Chainlink is an Ethereum-based network of data sources that enables blockchains to respond to real-world events via smart contracts. Chainlink’s token is called LINK and it is used to incentivize the maintenance of the Chainlink network, the same way ETH incentivizes the mining and maintenance of the Ethereum network and BTC for Bitcoin.
Learn more about how Chainlink works, what role LINK has to play and how to invest in it.
What Is Chainlink?
Chainlink is another network layer on top of the Ethereum network that focuses on providing data to smart contracts. Essentially, smart contracts say, ‘If x event happens in the real world, execute y action on the blockchain.
Chainlink uses multiple data sources or ‘oracles’ to decentralize the data feeding into the smart contracts, so bad actors can’t input faulty information to manipulate the blockchain.
Because Chainlink solves a problem inherent to most cryptocurrencies—how best to input data about the real world without centralizing it—the network and its associated digital asset, LINK, have gained popularity since their launch in 2017.
In 2008, an anonymous creator Satoshi Nakamoto published a white paper introducing the world to Bitcoin and its affiliated technology, now known as blockchain. However, in building an ecosystem both secure and decentralized, Bitcoin sacrificed rigidity of function.
As it was originally conceptualized, for security reasons blockchain technology could not accept external data inputs. So blockchain technology faced a problem: How best to input data about the real world to inform the ecosystem? This is also what is called the “Oracle Problem.”
Ethereum was the first to introduce smart contracts and oracles, or data sources, in an attempt to navigate that challenge. Ethereum used oracles and smart contracts to convert real-world events into data legible to the blockchain. So, if event x happens, it triggers action y in the network. But a sole oracle determining what information is accurate effectively defeated one of cryptocurrency’s core tenants—decentralization.
Chainlink improved upon that by introducing a network of oracles. This setup required oracles to come to a consensus on which data to input to execute the smart contracts. The decentralized oracles make it more difficult for a bad actor to feed the blockchain incorrect information.
Hundreds of node operators fulfill the oracle function for Chainlink, both as individuals and as collectives.
|Already Mined/ Total Supply (as of July 30, 2021)||443 million/1 billion LINK|
|Special Feature||A distributed network of oracles allowing for the input of ‘real world data’ into blockchains.|
LINK is not minable the way ETH or BTC is minable. Instead, node operators—the ones running the oracles—and data providers earn LINK, the latter for providing data, and the former for verifying the data. So, node operators are still maintaining the network similar to how miners do on other projects, but through a non-mining activity.
Total Supply of LINK
LINK has a maximum supply of 1 billion and about 44% of those tokens were in circulation as of July 2021.
How To Buy LINK
There are multiple ways to go about buying LINK, but it can be traded on the following exchanges:
According to the cryptocurrency exchange Bitni, transaction time for Chainlink can be as short as 15 seconds for a single block. Typically, though, 20-30 levels of blocks are needed for immutability, so between five and seven and a half minutes is a safer transaction time. Another exchange, Kraken, requires 20 confirmations and expects transactions completed in about 5 minutes.
Other ways To Invest in Chainlink
Another way for your portfolio to gain exposure to LINK is through investment in Grayscale’s Chainlink Trust, an ETF-like product. This fund is subject to a minimum investment requirement of $25,000 and an annual 2.5% management fee.
Chainlink was launched via an Initial Coin Offering in 2017.
Originally, Chainlink was built on top of Ethereum, a decentralized software platform. On April 15, 2021, a Chainlink announced the project would enable off-chain computing, allowing the decentralized oracle network to be adaptable to a greater number of use cases.