration by visiting its Ecosystem. The major one is with layer 1 blockchain i.e Chainlink Solana partnership.
Chainlink Crypto ICO:
Chainlink launched its ICO on 18th September 2017 at a price of $0.11 per LINK token, raising a total of $32 million USD worth of Ether ETH tokens. The ICO holders have garnered over 200X returns at the time of writing this post. After launching its ICO, the network launched its mainnet in 2019 which further rose the overall LINK token price.
Chainlink published its second whitepaper in April 2021, highlighting an expansive role of oracle networks. The next step is to create DON i.e Decentralized Oracle Networks which is a network maintained by the committe of Chainlink nodes that supports unlimited range of oracle functions.
With DON, Chainlink plans to advance in seven key areas listed below –
- Hybrid Smart Contracts
- Abstracting Complexity
- Order-fairness for transactions
- Trust Minimization
- Incentive based secuirty
To get an in-depth understanding of the concept, I suggest reading the Chainlink V2.0 Whitepaper.
Chainlink enjoyed the first mover advantage into the crypto space by becoming the only oracle available during the early stages of blockchain development. The founders were quick to identify the gap in the smart contract and built a viable product that solved the concern around smart contracts. As of date, API3 is the nearest competitor of Chainlink but has much ground to cover before it post threat to Chainlink market share.
Chainlink allows the data providers to monetize data by earning LINK tokens. Any company or individual targeting a niche can request Chainlink to beome a data source for its nodes. Upon approval, the system incentivise the provider with LINK tokens once the authenticity of data is verified by the oracle.
Making Smart Contracts, Smart:
Smart contract is a revolutionary product built on the blockchain. Feeding it with real-world data helped to execute them with near perfection. The majority of data was missing from the smart contract computations before Chainlink integrated off-chain functionality with smart contracts, making them smarter.
Bringing Blockchain Mainstream:
Chainlink has helped bringing blockchain technology to mainstream companies. Its collaboration with SWIFT and Google Cloud are some of the examples which shows how the oracle is used to connect with on-chain smart contracts that brings value when it comes to evaluating off-chain data.
Chainlink was initially built on Ethereum blockchain to serve Ethereum based smart contracts. However, it is expanding it’s footsteps to a much bigger space by offering its services to the smart contracts based on different blockchains like Solana Crypto, Polygon MATIC, Avalanche etc. Making it a dominant player in the market.
Combination of Chainlink and The Graph crypto protocol completes the blockchain ecosystem
Chainlink Crypto Price:
Please check the latest Chainlink Crypto price, shared below –
Chainlink Coin Price Prediction:
LINK token raised $32 million during its ICO in 2017. After the ICO, the price took a big jump and hit a little above $0.45 per token before falling down. It rallied again during the bull run of 2017, hitting an all time high of $1.35
The bear market of 2018 took a toll on the price action of every crypto coin including LINK, witnessing the price drop back to $0.20 before sustaining within the range of $0.20-$0.50 for some period of time.
The bull market of 2021 came as a blessing for the coin that saw price hitting a lifetime high of $50 per token. The euphoria didn’t last long and the price fell back to $15 in the following market crash.
At the time of writing, LINK is hovering in the range between $25-$35 mark, looking to prepare for the next bull run. The market sentiments around the project are positive, so does its development. There’s no big competition that has emerged to challenge its dominance. Given the strong and increasing partnerships, the coin is poised to grow. It may hit the previous high anytime soon and may land in the range between $80-$90 per token.
Checkout Pavia Crypto: The new Metaverse project launched on Cardano blockchain
Where to buy Chainlink Crypto?
Chainlink Crypto can be bought either on centralized or decentralized exchanges. Uniswap exchange is one of the DEX where you can purchase LINK tokens by swapping them with other ERC20 tokens.
Apart from DEXes, the coin can be purchased on the leading centralized platforms like Binance, Coinbase, Gemini or WazirX. Remember, purchasing coins from DEXes doesn’t require any verification process.
Is Chainlink Crypto worth investing?
Chainlink is one such blockchain project that addressed the real issue faced by the technology. It was quick to identify the problem and took no time in building the oracle that can connect the on-chain smart contracts with off-chain environment, enabling the transfer of authentic real world data to the blockchain after validation.
The idea is as revolutionary as blockchain technology itself. Since its inception, the project has done some serious partnerships and launched itself on other blockchains like Polygon etc. There’s no player in the market that can beat its core competency.
The success of Chainlink is directly proportional to the acceptance of blockchain technology at a global scale and Ethereum has proved time and again that blockchain is going to take over the world starting with smart contracts and DAPPS.
The future look bright for Chainlink. Unless it face some serious competition or come under any kind of lawsuit (like SEC lawsuit on Ripple XRP cryptocurrency), no one can stop the project from booming but itself. I am positive on Chainlink and I request you to do your due diligence before investing in this or any other crypto project of your choice.
This completes my review of Chainlink Crypto with price prediction. In the next post, I will talk about 1INCH Coin, the DEX aggregator and Pavia Crypto Metaverse. If you’re a fan of blockchain technology then please do share this post on your social handles and educate everyone around you. Do remember to subscribe to my YouTube channel for more informative content, released every week.
Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.
Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.