Getting real-world information in and out of blockchains is a conundrum which has puzzled crypto specialists for some time. In a context where decentralization, trustworthiness and security must be maintained at all cost, Chainlink (Link) provides a highly relevant answer and has already managed to convincingly show how this issue can be countered. This is why such prominent actors as Google, SWIFT, Barlays, five other major banks and several more organizations have manifested their interest even though the initiative is still in its early days.
Our Chainlink guide tells you all there is to know about this fascinating project.
The Chainlink cryptocurrency: Introduction and definition
Founded by Sergey Nazarov and Steve Ellis, Chainlink (Link) raised $32 million from its ICO, totaling 1 billion Link Tokens. However, the system didn’t launch until May 2019 on the Ethereum mainnet.
What makes Chainlink so different from other cryptographic projects is that it creates a stable bridge, minimizing the failures or security breaches oracles encounter. By weaving a decentralized oracle network which runs 24/7, it provides accurate information and resists any potential attempts at manipulation. Chainlink (Link) is thus making blockchain technology relevant to a wide variety of applications.
What is an Oracle System?
One of the main issues smart contracts face is their impossibility to access real-world data in order to confirm or infirm the outcome of the question they hold. For instance, let us imagine that two users escrowed tokens into a smart contract to be released to one of them based on the results of a hockey game. Each individual might have locked in three tokens and placed a bid on their favorite team to win. Once the game is over, one of the two participants would receive their own tokens back plus the other person’s (minus any fee charged for the operation). The issue lies in the fact that smart contracts do not have access to game results, or indeed to any other type of off-chain information without creating vulnerability.
An oracle is a dependable entity smart contracts may use to retrieve the responses they need. They get their name from the Greek oracles people used to turn to for answers when divination seemed like the most trustworthy source of information.
Chainlink’s decentralized oracle system improves upon the previous generation of data feeds by using “trusted-execution environments” to secure the exchanges. The organization acquired these when it purchased a startup named TownCrier. Chainlink (Link) also relies on special hardware. This allows real-world information (or even money) to be injected into a blockchain through Chainlink. Interactions between Chainlink and SWIFT, for instance, create a solid junction between both worlds and minimizes the potential for points of failure.
How does Chainlink (Link) work?
The Chainlink (Link) decentralized oracle network requires the installation of the ChainLink Core software, which coordinates tasks between the oracles and communicates with the Ethereum blockchain.
The Chainlink token, LINK, is utilized by those oracles that wish to make data available to smart contracts. They use the currency as stake to place bids on the information they want to make accessible to the purchaser a request emanates from. This means that, in the event of misbehavior, the tokens they have placed as stake may be kept as a penalty. If selected, they provide the blockchain with the answer they promised, for which they receive payment. Supplying false information would therefore only serve to lose their bid and not get paid. The validity of the data provided is verified through cross-referencing. Purchasers may also review the oracles and indicate how authoritative the information they obtained was.
These measures are one of the main advantages of Chainlink and guarantee the sources are reliable and the data unfalsifiable, since the incentive to carry out the tasks correctly is so strong.
Why use Chainlink?
Originally an Ethereum-bound service, Chainlink (Link) is now available on a variety of blockchains, including Hyperledger and, of course, Bitcoin. By bringing oracles together in the form of a network, this blockchain middleware bridges the gap between smart contracts across several blockchains and the information they require to function.
According to the founders of Chainlink, smart contracts could, one day, replace the need for legal agreements as we know them, provided they are able to communicate with external systems. As some oracles can actually be notarized as a means of verifying their data, they could arguably be even more secure than the solutions we currently have in place. This would allow market data, events data, web APIs, backend systems, retail and bank transactions and more to not just coexists but to interact meaningfully.
Connecting smart contracts to the outside world holds the potential to transform existing systems by granting the possibility to benefit from decentralization and blockchain technology. While all this is still very much theoretical – which is one of Chainlink’s drawbacks – and it consequently remains to be seen whether the system will be widely adopted, its promises are very tangible.
How to buy Chainlink (Link) on Bitit?
Chainlink news has therefore convinced many to invest in the system by purchasing some Link Tokens, either to hold on to or to participate in the exchanges happening on the network. Chainlink’s currency is an ERC766 token – very close in its functionalities to the ERC-20 tokens – and ensures the data payload of each transfer.
LINK is obtainable by traders from some of the most prominent exchanges, though these rarely address the needs of investors who want a little more simplicity. Fortunately, Chainlink (Link) is also available on Bitit, where a user-friendly platform allows you to determine at a glance how many Link tokens you may purchase for the amount of your choice in our own currency.
To access this convenient dashboard, you don’t even have to create an account! But you might want to if you wish to make a purchase. A couple of easy steps will allow you to log in and buy your LINK as if you were on any e-commerce site, putting your items into a cart before proceeding to checkout.
A few minutes later, your tokens are sent directly to your wallet, which you must choose carefully.
How to store Chainlink (Link)?
Selecting the right e-wallet for your Chainlink (Link) tokens is very important as you will want to store them securely whether you intend to use them on the network or not. There exist several options to keep your altcoins safe, as any wallet that supports ERC-20 tokens will offer adequate compatibility.
This means that such reputable Ethereum wallets as MyCrypto or MyEtherWallet (MEW) are good choices if you prefer to use a mobile or software solution. It is, however, not advised to store large amounts of any cryptocurrency on these online solutions.
The best approach to make certain your tokens are out of harm’s way is to store them away from any connected devices by opting for a hardware wallet. The Ledger Nano S or X are excellent alternatives, as is the Trezor. These will hold any significant quantity of Link and keep it perfectly safe.
The novel idea of rewarding data providers in a similar way as cryptocurrency miners traditionally get their fees would undoubtedly offer a different incentive from what typical oracles are used to. Chainlink (Link) gives businesses and financial institutions a powerful solution to help them adopt smart contracts and embrace decentralization. This would also allow them to take advantage of the trust and immutability that come with it without having to create any individual systems or networks. Only time will tell if enough organizations, partners and operators will support the system and increase the robustness of its value.