Chainlink In Crypto And Blockchain, Everything You Need To Know

Chainlink In Crypto

Crypto Rishi

2 months ago|9 min read

31

Before we dig into this article, let’s go over a quick recap of what a smart contract is. Smart contracts are simply agreements written in code that are usually run on a Blockchain. Now you might be wondering why a Blockchain well, what happens on a Blockchain cannot be changed.

So when you and someone else come up with a financial agreement to change that agreement, you would have to change millions of computers all around the world. It’s no longer just your word versus someone else’s word or an agreement written on paper. It’s an agreement shared with millions of other people who have a copy of it.

1.       Smart Contracts

Moving on to smart contracts can be as simple as if I pay you ten dollars today. You’ll pay me back one dollar every day for the next 10 days. They can then get more complicated like if I give you ten dollars of Ethereum you’ll, give me ten dollars of doggy coins, where basically, the code can check if both people truly have ten dollars of each token, that they want to trade and then automate the Trading, so if one person doesn’t give all ten dollars or they change their mind, the other person won’t be left robbed.

2.       Limitations of Smart Contracts

Finally, financial smart contracts can be as complicated as if you give me ten dollars of USD I’ll give you eight dollars of Ethereum, but you have to pay me six percent yearly interest now, just like addition eventually becomes the building blocks for multiplication and even exponents. These simple, smart contracts can easily and quickly become the backbone of an entire nation’s financial system, but there is one problem. These smart contracts can only look at data on the Blockchain. They can only look at your past transactions, your current account balance, or what your friend has done on the Blockchain in the past. Inherently this limits them, but what if we could bond real-life data into a smart contract that way we could create something like a sports betting app where we could bet on who is going to win a game or how many points a team may win by?

3.       Examples

Let’s use a real-life example where quarterback Patrick Mahomes throws a 50-yard touchdown to win an NFL game. A sports betting app may use smart contracts to take up bets before the game and then at the end of the game. In the traditional world at least, a bookmaker would need to obtain the information about the game from a sports website to pay out the winners. However, in the new world of Blockchain technology, we don’t want to rely on a single person inputting that data. We don’t want to put our money in the hands of a single error-prone emotional by nature, human. What if the sports betting Blockchain app had a way to gather real-world data, put it on the Blockchain, and in a way that we don’t have to rely on a single person to hopefully give the Blockchain truthful data. So you must know what an oracle is.

4.       Oracle

An oracle is software that acts as an intermediary, helping to do a two-way data transfer between smart contracts and the real world. We have an entire video on what oracles are, so we won’t focus too much on how they work, but in this video, we’ll focus specifically on how chain link uses them moving on to what is chain link well chain link is a decentralized network of oracles That provide data from off-chain sources to on-chain sources and vice versa. It allows smart contracts to access real-world information that exists outside of the Blockchain in a secure manner now chain link also tackles the reliability problems associated with using a centralized data source, but we’ll get to that in a little bit launched in June of 2017 chain link Is the brainchild of smart-contract.com, a company co-founded by Sergey Nazarov and Steve Ellis? Although their innovation arrived when the crypto industry was booming with new projects, chain link has continuously delivered on its promises, coupled with plans to expand beyond just the Ethereum network.

5.       Chain Link

The chain link network acts as a bridge between the new and booming Blockchain industry and the traditional administrative structures that drive economies to build more efficient, secure, and transparent processes, and that was a little bit of jargon, but we’ll get into it in a minute. It should be noted that chain link is an Ethereum-based network and is secured by a proof-of-stake consensus. The algorithm and the chain-link is a Blockchain that was built to solve a problem to put off-chain data like temperatures and stock prices and then to allow Blockchain smart contracts to read that data. The important thing here is that this is good news for investors, since many crypto tokens are, unfortunately, solutions looking for problems to solve. Moving on, how does chain link work now.

6.       How does a Chain Link function

This is a great question. Why? Because if you, Google, you’ll find pages of really technical stuff that most people won’t understand. They explained the tokenomics or what problem chain link is solving or why you should invest in it, just nothing, truly explaining how it works so that you can understand. I will grab a chair because I’m about to attempt to do so now. The first thing you must understand with chain link is that it is technically replacing a bunch of middlemen, think about a real estate agent. Nowadays, a lot of people just go to a website like Zillow, find the house that they want and then move forward with that process as opposed to hiring an agent to show them eight different houses.

7.       Node Operators

The same is true with a travel agent. They are a middleman. Even more so, let’s refer back to our sports betting example. Someone is collecting money on both sides of the bet and also being a referee to decide who gets the winnings well chain links, oracles and the use of smart contracts will replace all of these people with code now. The way they do. That is very complicated, but here’s how it works first off. How does data get onto the chain-link network? The answer is node operators, and this is a fancy word for someone who locks up some of their money and says I want to be a trusted source of data. Ask me any question now you might be wondering: why do they have to lock up their money? Well, if we can prove that they are no longer being truthful, we can take that money from them. This incentivizes them to always tell the truth. However, the next question you might have is: why would they take this risk in the first place? Here’s a hint! It’s to earn money. People pay these node operators to give them reliable and truthful outside real-world data. It's a win-win situation.

In reality, it gets a little more technical than that. When someone wants a piece of data on the Blockchain, like maybe the weather, they first have to set up something called a requesting contract, which is the start of it all we’re about to get into some technical stuff. So if you grabbed that chair earlier, you better sit down in it after setting up a requesting contract, the chain-link algorithm will register this request as an event after which it will set up a new matching smart contract, known as a chain-link service level agreement Contract which will allow it to access data of the Blockchain afterward, the service level agreement contract will create three more subcontracts: a reputation contract, an order matching contract, and an aggregating contract.

8.       Chain Link’s Performance

Contract evaluates the track record of an oracle to determine its performance, history, and authenticity and then we’ll remove a bunch of unreliable or inaccurate nodes. To put it in a way, that’s easier to understand this contract checks to make sure that wherever we’re getting the data from can be trusted. The second contract is the order matching contract which sends the request, contracts, query, or question to trustable nodes and then checks their bids from the list that it gets. It then chooses the suitable amount and types of nodes to handle the question.

9.       Aggregating Contract

 Chain link converts the request, contracts, and question into another programming language, and then it can go into the real world and grab data from the internet. Finally, Chain Link’s aggregating contract can validate data from both single and multiple sources, using the previous NFL match. As an example, let’s assume eight different nodes send one set of similar scores of the game and then another three nodes transmit a different game score.

10.   Reputational Contract

While the aggregating contract will look at all these answers and then get rid of the ones that don’t make sense – or in this case the three that transmitted a different game score, the aggregating contract can repeat the validation process for many different sources, after which It reconciles them by taking an average now it is worth noting that some answers to questions cannot be an average, but that’s outside the scope of this articles with all of these processes combined chain link, seamlessly and reliably provides accurate data for smart contract execution. To sum it up all of these contracts work together to follow this simple formula, you pay chain link to go and find some trustable nodes, which is the reputation contract.

Then you give them a question that hopefully, they can find the answer to, and this is the order matching contract. Finally, you let chain-link aggregate all the data into a single answer, which is the aggregating contract. This is a good overview of how chain link works.

11.   Chain Link’s Tokenomics

Did I explain it well, hopefully, but let’s move on to chain links, and tokenomics, first off before I get into chain links tokenomics, I want to share with you a project that I’ve been working on. There are millions of people out there wanting a chain-link price prediction and then to help them make an educated guess. I've created a chain-link price prediction webpage that hopefully will show up on the first page of Google. Now I must say personally, I do not like price predictions, because they’re usually inaccurate, they can become self-fulfilling prophecies and they can harm a person’s reputation if they’re wrong. The idea here is to spoon-feed anyone who wants a price prediction with enough truthful and accurate information that they can accurately make an educated guess as to where the price of an asset may be going anyways.

12.   Link Present and Future

Blockchain has a native token called link and this token is used to fund the project’s growth. During the Link’s icon in September of 2017, the developers stated that there would be a maximum supply of 1 billion tokens at launch when they sold some of these tokens chain Link’s price was 11 cents, but today it trades between 20.30, representing a 20 000 increase from the launch price. At the time of writing this article, the link has a circulating supply of over 464 million tokens, which is around 46 percent of the total supply. It's also worth mentioning that, since the link token supply is limited, it could be considered non-inflationary, since an increase in demand will most likely make the price increase. Also, chain Link’s white paper reveals that 35 of the Link’s total supply will be allocated to people who help secure the chain links network and run the oracles. Then another 30 will be channeled towards the development of the chain-link Blockchain and the ecosystem, and the remaining 35 were sold in public sales. Events like the ICO since chain link is a decentralized network.

Users can leverage it to become node operators themselves and earn link tokens by handling important data-related tasks that ultimately lead to the Blockchain’s success. Now, in short – and this is important, the two main uses of link tokens are to pay the network, including the oracles, to give you some data and also to be used as deposits by node operators to ensure that they play nice and stay honest.

Thank you for reading

31

Crypto Rishi

Hi, I am an anonymous crypto guy. I am trying to exchange knowledge and build a community around crypto and blockchain. Find all the informational content about crypto and blockchain on my Feeding Trends blog here. If you like the content follow me to get a regular updates.

Comments

more

Read More