Chainlink (LINK) is a decentralized oracle network that aims to give smart contracts access to reliable data feeds. These feeds can include external data sources like data providers, web APIs, enterprise systems, cloud services, IoT devices, payment systems, other blockchains, and more.
What problem does Chainlink solve?
One of blockchain technology’s most important usage cases is allowing two or more parties to safely exchange data or value without the use of an intermediary. This is made possible by smart contracts, programs that automatically execute when the conditions written into the contract are met.
The problem is, smart contracts need to have a reliable, decentralized way to access real-world data like weather, news events, and prices — if the data feeding into a smart contract is incorrect or corrupted, the outcome will also be incorrect.
If smart contracts rely on a centralized source of data, it is much more likely that data source can be manipulated or compromised. This is known as the “oracle problem.”
To give a crude example, let’s imagine a smart contract that is programmed to release $100 worth of Token B to an individual when the contract receives $100 worth of Token A.
The contract needs to be able to retrieve data that can accurately tell it what the prices of Token A and Token B are, otherwise it will not dispense the correct amount of Token B, or it won’t release it at all!
How does Chainlink solve this?
To solve the oracle problem, Chainlink created a decentralized network that acts as middleware — a bridge — between smart contracts and external data sources (a.k.a. “on-chain” data and “off-chain” data).
All of the oracles on the Chainlink network are incentivized to verify the accuracy of the off-chain data feeds in return for payment in the network’s native token, LINK. A key part of this is Chainlink’s reputation system, which rates oracles based on different performance metrics like uptime, response time, and how many jobs they have successfully completed.
As well as creating an incentive for oracles to act with integrity, Chainlink creates a disincentive with its deposit penalty system. Node operators are required to lock up a certain number of LINK tokens every time they participate in a data query, and they risk losing this deposit if they provide inaccurate data or go offline.
This gives blockchains a secure, transparent, and decentralized way to retrieve data from off-chain sources, ultimately opening up their usage cases to payment systems, insurance, supply chain management, and more.
Who created Chainlink?
Chainlink was founded in September, 2014, by CEO, Sergey Nazarov and CTO, Steve Ellis.
What can you use LINK for?
If you’re a smart contract developer and planning on accessing data using Chainlink, you’ll need LINK to pay for services and to start receiving data feeds.
If you’re on the other side of the network and you’re running an oracle, you’ll need LINK so you can start answering queries.
How can you buy LINK tokens?
To buy LINK on our website or on one of our partner wallet applications, just select LINK from the drop-down menu, and follow the steps to complete your order.
If you get stuck, check out our handy guide on how to complete an order with MoonPay.