ChainLink is a platform which attempts to bridge the gap between smart contracts on the blockchain and real-world applications, which often tend to be off the blockchain.
The cryptocurrency uses “oracles”, which find and verify real-world data and bring it on-chain to be integrated into smart contracts.
ChainLink was developed by a company called SmartContract, founded in September 2014.
The core team behind the cryptocurrency involves two people, CEO Sergey Nazarov and CTO Steve Ellis. Sergey is a serial entrepreneur who took an interest in the crypto world in 2011, long before it became popular. Before starting SmartContract, he founded Secure Asset Exchange (an exchange network) and CryptoMail (a decentralized email service).
Steve Ellis, the CTO, was a co-founder of SmartContract and has worked with Sergey on Secure Asset Exchange. He also worked as a software engineer at Pivotal Labs.
ChainLink’s advisory team is also strong and includes Ari Juels, professor of Computer Science at Cornell Tech and co-director at IC3, Andrew Miller, who is also an advisor to ZCash and Tezos and Brian Lio, CEO of Smith+Crown, among others.
Since ChainLink does the work of bridging the gap between on-chain smart contracts and off-chain businesses and data, it has two main architectural components: on-chain infrastructure and off-chain infrastructure.
The on-chain infrastructure consists of on-chain contracts deployed on Ethereum’s blockchain. These are Oracle contracts, which process the data requests of users who wish to access off-chain data.
Users who want data from off the blockchain ecosystem submit a requesting contract to ChainLink’s network, which in turn processes these requests into its own contracts, which match the user’s contract to existing oracles which are appropriate for the application.
The contracts include:
A reputation contract which checks an oracle provider’s track to verify its authenticity.
An order-matching contract which logs the user contract’s agreement on the network and takes bids from responsible oracle providers, and
An aggregating contact which accumulates data from the chosen oracles and balances them for an accurate result.
The on-chain functions of ChainLink follows a three-step process using the above contracts:
Oracle Selection: The user contract contains a Service Level Agreement (SLA) which specifies parameters and requirements for the user’s data search, which may include oracle reputation, specifics of the data required, number of resources needed, etc. Users can use filters and search manually for available oracles. ChainLink also provides an automated matching engine in which oracles bid based on the SLA, when manual searching is infeasible.
Data Reporting: Chosen off-chain oracles carry out the service agreement mentioned in the user contract and transmit the data to the blockchain for on-chain nodes to process.
Result Aggregation: An aggregating contract is used to collect data submitted by the oracles and balances all the data to provide the user with accurate data. This step is necessary to ensure data integrity and prevent tampering.
User contracts have the option of implementing a penalty fee for misbehaviour which the oracles would be liable to pay.
The off-chain infrastructure consists of oracle nodes connected to the Ethereum network, which collect the user-requested data from off-chain resources. The data received is processed through the ChainLink Core, the software which allows the interaction between the off-chain infrastructure and the blockchain.
In return for their contribution to the network harvesting and data transmission, the off-chain oracle operators are compensated in the form of LINK, ChainLink’s native ERC20 token.
Additionally, off-chain nodes allow developers to integrate external adapters; plugins that operators use to accommodate other programs to their basic operations and perform subtasks to streamline data collection.
At present, ChainLink only interfaces with Smart Contracts on the Ethereum blockchain, but it aims to work with multiple networks in the future.
To solve the issues associated with a centralized oracle system which can be tampered with, ChainLink implements “source and oracle distribution”, meaning it uses multiple oracles to collect data for a single user contract, and these oracles, in turn, are expected to use multiple resources for their data collection. This successfully ensures integrity in the platform and accuracy of the data collected.
For further protection, ChainLink uses a technology called Intel Software Guard Extensions (SGS), which creates an “enclave” where certain protected areas of memory can’t be changed. This keeps oracles honest even if they are operated by an owner with a conflict of interest in a contract.
ChainLink’s ICO was held in September 2017, earning $32 million USD through the distribution of 350 million LINK tokens, which is 35% of the total supply of 1 billion tokens.
The distribution of the LINK tokens is as follows:
350 million tokens (35%) sold in the crowdsale.
350 million tokens (35%) would go to node operators to incentivize the ChainLink ecosystem, and
The remaining 300 million (30%) tokens would go to the company for the development of the cryptocurrency.
ChainLink has a circulating supply of 350 million LINK tokens as of July 2018, with a market cap of about $67.43 million USD and an individual price of $0.192 at the time of writing this article.
As far as cryptocurrencies go, ChainLink has an impressive list of partners.
Its most notable partner is, perhaps, SWIFT (Society for Worldwide Interbank Financial Telecommunication) which connects over 11,000 financial institutions worldwide. It’s the widely accepted network through which financial institutions send messages to instruct on activities related to payments, securities, etc.
Zepelin_os is another partner, which is an operating system for developing smart contracts.
Request Network, a cryptocurrency competitor which aims to become the standard for the exchange of fiat currencies with crypto, and London-based private asset firm Signal Capital are its other partners.
What makes ChainLink different from other cryptocurrencies?
ChainLink is the first (and currently the only) cryptocurrency which has attempted to bridge the gap between Smart Contracts restricted to the blockchain ecosystem and the real world.
Smart Contracts were pretty much inaccessible to businesses who had no intention to adopt the blockchain technology (which includes majority of them), and ChainLink solves this problem.
The “oracles” that ChainLink uses do exist currently, but they’re all centralized, defeating the purpose of the decentralized smart contacts and blockchain technology. ChainLink makes the entire process decentralized, and is the first cryptocurrency to have done so.
Should you invest in Chainlink?
ChainLink’s high position in global market cap rankings is a great point in its favour, although it has a fairly low individual price.
Bringing the previously unavailable Smart Contract technology to real-world applications is a revolutionary idea, and with the increasing popularity of the technology, it is certain to prove extremely useful in the future. Why the investors may pick this coin over the others offering similar services, is a question that will require the investor to study its competitors closely as well.
The LINK tokens are used to run the ChainLink network, and as a currency on the platform, which indicates that their value is likely to appreciate as the popularity of the platform increases (or if it increases).
The tokens can seem interesting for a long-term investment, and an opportunity particularly due to their low individual cost, which tends to have a positive psychological impact on the mass market.