Chainlink is an ecosystem of decentralized oracles networks, i.e. the interconnected software designs that connect smart contracts and off-chain data and services. Ideologically, it is the middleware between on-chain and off-chain metaverses that keeps the integrity of blockchain-based systems and accuracy of data utilized.
Launched in 2018 in testnet, Chainlink evolved into a building block of the modern DeFi ecosystem: its oracles guarantee the accurate pricing for liquidity pools, AMM-powered DEXs, ‘yield farming’ modules, on-chain wallets and so on.
Chainlink’s oracles work on the top of Ethereum mainnet, so its security and integrity is verified by the entire hashrate of Ethereum network.
Chainlink (LINK) token is a core native utility token of Chainlink distributed oracles network ecosystem.
What is Chainlink node and how does it work?
Chainlink ecosystem consists of numerous interconnected yet independent nodes. Chainlink oracle nodes receive requests from on-chain smart contracts and fetch the requested data from off-chain inputs through specified APIs. Then, they re-broadcast data to on-chain smart contracts triggering their execution.
Decentralized oracles network aggregate data from numerous oracles: thus, every single point of failure is removed from the system of data broadcasting to the blockchain.
Chainink itself is permissionless by nature, so everyone can run an oracle on it. At the same time, an oracle node’s operator can restrict other network participants from interacting with his/her systems.
Chainlink’s oracle nodes aren’t included into a single consensus: there’s no unified mechanism of node networks. To set up a Chainlink oracle node, an enthusiast of this blockchain needs client node software, on-chain oracle contract, data source subscriptions, and external monitoring systems to harvest off-chain data.
What does Chainlink offer for decentralized applications?
As Chainlink tools are of crucial importance for the majority of DeFi protocols, its team has developed a number of the ‘out-of-the-box’ solutions. Its flagship offering, ‘Decentralized Market Data’, ensures seamless, accurate and tamper-proof price broadcasting for decentralized exchanges, wallets, and ‘yield farming’ designs.
‘Verifiable Randomness’ tools are designed to advance RNGs behind decentralized games, lotteries, governance systems, and ‘Play-to-Earn’ products. Chainlink-powered VRF modules advance the decentralization, credibility and transparency of such systems.
‘Keepers and Compute’ tools can replace centralized cloud computations instruments for distributed data-driven systems. It is a viable alternative to high-profile products by the IT heavyweights.
Finally, ‘Cross-Chain Bridging’ solutions are necessary to facilitate secure and seamless interaction (data transfer, value transfer) between different blockchains. Also, Chainlink can empower existing digital solutions by its decentralized oracles. In recent months, Chainlink’s oracles utilization in real-world businesses gained massive traction.
Which DeFi protocols are using Chainlink?
Chainlink oracles garnered enormous popularity amidst 2020 DeFi Summer. It is integrated by all top-tier DeFi protocols like Aave Finance (AAVE), Synthetix Network (SNX), Yearn.Finance (YFI), Ampleforth (AMPL), and so on.
