Chainlink is a decentralised oracle service—which simply means it provides real-world data to smart contracts on the blockchain. Oracles help make smart contracts “functional”. Smart contracts need oracles to connect to the outside world and gather real-world information.
For example, Uniswap uses Chainlink price feeds to supply various asset prices, so its smart contracts can perform swaps and monitor liquidations.
Oracles like Chainlink are the backbone of the crypto economy—most smart contracts and dApps need some form of oracle to function.
It does this through its network of independent oracle node operators. They’re in charge of ensuring correct data for its range of supported smart contracts. In return for supplying accurate and extensive data, operators receive the native token LINK.
Chainlink mainnet went live in early 2019, led by CEO Sergey Nazarov, who created the protocol in Sep. 2017. Chainlink is currently the top oracle provider by market cap, with competition from UMA, API3 and Band Protocol.
Chainlink provides a range of services through its network of independent oracle node operators, such as:
- Market and data feeds
- Data feeds for DeFi, sports or weather
- Verifiable tamper-proof random number generator (VRF)
- Verifiable way to create randomness for NFTs and games.
- Automating smart contracts.
- Proof of Reserve
- Autonomous ways to audit reserves of value.
- Cross-chain communication
- A standard for bridging and building dApps between blockchains.
See its various case studies below for practical examples of Chainlinks products.
LINK Token Utility
Chainlink’s powered by the native token, LINK, an ERC-20 token with a maximum supply of 1B.
LINK has 2 main functions: payments and work (staking).
- Payments: LINK’s used to pay Chainlink node operators for providing oracle services. Prices are set by the Chainlink node operator based on demand and the current market for that data.
It’s the economic incentive to reward data providers, receive new data and ensure all prices feds are correct.
- Staking: LINK can be staked by node operators as collateral to provide oracle services. Node operators must deposit LINK with Chainlink to demonstrate commitment and incentivise good service to the network.
LINK launched a token offering in Sep. 2017. A total of 1B LINK tokens were initially issued and allocated as follows:
- Token sale investors (35%): Pre-sale LINK sold for $0.09 and $0.11 via public sale.
- Rewards (35%): Reserved for Node Operators and ecosystem rewards.
- Team (30%): Chainlink’s parent company SmartContract.com.
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