What is ChainLink?
ChainLink is a decentralized blockchain platform that is built upon the Ethereum network. It aims to solve the problem of the connectivity of smart contracts with the “real” world. Ever since the advent of blockchain technology, numerous uses have been discovered, these range from decentralized apps, monetary exchanges, and even voting systems. However, a pressing concern regarding blockchains is that each blockchain is a world of its own, which is completely cut off from the rest of the world. This is where ChainLink comes in.
ChainLink makes use of its unique network of nodes to provide a way in which information can be taken in and out of a blockchain, in a way that is secure, trustworthy, and decentralized. Chainlink employs the use of oracles, which take data from the real world and make it workable on a blockchain.
Who Founded ChainLink?
The parent company of ChainLink is called Smart Contract Ltd. It is based in San Francisco and is led by CEO Sergey Nazarov and CTO Steve Ellis. Sergey Nazarov is a well-known figure in the world of blockchain, as he is the founder of numerous other ventures such as Secure Asset Exchange and Crypto Mail. While Steve Ellis, before co-founding Smart Contacts Ltd, was a software engineer at Pivotal Labs and Secure Asset Exchange.
The ChainLink project was launched in June 2017, and its whitepaper was released in September of the same year. An initial coin offering was held, in which $32 million was raised in just 2 hours. However, there was a controversy, as 90% of the tokens were already bought at the pre-sale, thus leaving only 10% of the tokens for the actual public sale. On average, 1 LINK was sold for $0.11.
How ChainLink Works?
The process through which ChainLink can be divided into three simple yet diverse stages. These stages include Oracle selection, Data Reporting, and Result Aggregation. In Oracle selection, the first step is for the users to create a service-level agreement also known as SLA. Essentially the SLA specifies the data that is required from the outside world. ChainLink then checks the requirements put forward in the SLA and matches them with oracles that can provide the relevant data. Finally, the user can then submit their SLA, and deposit LINK currency in order to create an Order-matching contract. The Order-matching contract then allows oracles to bid.
In the Data reporting stage, the oracles connect with external sources to extract real-world data from them. This data is the same, as is requested by the user in the SLA. The data is then processed by the oracles and finally sent back to the ChainLink blockchain.
In the final stage, appropriately named Result aggregation, all the data, collected and processed by the oracles is tallied and sent to an Aggregation contract. The Aggregation contract analyzes all the data, and assesses the validity and accuracy of the data, and sees if it is in line with the data requested by the user in the SLA. Finally, it reveals a weighted score to the user, which is made using the sum of all the data that it has received.
Architecture of ChainLink
ChainLink is a blockchain that is essentially run via three different types of smart contracts. These smart contracts provide the functionality that makes ChainLink effective. These three smart contracts include Aggregation Contracts, Order Matching Contracts, and Reputation Contracts.
As mentioned earlier, the Aggregation contract collects the data sent by the oracles and verify and validate its authenticity so that the most accurate data can be sent to the smart contracts that require them. Order-matching Contracts, as the name indicates, match the data that is required by the SLA with the best bidding oracles, thus creating a win-win situation.
Finally, the Reputation contract is responsible for checking the overall integrity and authenticity of an oracle. It achieves its purpose by checking the track record of the oracle. The Reputation contract checks the total number of requests that the oracle has completed, along with its average response time, and the amount of LINK it has staked.
What is LINK?
LINK is the native cryptocurrency of the ChainLink blockchain. It is primarily used for the transfer of value across the blockchain. This also means that the node operators through whom the whole network operates, are paid in LINK. In addition to this, whenever a user needs some data from the outside world, they are required to submit a service-level agreement (SLA) along with some LINK in order to start the process of finding an appropriate Oracle. Therefore if a company wants to run a smart contract that has been enhanced with a ChainLink node, then they’ll have to use LINK currency to do so.
LINK is an ERC20 token, and it also has the added functionality of ERC223 ‘Transfer and Call.’ Essentially what this means is that LINK can be processed and received by a smart contract within a single transaction. The LINK token launched in 2017. Its price at that time was 20 cents, but since then its rise has been meteoric, to say the least. In 2019 its price remained stable at around $1, while its price rose from $2 at the start of 2020, to an all-time high of around $36 in the February of 2021.
Concerns
As with all platforms built upon the Ethereum network, ChainLink can also suffer from the limitations of Ethereum. The congestion on the network can have adverse effects on the functionality of ChainLink. Another concern is that 60% of LINK remains in the control of the parent company thus making it quite a centralized project.
A pressing concern regarding ChainLink has always been the limited number of oracles in its oracle network. As of this moment, the network has 250 active oracles. This number needs to increase significantly if ChainLink intends to fulfill its purpose. Finally, a core issue with ChainLink is that it can’t verify the information given to the user in a trust-less manner. This means that ChainLink relies on centralized verification and dispute resolution but does not have a trust-less way to verify whether the information or data provided is accurate or not.