Chainlink is a decentralized oracle network that enables smart contracts to connect to data and services outside the blockchain network, including real data outside the blockchain, related applications and APIs. Since the blockchain itself cannot be connected to external applications in a trusted manner, the decentralized oracle of Chainlink adopts the same mode as the blockchain and builds a decentralized independent oracle network. The Oracle opportunities in the network jointly obtain data from multiple data sources, aggregate the data, and transmit the validated aggregated data to the smart contract to trigger contract execution, Thus bridging the gap between smart contracts (such as those on Ethereum) and their external data, and avoiding all centralization risks in the whole process. Chainlink is one of the main data sources used to provide information to applications in decentralized finance.
Chainlink is not a single oracle network, but an ecosystem composed of many decentralized oracle networks running in parallel. Each oracle network can provide a variety of oracle services without cross dependence with other oracle networks.
The oracle project is most concerned about the reliability and authenticity of data. Data problems and fault errors have always been the core problems that oracle projects try to solve and break through.
How does Chainlink (LINK) Work?
The operating principle of Chainlink is basically that the data purchaser selects the data they want, that is, the demand is first sent by the on chain smart contract. Chainlink will register this data request or query as "event" and create a corresponding smart contract to obtain the off chain data. After the creation, the request contract will be delivered to the data provider (ChainLink node) for bidding. The data provider will bid for who will provide the data and select the appropriate number and type of data providers to meet the data request. After that, all data from the selected oracle will be validated and integrated by the aggregated contract. After all is completed, the node will receive the data request for the contract, compile it through the translation software, transform the off-chain prediction into the programming language applicable to the blockchain, and finally send it back to the chainlink aggregated contract.
In this process, the data purchaser needs to pay a certain fee to obtain the data return, and the price is determined by the node operator according to the market conditions of the data. Meanwhile, in order to ensure that data providers choose data, they must stake a part of Chainlink's native token $LINK when collateralizing. If the provider tries to destroy or perform actions that violate the system, the staked LINK by the provider will serve as a fine and protect the user. Once the data purchaser selects the provider, their task is to bring the correct answer to the chain.
The reputation contract in the ChainLink internal system can check the past records of the oracle data provider to ensure the reliability of its data and past performance records, so as to evaluate the data provider nodes and eliminate the nodes with poor reputation or unreliability.
What is Chainlink (LINK)?
LINK is the native cryptocurrency of ChianLink and belongs to ERC20 standard. LINK tokens are mainly used to pay the service fees of ChainLink network nodes. The nodes will set the cost price of data collection with LINK tokens. In addition, LINK tokens can also be used as collateral on the network to show the loyalty and commitment of nodes to the ChainLink network.