Updated: Dec 20, 2019
ChainLink is described as a secure blockchain middleware that connects smart contracts across other blockchains. This is done by allowing smart contracts to access major off-chain resources, like web APIs, data feeds, and traditional bank account payments. The ChainLink crypto ecosystem revolves around the LINK network and LINK token. LINK is established, as the cryptocurrency of choice to pay ChainLink’s node operators.
This guide will explain what ChainLink is designed for, the team behind it, how it works, and various applications.
What is ChainLink Designed For?
ChainLink was launched in June 2017, by the San Francisco Fintech company, ‘SmartContract’. The developers believed that smart contracts will revolutionize multiple industry verticals, by essentially replacing the need for traditional legal agreements. However, the team understood that this was possible only when smart contracts start effectively communicating with external systems.
The underlying consensus protocols related to existing blockchain technology didn't support effective communication. The developers created ChainLink, to enhance the usability and applicability of smart contracts, throughout the business world. They decided to get this done by releasing APIs and other platforms.
Who Is the Team Behind ChainLink?
The duo team Sergey Nazarov and Steve Ellis, are behind ChainLink and SmartContract.com. Nazarov started his career at FirstMark Capital, then switched over to join the cryptocurrency revolution, believing it to have the ability to change the way the world handled money.
Tom Gosner signed on as a notable addition to the ChainLink board, towards the end of 2018. Gosner is the founder of DocuSign and was brought in to help integrate agreements built on DocuSign, with ChainLink smart contracts.
How Does ChainLink Work?
The ChainLink Network uses traditional blockchain middleware called ‘oracles’ to interact with external resources, like traditional banking systems, data feeds, and API’s. ChainLink’s secure oracle network is blockchain technology-based and fully decentralized, which allows connectivity between external (or off-chain) resources and smart contracts.
According to developers, the platform allows anyone with a data feed or an API, direct access to smart contracts in exchange for LINK tokens. These participants are called node operators, who allow data providers (service or payment provider) to sell their API based service to the smart contract.
The network has two separate parts – on-chain and off-chain. These two must interact for successful service delivery. The on-chain component filters oracles, based on user-generated metrics to a smart contract.
The off-chain component contains oracle nodes, which are connected to the Ethereum network. This ensures that responses are individually harvested to off-chain requests.
For instance, an off-chain node could be run by the New York Stock exchange to provide real-time accurate trade information to the ChainLink network.
What are Current and Future Applications of ChainLink?
ChainLink recently partnered with Celer, a layer 2 scaling platform, which is designed to generalize off-chain smart contracts and off-chain transactions. The partnership enables users on the Celer network to execute payments based on, off-chain with conditional circumstances.
ChainLink is on the path to developing the standard of Oracle smart contracts, with the recent signing of numerous partnerships among a broad and diverse group of industry participants.
A series of security audits is being wrapped up by ChainLink, in partnership with Ethereum test networks Ropsten, Kovan, and Rinkeby. Another notable partnership is with Katallassos, which is a high-performance financial framework. ChainLink is expected to behave as Katallassos’ off-chain data feed connector.
Mobilum, a trading platform, has also recently partnered with ChainLink, to use it as a secure and authentic off-chain data feed. The off-chain price feeds are to be used by Mobilum, to reconcile the amount of cryptocurrency required for enabling a settlement, using fiat currency. ChainLink is also expected to enable better liquidity, instant transactions, and low latency for Mobilum as market data gets filtered through the system.
There has been a flurry of notable developments in ChainLink, since the beginning of 2019. The project is positioned to become a trust-minimized and practical data feed filter, for all open financial platforms and protocols, after the crypto industry’s shift towards decentralized finance (DeFi).
ChainLink has immense potential which if implemented correctly, can be used to connect smart contracts with the outside world. It may allow users to receive external inputs that work towards proving performance, and other information that end users may want to receive. This can enable smart contracts to mimic traditional financial agreements, currently ruling the market.
A major factor that is expected to propel ChainLink’s success is the fact that it does not require financial institutions and businesses, to switch over to smart contracts. They can utilize smart contracts through the ChainLink network and enjoy all the benefits of immutability, decentralization, and trust without the added expense of creating a new infrastructure.