In basic terms, Chainlink is a decentralized network that can communicate directly with smart contracts, providing them with real-time data and automating how contracts are carried out. LINK is the cryptocurrency used in the Chainlink system and fuels this network of smart contracts and data.
That’s the overhead view of what Chainlink is. But understanding why this cryptocurrency has developed such a large, enthusiastic following requires a more in-depth analysis of why it was created, what problems it tries to solve, and how some of its proponents consider it to be the basis of a “4th industrial revolution.”
Smart Contracts, Oracles, and Chainlink
You’ve likely signed dozens of contracts throughout your life, some without even knowing it. A lease for an apartment is a contract; you agree to pay a certain amount of money each month, and your landlord agrees to provide you with shelter and basic services each month. In this example, if you stop paying your rent, your landlord will eventually notice and carry out some predetermined actions, like fines, warnings, or even eviction.
This is simple and makes sense to most of us, but smart contracts take this one step further. Smart contracts exist within a blockchain, allowing the contract to be verifiable, unchangeable, and trusted by all parties. When something is secured in a blockchain, no details can be hidden and no clauses can be added in at a later date unbeknownst to you. However, in order for a smart contract to work in the real world, data needs to be provided to the blockchain.
Think of it like this: you pay your rent, that’s data; that data goes to your landlord, they verify that you paid the correct amount, and they allow you to continue using your apartment. While this system works, it’s a lot of steps. Smart contracts simplify this by making this an automated procedure; data comes in (e.g. rent money), its compared to the parameters that were set (e.g. the cost of rent), and if it matches up, the contract continues; if it fails to match up, predetermined actions are executed (e.g. fines, warnings, etc.).
How does the data get from the real-world onto the blockchain, where it can be verified in the smart contract? That’s where oracles come in. Oracles sounds like some mythological creature, but it’s actually a pretty simple type of software that communicates real-world data into a blockchain environment. The downside to Oracles? The more centralized they are, the more at-risk they are for attacks, faulty systems, or network failures.
Chainlink solves this problem by existing as a network of decentralized nodes, powering oracles to provide information from the real-world into the blockchain environment where it can be communicated to smart contracts. If one oracle is attacked the other oracles remain functional and can continue to provide valuable data. For this reason, some of Chainlink’s supporters claim that Chainlink “solves the oracle problem.”
The purpose of LINK
What you’ve just read is an explanation of how the Chainlink system works, but where does LINK fit into this equation? The purpose of LINK is largely to fund this system, providing node operators with an incentive to continue providing real-world data into the blockchain environment. Node operators set a price for their services, and data providers pay that amount to the node operator in order for their data to be communicated to the smart contract. Node operators also stake their LINK tokens within the Chainlink network as a way to keep a vested interest in the health of the overall system and as a commitment to fair and ethical safeguarding of the data they’re providing.
Why would an individual buy LINK? Some people buy LINK because they want to set up their very own smart contract, though there aren’t many who fit into this scenario. Most people who hold LINK do so as a speculative investment, betting that their LINK tokens will be sought after and valued by companies trying to use the Chainlink system to execute their smart contracts.
Chainlink’s Vision
If successful, Chainlink seeks to solve previously unsolvable issues related to contracts, fraud, and our growing global economy. As industries grow, the need for contracts only increases; but every contract requires careful monitoring and represents an opportunity for fraud, mistakes, and waste. Smart contracts seek to solve this problem by executing contracts via blockchain technology, but they’re hampered by a need for off-chain data. Oracles seek to provide off-chain data to the smart contracts, but they represent a centralized point of failure that can be exploited. Chainlink seeks to provide oracles with the decentralized network necessary to provide real-time data to blockchain verified smart contracts, ensuring all parties of a contract are treated fairly and parameters of a contract are executed without delay.
Imagine a world where large conglomerates cannot cheat small businesses out of terms they previously agreed to. Imagine individuals feeling confident that a mega corporation doesn’t have the upper-hand when it comes to the contract they’ve signed into. With data being able to flow in and out of the blockchain environment effortlessly, industries finally have the fuel they need to continue growing, expanding, and adapting to the 21st centuries demands.
LINK and Metal Pay
We were impressed with the scope of Chainlink’s vision, the enthusiasm of their supporters, and the integrity of their core team. Adding LINK to Metal Pay provides people across the United States with a way to buy LINK directly with US dollars, or to swap different cryptocurrencies for LINK. Creating a Metal Pay account takes as little as 17 clicks, and every fully on-boarded user gets a Cash wallet that has a FDIC-insured cash balance in our partner bank.
Ready to get some LINK for yourself? Download Metal Pay today, set up your account, and start buying LINK or any of our other 35+ different cryptocurrencies in our Marketplace. While you’re here, enjoy the other features that Metal Pay has to offer, like sending money to friends, sending cryptocurrency to friends, and so much more.
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