Cryptocurrency and blockchain technology has come from the dark shadows of uncertainty into the view of a mainstream audience. The evolution of new types of crypto assets and continuous developments in the crypto space, such as DeFi and NFT, has strengthened the reputation of crypto. On the other hand, the name of Chainlink has also become a common entry as one of the key components for blockchain applications.
The decentralized oracle network has gaiblockchainned prominent attention in recent times, drawing every beginner towards its special highlights. The following discussion helps you learn about the different Chainlink uses and applications in the real world with insights on its fundamentals. You can develop a clear impression of the fundamental reasons for coming up with such a platform.
Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.
The Potential of Blockchain and Smart Contracts
Blockchains and smart contracts changed the face of information transfer, financial transactions, and execution of agreements forever. You might be wondering why you are looking at the value of blockchain and smart contracts in a discussion about Chainlink and how it will help you understand the decentralized oracle platform.
Blockchain is basically a decentralized network of computers that removes counterparty risks by carrying out computation tasks and data storage in a single shared digital ledger. On the other hand, blockchain can serve many other applications beyond cryptocurrencies with the help of smart contracts. However, smart contracts are responsible for bringing back the counterparty risk into blockchain applications. How?
Curious to understand the complete smart contract development lifecycle? Enroll in Smart Contracts Development Course Now!
Reasons for Developing Chainlink
Smart contracts need data for executing commands and cannot fetch external data due to isolated nature of blockchain networks. As a result, developers encounter problems in creating smart contracts which can leverage external data. While this may appear quite simple when you see it this way, there is more to lose for developers. They cannot use information from asset prices, IoT sensors, enterprise systems, and many real-world data sets.
Therefore, smart contracts have to depend on oracles, which are helpful software components for obtaining data inputs from external sources. How does the Chainlink blockchain show any form of relevance in this case? Smart contract developers must develop oracles with security and reliability traits at par with blockchain. In addition, a centralized oracle can gain centralized control over a smart contract if it is solely responsible for data inputs in the smart contract.
Now, you can clearly notice why decentralized oracles like Chainlink are the need of the hour for the crypto ecosystem. Let us find out what is so special about the popular decentralized oracle platform.
Want to know the real-world examples of smart contracts and understand how you can use it for your business? Check the presentation Now on Examples Of Smart Contracts
What is Chainlink?
The definition of Chainlink is probably the first thing you need to understand its fundamentals. As mentioned already, it is a decentralized oracle service that facilitates better interconnectivity among smart contracts. Smart contracts can leverage the decentralized oracle service for seamless access to credible data feeds, payments, APIs, and a wide range of other resources.
You can think of the platform as an intermediary between off-chain and on-chain systems. Smart contracts could access off-chain resources and respond timely to real-world events alongside executing agreements without external proof of performance. The primary components of its ecosystem include the Chainlink cryptocurrency, LINK token, and the blockchain, i.e., LINK network.
Many of you might be wondering about the specialty of the LINK decentralized oracle network. The concept of a decentralized oracle basically resolves the most prominent issue in creating smart contracts, i.e., centralized oracles. An overview of the architecture and working of Chainlink can shed more light on how the decentralized oracle benefits smart contracts.
Architecture of Chainlink
One of the basic aspects in any discussion about the LINK decentralized oracle network would refer to its architecture. The Chainlink blockchain leverages different nodes for obtaining the data required for smart contracts. However, the nodes reach a specific consensus prior to transmission of data to the smart contract. As a result, the smart contract does not have to depend on a single, centralized oracle.
In addition, Chainlink nodes are capable of retrieving data one time or multiple times. How does the decentralized oracle offer the assurance of decentralization? You can find the answer by diving deeper into the components of the LINK oracle service. The two important components in Chainlink are on-chain and off-chain components. Let us find more about these components and their significance in a smart contract oracle service.
Want to learn blockchain in detail? Enroll Now: Certified Enterprise Blockchain Professional (CEBP) Course
The on-chain components basically refer to the oracle contracts based on Ethereum blockchain, which helps in monitoring and processing data requests of users. On-chain components transfer requests for off-chain data to the Chainlink network to facilitate its processing in native blockchain contracts. Subsequently, the native contracts can match the requests with relevant oracle services. You can find three distinct parts of Chainlink contracts such as,
- Reputation contract
- Aggregating contract
- Order-matching contract
Each contract serves a distinct role and drives the desired functionality of Chainlink blockchain, i.e., as a smart contract oracle. The reputation contract helps in documentation of performance metrics of oracle service providers alongside monitoring their track record. The aggregating contract works on collection of responses from oracle providers followed by computation of final answers to original questions. Furthermore, the order-matching contract plays a vital role in logging the proposal of users on the network and collecting bids from oracle providers. The order-matching contract also plays a vital role in selection of oracle service providers, based on analysis of reputation contracts.
Get familiar with the terms related to Ethereum with Ethereum flashcards.
The off-chain components are the next significant aspect in answers for “What is so good about Chainlink?” as they include the off-chain oracle nodes. Such nodes could help in harvesting responses to various external requests. Subsequently, all the individual responses are aggregated through different consensus mechanisms before transformation into a single, global response. Where is the destination for processing all data? Chainlink Core helps in connecting the blockchain with off-chain data resources. It is basically a device that supports translation of off-chain data followed by transferring it to an on-chain oracle.
Off-chain nodes can receive compensation in the form of the Chainlink cryptocurrency, i.e., LINK. In addition, off-chain nodes also facilitate integration of external adapters for productive data collection. The Chainlink Adapter serves as a connecting bridge between off-chain nodes and external data. The adapter can work on reading and processing the data as well as writing it to the blockchain.
Start your blockchain journey Now with the Enterprise Blockchains Fundamentals
What is The Specialty of Chainlink?
The overview of architecture and working of Chainlink provides a clear impression of how it is a special oracle service. However, some of its unique features separate it from any other oracle available in the market. For example, you can find the value advantages of the multiple layers of security offered by the Chainlink blockchain oracle. On the other hand, you have the advantage of decentralization, thereby establishing solid foundations of trust in the oracle network. Here are some of the notable features which set the LINK decentralized oracle service apart from its counterparts.
- The foremost distinctive feature of Chainlink is the generalized architecture, which serves as a flexible framework for developing and running oracles. Users can enjoy seamless flexibility in creating and connecting smart contracts to customized oracle networks without depending on centralized oracles.
- Another significant highlight of Chainlink crypto oracle platform is the facility for data signing. Oracles on the platform could sign the data they provide to on-chain components. The unique cryptographic signature can help users in verifying origins of the data from specific oracle nodes.
- The value of Chainlink blockchain oracle for offering high-quality data from premium data providers is also one of the notable highlights for the oracle service. It empowers smart contracts with the power of data from external systems and the ability to transmit commands to other systems for specific tasks.
- The most prominent answer to “What is so good about Chainlink?” would obviously refer to its blockchain-agnostic nature. It can operate natively on any blockchain network without any restrictions, thereby expanding the scope for its adoption.
- You would also find the element of service-level agreements in the pipeline for the future of Chainlink. Over the course of time, the oracle service would help users in defining the terms of the requested job in on-chain smart contracts. Thereby, service-level agreements could strengthen the integrity of data delivered by the oracle service.
- The facility of reputation systems is also another crucial highlight for the Chainlink cryptocurrency oracle service. Users can select oracles according to the historical performance metrics. On the other hand, node operators have the privilege of offering additional information such as identity, third-party certifications, and identity.
With so many answers for “What is so good about Chainlink?” you can also expect some new additional security features. The oracle service plans on introducing new features for advanced oracle computations as well as oracle and data privacy.
Want to learn about security in blockchains? Enroll: Certified Blockchain Security Expert (CBSE) Course
Future Prospects for Chainlink
The unique features of Chainlink showcase how it can serve a massive role in smart contract development. In addition, the oracle service is evolving continuously with new features without compromising the essential traits required in a decentralized oracle. Where is the platform headed from here? Does Chainlink have a future? Such questions obviously strike some critical thoughts regarding the long-term prospects for this decentralized oracle service.
As of now, Chainlink blockchain oracle service is the most trusted alternative for developing advanced smart contracts with security and reliability like blockchain technologies. Furthermore, the wide range of Chainlink uses in real-world also sets a promising tone for its future. Here is an outline of the top smart contract use cases powered by the LINK decentralized oracle service.
- DeFi applications can leverage the decentralized oracle for verifying collateralization, determining the price of assets, and accessing interest rates.
- Smart contracts also serve a crucial role in development of insurance contracts based on blockchain. The real-world example of Chainlink crypto oracle use cases in insurance refers to the Arbol crop insurance market. The oracle provides weather data to the insurance market, thereby driving better decisions.
- Another entry the wide range of innovative Chainlink uses refers to the development of blockchain games with NFTs. The decentralized oracle can offer an ideal source of randomness for creating random in-game scenarios.
Aspiring to Become a Certified NFT Expert? Enroll in Certified NFT Professional (CNFTP) Course Now!
On a final note, the answer to “Does Chainlink have a future?” becomes clearly evident. The decentralized oracle service can empower smart contract developers with the flexibility to obtain seamless access to external information. Chainlink can help in bridging the gap between traditional off-chain systems and different blockchain networks.
With a unique set of features and a powerful architecture, the decentralized oracle service stands true to its desired functionalities. Apart from facilitating secure interaction between smart contracts and external data systems, the wide range of Chainlink uses in the real-world set the perfect tone for its future. Learn more about the decentralized oracle service right now and explore its potential.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!