In 2009, two revolutionary concepts emerged in Satoshi Nakamoto’s famous Bitcoin Whitepaper; Blockchain and smart contract technology. While the former has been getting a lot of attention in the past year, smart contracts are no less important nor less crucial in the development of many dapps.
In a nutshell, smart contracts allow the programmatic, automatic process of transferring tokens from one party to another without relying on anyone. It allows direct interaction between two or more parties. However, as revolutionary as they are, they suffer from a major flaw; they can only utilize any information or data within the blockchain itself. This severely limits their capabilities as much of the data and information needed to initiate more complex smart contract interaction is found off-chain, aka, in the real world.
It is this problem that decentralized protocols such as Chainlink seek to solve. This Chainlink review article will fully explain what Chainlink is, what oracles are and how crucial they are becoming, and why you should consider having some LINK tokens in your portfolio.
So, what is Chainlink? Well, it is a decentralized network of oracles that provide off-chain data to on-chain resources. It basically acts as the middleman for two completely different environments and bridges the two.
When it comes to blockchain, they are decentralized networks that operate within their own parameters. The information that gets inputted, verified, and stored is all the information smart contracts use. As mentioned previously, this limits both blockchains' and smart contracts’ capabilities because they become trapped within their own little universe. It is even more limited when you consider the huge amount of data that resides off-chain or in the real world. We are talking about prices, events, payments, weather, travel information, political election results, etc.
Now it is possible for blockchain networks to retrieve some of these data and information, but we then come across another barrier. Much of that off-chain information comes from centralized entities, which can be susceptible to possible manipulation; or what if the information is just plain wrong? Because much of the data that is needed is in the hands of a few, it becomes that much harder to spot these mistakes.
Chainlink is trying to solve these two major barriers. As a decentralized network, its oracle nodes are able to retrieve and verify the information needed by the many decentralized applications (dApps) being built on the various blockchain platforms. Oracle nodes have their reputation immutably stored on the blockchain for all to see, so any dApp or project wishing to use Chainlink can link up with an oracle node with a reputable track history.
Read our Chainlink review further to fully understand what this is all about.
But, Chainlink is not just about connecting smart contracts to off-chain data. It seeks to also solve the interoperability problem by bridging various previously isolated blockchains and allow data and other information to travel between them.
The ‘Request Smart Contract' will trigger a corresponding smart contract (known as a Service Level Agreement or SLA smart contract) and further generate three more sub-smart contracts which are:
- The Chainlink Reputation Contract: This keeps track of the oracle's provider record and performance to authenticate the reliability of the data supplied.
- The Chainlink Order-Matching Contract: This matches the request made from the Request Smart Contract based on the parameters set. It will choose nodes based on the bids made and fulfil the request.
- The Chainlink Aggregating Contract: Once the Request node is matched, the information received from the chosen oracles will be aggregated on the Aggregating Contract. The data received will then turn into a single weighted value before being sent back to the smart contract that requested the information.
Once the Aggregating Contract returns the requested information to the Request Smart Contract, the information will be translated and parsed on the blockchain. In return, the node operators will be rewarded with LINK for their services.
Chainlink’s native token, LINK, is an ERC-20 token on the Ethereum blockchain. It has a max supply of 1 billion, with a current circulating supply of 419,009,556.
LINK serves two purposes. Firstly, it is used as a form of payment by smart contractors to node operators. In other words, paying for data. Additionally, smart contractors are also paying node operators to format the off-chain data into readable blockchain data, as well as all off-chain computations that need to be done. The price for this service will vary depending on the type of data needed, the difficulty in obtaining it, as well as nodes competing with each other to by providing the best price.
The second is to bond/stake LINK in order to run a Chainlink node. In order to get some ‘skin in the game’ and as a form of ‘insurance policy, nodes are required to stake some LINK in order to operate and maintain up-time. The amount of LINK needed to be staked will depend on how valuable the data is for the smart contractors. The more valuable a data is, the more collateral nodes will be required to stake in order to receive the contract from those smart contractors to retrieve the information needed. This is to ensure that nodes will do everything they can to ensure that the data they retrieve is reliable and accurate. Failure to do this will result in having their staked LINKs being slashed.
Even though Chainlink is an ERC-20 token and resides within the Ethereum blockchain, it has its own consensus called Proof-of-Stake (PoS). As mentioned earlier, in order for a node operator to participate, they will need to stake a certain amount of LINK tokens, which will also depend on how valuable a smart contractor’s request for data will be. If the node operators wish to accept that smart contractor’s request, they will need to stake more LINK as collateral for the data they are supposed to retrieve.
Thus far, Chainlink seems to be a really good project with strong tokenomics and real use cases. But is its ecosystem being utilized? Has Chainlink been experiencing mass adoption? Well, you can click here to view the number of partnerships, collaborations, organizations, and projects that have integrated Chainlink’s oracles since its inception. We have not able to list all of them in this Chainlink review, but it includes 512 partnerships, collaborations, and integration thus far! Some of these include Google, Aave, Synthetix, Zilliqa, Polkadot, Binance, Huobi, Pancake Swap, SushiSwap, Paxos, Unstoppable Domain, Injective Protocol, among many, many others.
So yes, you can rest-assured believe that Chainlink has no shortage of dApps, organizations, and exchanges that are looking to use its oracles for crucial off-chain data and information.
Chainlink was founded in June 2017 by Steve Ellis and Sergey Nazarov, who is currently CEO at Chainlink Labs. Sergey has a degree in business administration from New York University, with a focus on philosophy and administration. He founded several enterprises, notably Existlocal, CryptaMail, and with Steve Ellis, SmartContract. It was SmartContract.com that introduced Chainlink.
Steve Ellis has a degree in computer science from New York University. In 2014, he co-founded Secure Asset Exchange, a company facilitating easy web access to a decentralized asset exchange.
Who Is This Product For?
When it comes to using Chainlink’s oracles, it is mostly project developers who want to integrate Chainlink into their projects or those who want to sell their data and become part of the participating nodes.
In addition, when it comes to buying some LINK, there are a variety of exchanges that offer LINK tokens. The most notable ones are Binance, Atomic Wallet, Coinbase Pro, Huobi Global, Kraken, Gate.io, FTX, among others.
On April 15, 2021, Chainlink finally published its long-awaited Whitepaper 2.0. Ever since publishing its original Whitepaper three years ago, the network has seen a vast expansion of their oracles being adopted by many in the crypto space, including such dApps within DeFi, NFT, gaming, insurance, and more. The vast array of projects utilizing their decentralized oracles compelled the network to adapt and innovate its oracles to growing demand and complexity in smart contracts.
The 2.0 Whitepaper is over 100 pages long, and we will not be able to cover everything here. However, here are some of the most important details:
- Chainlink Price Feeds: They will provide an extensive collection of on-chain financial market data for a broad array of assets, which is used to secure billions of dollars for leading DeFi applications like Aave, Synthetix, and dYdX.
- Chainlink VRF: They will generate verifiable randomness backed by on-chain cryptographic proofs, enabling projects like Aavegotchi to mint NFTs with provably rare attributes and PoolTogether to fairly select winners in its no-loss lottery.
- Chainlink Proof of Reserve: This feature supplies on-chain data feeds that enable smart contracts to perform on-demand audits of tokenized asset reserves, such as for stablecoins like TUSD and PAX and cross-chain tokens.
- Chainlink External Adapters: This feature gives developers the tools to create connections to any off-chain resource or API, leveraged by Arbol’s parametric crop insurance market to fetch weather data and Everpedia’s prediction market users to get U.S. election results.
The Whitepaper also introduces an outline for a new architecture for building hybrid smart contracts. What are these? Well, simply put, these are smart contracts that rely on the new Chainlink Decentralized Oracle Networks (DONs) to create a decentralized metalayer and offer key capabilities that blockchains cannot. This metalayer serves as a secure off-chain computation layer that partly relies on blockchains for security yet operates with the connectedness, rich data of off-chain systems. In other words, it utilizes the best of both worlds. The result is its support for greater flexibility in user adoption and use cases.
These DONs will provide additional services to next-generation smart contract use cases. Apart from the hybrid smart contract, additional advance services include:
- Enhanced Chainlink Data Feeds: This service provides higher-frequency updates, privacy-preserving queries, and multi-blockchain delivery, all of which lowers costs and empowers DeFi applications like derivatives protocols and enterprise solutions with even more secure and reliable source of external data. Chainlink Data Feeds are already being made more scalable through OCR.
- Enhanced Chainlink VRF: This enhances security, crypto-economic security, and cost-efficiency to support more secure gaming, NFT minting, and any other applications that require a secure source of randomness for end-to-end security.
- Chainlink Keepers: This provides decentralized and highly reliable automated maintenance of key smart contract functions like harvesting yield and triggering liquidations, currently being primed for production and tested by top projects.
- Chainlink Fair Sequencing Services (FSS): These services use DONs to order user transactions on a blockchain as a means of mitigating front-running, back-running, and other related attacks, as well as other types of transactions like oracle report transmission caused by Miner-Extractable Value (MEV).
- Chainlink Decentralized Identity: Privacy-preserving oracle protocols interoperate with existing systems in a backward-compatible manner to open up new use cases like on-chain credit-based lending.
We cannot have a Chainlink review without also discussing the project’s famous supporters and community members. Known collectively as the Link Marines, they are an effective fighting force and one of the largest communities for a project within the entire crypto space. The network has a following of more than 263,000 people on Twitter and more than 32,000 members on Telegram. Moreover, Chainlink supports its community by allowing them to interact and receive the most updated news in their own native language. Whether you live in Korea, Italy, Latin America, Turkey, The Netherlands, or wherever else. you can join any of these communities on Telegram.
However, unlike other crypto communities, the Link Marines have been known to be more realistic and pragmatic. They have put more emphasis on technology and reason rather than on hope. Many have been keeping up to date with the latest updates and upgrades the network has been having and thus, have been able to keep any FUD or criticism of Chainlink at bay.
Chainlink itself recognizes the power of its own members, so much so that it even allows anyone who is passionate about Chainlink to become an official Chainlink Advocate.
Chainlink has been making great strides in the past few years. It is almost hard to believe that on May 3, 2020, the price for just one LINK token was at a measly $0.51! At the time of writing this Chainlink review article, it is now up at $39.72. It is ranked in the top 20 within the entire crypto market space. Considering the number of partnerships and collaborations the network has been getting involved in, the price action should not come as a surprise. However, while Chainlink was the first oracle network in the crypto space, that does not mean it holds a monopoly. Much less, it does not face possible fierce competition.
Band Protocol is another cross-chain data oracle platform that attempts to do what Chainlink is also doing; retrieve off-chain data and supply it to on-chain applications. And just like Chainlink, it originally launched on the Ethereum blockchain as an ERC-20 token, but in June 2020, it transitioned to the Cosmos network, coinciding with the release of Band Protocol 2.0.
Unlike Chainlink, Oracle nodes have a dual role in the BandChain, relaying data to on-chain applications, as well as being involved in block production/validation.
Although currently sitting at 160, according to CoinMarketCap, the BAND token has not been sitting idle. It, too, has been experiencing a massive uptrend in price.
Another competitor for providing oracle service is Tellor. This one has a smaller marketcap and is currently sitting at 329 on CoinMarketCap. It uses a proof-of-Work (PoW)and PoS consensus. Basically, anyone wanting to become a node needs to stake 1000 TRB tokens to act as a guarantee of the correctness of data inputs. In addition, to secure the network via PoW, miners also have the additional task of providing an off-chain data point.
A third competitor is the Decentralized Information Asset or DIA platform. It is an open-sourced oracle platform that enables market actors to source, supply, and share trustable data. It aims to become the Wikipedia of financial data by bringing together data analysts, data providers, and data users. Users are incentivized to provide accurate, reliable off-chain data whist also incentivizing others to verify them. Users can stake DIA tokens to incentive new data to appear on the platform, but access to historical data through DIA is free.
At the moment, there is no doubt Chainlink is the king of oracles. This Chainlink review has shows that it has robust tokenomics, been able to partner up with many of the well-known and upcoming dApps and blockchain platforms. It has a large, loyal community behind it, with many more eager to join up. It has strong liquidity and presence on many exchanges, allowing newcomers with easy access to the LINK token, thereby allowing mass adoption. And to top it all off, it is solving a real-world crypto problem.
Although Chainlink does have its fair share of competitors, right now, anyone holding LINK can sleep soundly in knowing that the chances of any of these competitors dethroning Chainlink, at least in this current bull run, are slim. That is not to say that it can't happen in the long run, but there is no doubt that Chainlink will fight tooth and nail to remain in its dominant position, and with its dedicated Link marines behind it, well, I’d hate to be the person fighting against them…
- Value for Money
- Ease of Use
- Solves the Oracle problem
- Increases opportunities for smart contracts
- Strong partnerships
- Ahead of the competition
- No roadmap as of right now
- Rapid development can lead to failures or malfunctions
- The project is very new so it's hard to portray its future