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Chainlink (LINK)

Manuel Valente

Introduction

Chainlink is a decentralized oracle system.

Since the creation ofEthereum and the growing use of decentralized applications in 2017, smart-contracts are gradually proving their usefulness.

The consequences are wide-ranging, affecting finance, insurance, governance methods, etc.

A new type of application is emerging, hosted on public blockchain networks, mostly on Ethereum.
These are applications that are open to all, auditable, censorship-resistant, running flawlessly around the clock, and can hold and transfer value in the form of cryptocurrencies or digital assets (tokens).
While the execution of these autonomous contracts is predictable and inescapable, there are points of weakness for functions that require data external to the blockchain.

 

The history of the LINK team

Chainlink was launched in 2017 by Sergey Nazarov and Steve Ellis, with the ambition of solving one of the biggest challenges of blockchain technology: connecting smart contracts to real-world data.
Before Chainlink, smart contracts on blockchains like Ethereum were limited to information available only on the blockchain.
Chainlink has changed this by creating a decentralized network of oracles, which enables smart contracts to interface with external data sources reliably and securely.
Sergey Nazarov, co-founder and CEO of Chainlink, is an experienced entrepreneur in cryptocurrencies and blockchain technology.
Prior to Chainlink, he had already co-founded several startups in this sector, including SmartContract.com, which helped lay the foundations for Chainlink.
Steve Ellis, the co-founder and CTO, has a solid background in software development and security engineering.
Together, they have assembled a team of experts in cryptography, IT security and blockchain, who work to maintain and develop the Chainlink network.
The Chainlink team stands out for its rigorous approach to decentralization and security.
In just a few years, Chainlink has become a key leader in the field of decentralized oracles, supporting hundreds of DeFi (decentralized finance) projects and other blockchain applications.

 

How does LINK work?

Those who wish to do so must install software called ChainLink Core, whose role is to communicate with the Ethereum blockchain and distribute and schedule tasks between oracles.

Companies that need them offer amounts in LINK, Chainlink’s token, so that the oracles can provide the data required for smart-contracts to function properly.

For a single query, several oracles will be called upon.
Each of these oracles will use different data sources to produce a result that will be written to the blockchain.

To avoid problems of collusion or dishonesty, users of the ChainLink oracle system can request that their requests be processed only by oracles that have LINK tokens in escrow.

They choose the price of the data they supply, and the more queries they process, the more LINK they earn.

However, if the data they offer doesn’t match the majority of other oracles, not only do they not get paid, but they lose the LINKs they’ve sequestered.

In addition, a reputational system exists, through which smart-contract customers can rate the quality of the data provided by oracles.
These different systems should result in reliable data sources that are very difficult to falsify.

The LINK token therefore provides the necessary economic incentive for each party to perform its tasks correctly.

The oracle system to feed smart contracts

Let’s take the case of a contract to manage bets on the outcome of a France-Argentina soccer match.

To do this, each participant sends an ether and the name of the winning team to the contract address, which will hold them until the match has been played.

France wins, and one of the participants receives his or her two Ethers, minus any commission paid by the company running the system.
Unfortunately, a smart contract is unable to open a web page to consult the Team and determine which of the two teams has won.

He therefore needs a source of data that can be consulted from within the blockchain, that he can interrogate at any time, and that is reliable.
These entities are called oracles, in reference to the divinatory nature of oracles in ancient Greece.

Chainlink’s idea is to create a decentralized oracle system that is always available, resistant to manipulation, and provides accurate information even if some oracles are wrong.

The use cases are multiple, and may concern information on the stock market price, the weather over a city, or the winner of the latest season of Koh-Lanta.
Any decentralized application requiring a high degree of reliability on external data imported into its contracts can benefit from the services provided by Chainlink’s oracles(Chainlink prices).

Better still, a contract can combine several queries to make complex decisions, particularly in the fields of insurance or financial products.
Our Coinhouse Premium Service teams study cryptoasset projects on a daily basis, and will be able to provide further details on the potential value of the Chainlink project and carry out thepurchase of LINK tokens for convinced investors.

What are LINK tokens used for?

LINK tokens are essential to the operation of the Chainlink network.
They fulfil several key roles:

  1. Payment for oracle services: LINK tokens are used to pay for oracle services, which provide external data to smart contracts on the blockchain.
    Smart contract developers pay in LINK to obtain accurate and reliable data.
  2. Incentive and security: Operator nodes (oracles) are rewarded with LINK for providing accurate data and the required services.
    LINK tokens are also used as collateral by these nodes, providing an incentive to maintain reliable and secure services.
    If a node misbehaves or provides incorrect data, it can lose its LINK tokens as a penalty.
  3. Future governance: Although not yet implemented, LINK tokens could be used in the future for Chainlink network governance, AND enable holders to participate in decisions concerning the protocol’s evolution.

Tokenomics

LINK tokens are essential to the operation of the Chainlink network.
They fulfil several key roles:

  1. Payment for oracle services: LINK tokens are used to pay for oracle services, which provide external data to smart contracts on the blockchain.
    Smart contract developers pay in LINK to obtain accurate and reliable data.
  2. Incentive and security: Operator nodes(oracles) are rewarded with LINK for providing accurate data and the required services.
    LINK tokens are also used as collateral by these nodes, providing an incentive to maintain reliable and secure services.
    If a node misbehaves or provides incorrect data, it can lose its LINK tokens as a penalty.
  3. Future governance: Although not yet implemented, LINK tokens could be used in the future for Chainlink network governance, enabling holders to participate in decisions concerning the protocol’s evolution.

What are LINK’s projects?

  • Chainlink Staking:
    • Objective: Enable LINK token holders to participate in network security and governance by locking their tokens into staking contracts.
    • Benefit: Staking participants will receive rewards for helping to secure the network, increasing the incentive to hold and use LINKs.
  • Cross-Chain Interoperability Protocol (CCIP):
    • Objective: To develop a cross-chain interoperability protocol that will facilitate the transfer of data and value between different blockchains.
    • Benefit: CCIP will enable smart contracts from different blockchains to communicate with each other, paving the way for a new generation of multi-chain decentralized applications (dApps).
  • DECO:
    • Goal: Enhance data privacy on the blockchain with zero-knowledge disclosure (ZKP) proof technology, enabling users to prove information without revealing it in full.
    • Advantage: DECO will make it possible to secure sensitive transactions and protect users’ privacy, while guaranteeing the integrity of the data provided by Chainlink oracles.
  • Chainlink VRF (Verifiable Random Function):
    • Objective: To offer a reliable and verifiable source of random number generation on the blockchain, essential for applications such as blockchain games or lotteries.
    • Benefit: Ensure fairness and transparency in systems that require random number generation, such as decentralized games or lottery systems.
  • Off-Chain Oracles expansion:
    • Objective: Improve the quality and reliability of data provided by oracles by integrating more reliable off-chain data sources.
    • Benefit: Offer greater data diversity and enhance the robustness of Chainlink-dependent smart contracts, particularly in the decentralized finance (DeFi), insurance and prediction markets.
  • Institutional adoption:
    • Objective: drive Chainlink adoption among large corporations and financial institutions by providing secure oracle solutions for specific use cases, such as financial asset pricing or derivatives management.
    • Benefit: Facilitating the integration of blockchains into traditional financial systems, thereby increasing the credibility and use of Chainlink in the global financial sector.

How to buy LINK?

  • Registration: Create a Coinhouse account on their website.
    Fill in the necessary information and validate your e-mail address.
  • Verification: Coinhouse requires identity verification to ensure secure transactions.
    You will need to provide proof of identity and possibly proof of address.
  • Deposit funds: Once your account has been verified, deposit euro funds into your Coinhouse account.
    You can make this deposit by bank transfer or credit card.
  • Buy LINK: Go to the “Buy cryptos” section of your dashboard.
    Look for “Chainlink (LINK)” in the list of available cryptocurrencies.
    Select the quantity of LINK you wish to purchase and confirm the transaction.
  • Storage: After purchase, your LINKs will be stored in your Coinhouse wallet.
    You can leave them on the platform or transfer them to an external wallet for added security.

Coinhouse's opinion

Chainlink (LINK) is an innovative cryptocurrency that plays a crucial role in the smart contract ecosystem.
By linking real-world data to the blockchain via decentralized oracles, Chainlink enables greater adoption of decentralized applications (dApps) and strengthens the reliability of smart contracts.
With its robust security model, widespread adoption by numerous blockchain projects, and strong strategic partnerships, Chainlink has established itself as a key player in the DeFi and digital economy.
For investors, LINK offers an opportunity to invest in a technology fundamental to the future of smart contracts and blockchain.

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