What is the Next Chainlink to Look Out for in 2021?

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While cryptocurrencies are still the most famous applications of blockchain technology, they are far from the only ones, and they might not even be the ones with the greatest impact.

Blockchains are a type of secure, immutable, distributed ledger, and ledgers can record a lot more than just transactions. When the Ethereum blockchain introduced smart contracts in 2015, it opened a whole world of possibilities. Now applications ranging from games to social media platforms could be run on a blockchain.

Decentralized financial (DeFi) applications also launched thanks to smart-contract-capable blockchains. Chainlink managed to take smart contracts one step further. Now a lot of people are wondering what comes next. What is the next Chainlink? We take a deeper look, read on to find out.

First, we're going to need a little background information.

What is a Smart Contract?

Smart contracts are instructions that are written into and automatically executed by the blockchain. It’s like telling the blockchain, “if X happens, then do Y. And if X doesn’t happen, then do Z.” Because the instructions are written into the blockchain, they are publicly visible, and anyone can check them out to make sure everything looks okay.

Crowdfunding is a great example of how smart contracts work and blockchains are actually being used for just that. Let’s say you want to raise 500 Ether by March 1st, 2021, you would then place a smart contract in the Ethereum blockchain. Anyone who wants to pledge funds to your project would send the amount of Ether they want to pledge not to you but to the smart contract’s account.

On March 1st, as instructed, the blockchain will check how much Ether there is in that account. If it’s at least 500, then the Ether will be transferred to your account; if not, each person who pledged will get their funds back. And all this will be done automatically with publicly-viewable transactions—complete transparency and efficiency.

While crowdfunding may be a simple example to let you begin to understand how smart contracts work, some smart contracts are a little more complicated. In our example, the smart contract has the advantage of having all the data in the blockchain itself.

The contract is on the blockchain, as are each and every one of the transactions related to that contract. But what if the contract needs information that isn’t on the blockchain?

Let’s say the residents of your city raise money to give as a prize to your local little league team, but they’ll only get it if they win their division. We can create the contract, and funds can be transferred to the contract account. But the little league results and division winners aren’t stored on the blockchain, so there has to be a way to get that information in there so the team can get their prize.

This is where so-called oracles come into play. Oracles are machines that can feed real-world data (like our little league results, the current price of gold or oil, the results of the recent US presidential election, etc.) into blockchains. Problem solved, right? Well, not quite.

First, there is the question of whether the oracle is trustworthy. Is it feeding the right data into the blockchain? Is the oracle secure? What if it’s hacked? Then there’s the question of centralization.

One oracle, i.e. one machine feeding data, is a centralized solution to the problem. But it’s not logical to introduce a centralized feature into a decentralized system. A single point failure could take down the whole system, and that’s just what decentralization is looking to solve.

And then came Chainlink…

What is Chainlink?

Chainlink is an ingenious solution to the problem of oracle centralization. Instead of one oracle, a whole decentralized network of oracles is feeding the real-world data into the blockchain. Each one of these machines is equipped with advanced, high-grade security hardware.

But it’s not just the hardware that makes Chainlink secure and trustworthy. The Chainlink network uses a very cleverly designed array of contracts and subcontracts that, on one hand, determines which oracles are reliable and which ones aren’t.

It also validates the information and can even aggregate or average the information from several nodes or take it from a single oracle. In a nutshell, Chainlink has solved the problem of transferring real-world data into blockchains in a way that is accurate, reliable, and efficient.

So Chainlink can get those little league results into the blockchain so the team can get their prize. Do you want to create a stablecoin pegged to the average price of silver across several markets? No problem. Chainlink can gather the data, calculate the average and feed the result into the blockchain.

What is the Chainlink (LINK) Token?

Besides being the name of the actual network, chainlink is also the name of a cryptocurrency token. The operators of the nodes (or oracles) that make up the Chainlink network have to get paid to keep those machines running. Every time a contract requests information from the Chainlink network, the nodes’ operators are paid in chainlink tokens.

Chainlink is an ERC-20 token that is currently the #7 ranked cryptocurrency. At the time of writing, its price is just over 22 USD and a 24-hour trading volume of just over 3.7 billion USD. Chainlink’s price has generally been going up for about a year now and reached its all-time high about a week ago on January 23d, hitting 25.51 USD.

what is the next chainlink

What has Chainlink Accomplished?

The introduction of smart-contract-capable blockchains was a big step forward. So much, in fact, that smart contracts defined a whole new generation of blockchains. Smart contracts on blockchains like Ethereum or EOS have been used for a lot of things. From crowdfunding and Initial Coin Offerings (ICOs) to social media platforms like Murmur or Blabber to instant messaging apps like EOS chat or SENSE chat to games and a lot of other decentralized applications (dApps).

Important as they were, these first dApps used on-chain data only. But to make smart contracts more useful and attractive to the world outside the blockchains, there had to be a way to feed real-world data into the blockchain contracts. So began the oracles, and then along came Chainlink and made it possible to pass that information securely, reliably, and efficiently.

As this became possible, a lot of opportunities opened up for DeFi applications. At the time of writing, Chainlink is securing information for hundreds of active contracts worth over 5 billion USD. And with each new node or oracle installed into the Chainlink framework, the network becomes even more secure and runs at a lower cost.

Chainlink’s contributions to blockchain technology have been so significant that they were recognized as one of the Most Promising Technology Pioneers of 2020 by the World Economic Forum.

So what is the next Chainlink?

Chainlink might be the pioneer of decentralized oracle networks, but they are far from being the only one. Some of the other projects that are working on reliably feeding real-world data into blockchains are:

  • Band Protocol: at the moment of writing, Band Protocol is the second most-successful decentralized oracle network. Although it’s currently lagging far behind Chainlink in terms of market cap (almost 287 million USD versus Chainlink’s over 5.8 billion USD), Band has been around for a lot less time. Chainlink has been around since 2017, while Band was launched in late 2019. In just one year, the BAND token’s price has gone up by over 2,700%. Band is compatible with multiple blockchains and is backed by industry-leading exchange Binance, so this is definitely one to watch.
  • Bridge Protocol: This is one of the newest players on the field. Bridge was launched during the latter half of 2020. It provides oracle services to the TRON blockchain, can gather real-world information from a wide variety of sources, and is much more affordable than the big names in the game, making it more attractive to small businesses in need of smart-contract services.
  • Decentralized Information Asset (DIA): This is also a newcomer to the field. DIA is an open-source oracle network targeted at DeFi applications. DIA’s advantages are that it is freely accessible and very scalable. Though it is certainly one of the smallest players in this game, that means that it has a lot of room to grow.

In Conclusion

While trying to find the answer to the question of what is the next Chainlink, I hope to have shed some light on how important it is to be able to transfer real-world data into smart contracts and just how big Chainlink’s contribution to DeFi really is.

Its impact has been so profound that currently, almost all DeFi applications are tied to the ethereum blockchain via Chainlink. There are other players in the game, however. Band Protocol is compatible with multiple blockchains instead of just ethereum. Bridge Protocol provides decentralized oracle services to a next-generation blockchain like TRON. DAI is freely accessible.

Each project brings something different to the table. The question is whether it will be enough to take the throne. Chainlink has already firmly established itself as the industry leader in decentralized oracle networks, and it’s great at doing the job.

So the answer to what is the next Chainlink might very well be nothing. However, Band Protocol is worth keeping an eye on. With support for multiple blockchains and backing from Binance, they aren’t to be dismissed. What do you think?

Do you believe Chainlink will forever reign supreme? Do you believe Band Protocol could take the first spot? Which one of these networks would you use or invest in? Leave a note in the comments to let us know.

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