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What is Chainlink (LINK)?

By iTrustCapitalMay 19, 20223 minutes read
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Understanding Chainlink (LINK)

Chainlink is a unique cryptocurrency software enabling links between blockchains and other data sources and applications. Integral to Chainlink is the cryptocurrency known as LINK. This digital currency is used to pay fees to Chainlink network operators. 

Here’s a closer look at how Chainlink works and some of the projects that use Chainlink. Keep reading to get your noggin around Chainlink.

Chainlink is a blockchain software rather than a blockchain itself. Chainlink software connects blockchains with non-blockchain data sources. Chainlink supports smart contracts—electronic contracts that can automatically execute.

What types of data does Chainlink connect with blockchains? These are some examples:

  • Financial market data 

  • Weather data

  • Energy prices

  • Sports scores

  • Supply chain information

  • Insurance coverage information

  • Gaming data

  • Marketing data

  • Governance decisions 

LINK operates as an ERC-20 token on the Ethereum network, making it compatible with other currencies and smart contracts supported by the Ethereum platform. Around half of the 1 billion LINK coins are already in circulation.

Chainlink is considered a decentralized oracle network because of its ability to provide verifiable information to blockchains. Oracle networks allow information to be transferred from off-chain sources to on-chain sources. Here’s a step-by-step walkthrough of how that works:

  1. Developer creates a smart contract: Smart contracts are what enable Chainlink to interact with various data sources. Anyone with the technical know-how can create a Chainlink smart contract to collect real-world inputs for sharing with a blockchain. 

  2. Smart contract automatically executes: Smart contracts automatically request and share information as specified by the code in the smart contract. Multiple smart contracts may be used to facilitate the information collection and sharing.

  3. LINK is used for payment: Chainlink network operators earn fees in LINK for operating and securing the Chainlink network. Those receiving data or information through Chainlink use the LINK currency to pay transaction fees.

Chainlink supports a diverse range of projects. More than 1,200 projects use Chainlink, integrating many data providers. Here are examples of projects built on Chainlink:

  • Symphony Finance: Symphony Finance is a decentralized exchange that enables traders to earn yield from limit orders. Symphony Finance uses Chainlink for its price feeds.

  • NFTBank: NFTBank is a non-fungible token (NFT) portfolio management service. NFTBank works with Chainlink to import data on NFT projects, including Bored Ape Yacht Club and CryptoPunks.

  • Chiliz: Chiliz is a blockchain and cryptocurrency project focusing on sports and entertainment data. Chiliz uses Chainlink to mint new NFTs, notably for partnerships with FC Barcelona, Juventus, Paris Saint-Germain, Atlético de Madrid, Galatasaray A.S. Roma, CA Independiente, and championship eSports teams.

  • AccuWeather: The weather app AccuWeather works with Chainlink to share its plethora of weather data with blockchain networks, enabling a new revenue source for AccuWeather. Blockchains can use the data for projects including farm insurance.

  • DigiTix.io: A ticketing platform, DigiTix.io, uses Chainlink for ticket pricing data and minting blockchain-based event tickets as NFTs.

  • Elysia: Elysia is a tokenized real estate platform that enables investors to earn income from rental properties. Elysia relies on data from Chainlink to calculate real estate valuations and determine ownership distributions.

  • Wrasslers: The collectible NFT game Wrasslers relies on Chainlink to ensure randomization when generating new character NFTs for the game.

Chainlink supports companies, apps, and projects, serving a variety of needs to link blockchains with real-world events.

Chainlink was founded in 2017 and is led by co-founder and CEO Sergey Nazarov, alongside co-founder and CTO Steve Ellis. In September of 2017, Chainlink publicly launched LINK and raised $32 million in an initial coin offering (ICO). 

In April 2021, Chainlink announced a significant upgrade and released a second version of its whitepaper. The Chainlink 2.0 upgrade introduced price feeds, verified randomness generation, a proof-of-reserve auditing system, and external adapters to work with any application programming interface.

In December 2021, former Google CEO Eric Schmidt joined Chainlink as a strategic advisor.

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