What is Chainlink (LINK)?

What is Chainlink (LINK)?

Chainlink is a cryptocurrency with the goal of encouraging a global computer network to provide reliable, real-world data to smart contracts run on top of blockchains.

If you don't know, smart contracts are agreements that are programmed to run if and when certain conditions are met.

So far, smart contracts have been used for everything from creating new crypto-financial products to developing new cryptoactives.

However, one problem that persists is that most smart contracts need to rely on some sort of external data source to properly execute their terms.

For example, smart contracts looking to replicate securities or insurance deals may need access to API reporting on market prices, or Internet of Things data.

Chainlink was created to solve this problem by encouraging data providers (called “oracles”) to act as a bridge between smart blockchain contracts and external data sources.

Each oracle on the Chainlink network is encouraged to provide accurate data as a reputation score is assigned to each. Furthermore, when nodes (nodes) follow the rules of the software and provide useful data, they are rewarded in Chainlink's cryptocurrency, LINK.

Coming amid a crowded field of projects in 2017, the Chainlink team has been able to fulfill its vision, expanding efforts beyond Ethereum (ETH) amid an increase in market activity.

Starting in 2020, Chainlink is looking to support all blockchain-based smart contract networks.

Users who want to stay connected on Chainlink's current development status can follow its official project tracker for up-to-date details.

What is Chainlink (LINK)?

Who Created Chainlink?

The Chainlink network was launched in June 2017 by the for-profit company SmartContract, and the first version was launched in the same month.

The company's co-founders Steve Ellis and Sergey Nazarov later published the Chainlink white paper in September 2017 with Ari Juels, a consultant at the company.

Chainlink's team then made an Initial Coin Offer (ICO), raising the equivalent of $32 million by selling 35% of the 1 billion-unit supply of its LINK cryptocurrency.

As for the rest of the tokens, 30% were distributed to SmartContract to be used in the development of the Chainlink blockchain and 35% were to encourage node operators (nodes).

Why Does Chainlink Have Value?

The LINK cryptocurrency derives its value from its ability to ensure the successful execution of smart contracts that depend on the Chainlink network.

Most notably, LINK is built into the network itself and is the only currency that can be used for the main operations of the network. For example, LINK is used to pay node operators that retrieve data.

In this way, it also plays a necessary role in moderating interactions between Chainlink users.

LINK is used as a deposit required by smart contract creators and paid for by the oracles.

This fee is refunded if their services are not accepted or as soon as they complete the assignment. Smart contract creators keep the fee if an oracle fails to complete contract termination.

Finally, the amount of LINK an oracle has is one of the factors that determines its reputation.

Like many other cryptocurrencies, the supply of LINK tokens is also limited, which means that, according to the software's rules, there will only be 1 billion LINK.

Chainlink Price


How does Chainlink work?

To facilitate communication between its users and external data sources, Chainlink divides its execution process into three distinct steps.

  • Oracle Selection — First, Chainlink users craft a Service Level Agreement (SLA) that specifies a set of desired data requirements. The software then uses the SLA to match the user with oracles that can provide the data. Once the parameters are set, the user submits the SLA and deposits their LINK cryptocurrency into an Order-Matching contract, which accepts bids from oracles.


  • Data report — is where the oracles connect with external sources and get the actual data requested in the SLA. The data is then processed by the oracles and sent back to the contracts running on the Chainlink blockchain.


  • aggregation of results — the last step involves counting the results of the collected data oracles and returning to an aggregation contract. The aggregation contract takes the responses, assesses the validity of each, and returns a weighted score, using the sum of all received data, to the user.

Chainlink Architecture

The Chainlink blockchain is powered by three types of smart contracts.

  • Aggregation Contracts — Collects data from oracles and combines the most accurate results with the smart contract that needs them.


  • Order matching contract — Corresponds to a service level agreement (SLA) of an intelligent contract with the best bidding oracles.


  • Reputation Contract — Verifies the integrity of an oracle by checking its history. This includes factors such as the total number of completed requests, average response time, and the amount of LINK cryptocurrency the oracle has wagered.

However, Chainlink also interacts with oracles that do not operate on its blockchain, and that are independently responsible for collecting the actual data requested by the contracts.

Nodes are composed of two components:

  • Chainlink Core — Chainlink Core is responsible for reading newly populated SLAs and routing assignments for the Chainlink Adapter.


  • Chainlink adapter — acts as a bridge between the node and external data. The adapter can read and process the data and write it to the blockchain.

Why use Chainlink?

Chainlink may be of interest to developers looking to create blockchain-based financial products that need to access and examine external data sources.

Additionally, investors may want to add LINK to their portfolio if they believe the number of users for blockchain-based smart contracts will increase in the future.

If Chainlink solves key issues for smart contract users, it could become an essential tool in fusing blockchain technology with real-world applications.

Rate this post

Related Posts