What is Chainlink?
We introduced smart contracts as a fundamental feature of the Crypto space in a previous piece, highlighting how it is foundational to the huge potential Crypto has as a new industry.
In that piece, we mentioned the oracle issue. Owing to the nature of smart contracts (automatic, decentralized,) it is vital that the data that feeds into that contract be trustworthy. In the absence of trustworthy data, smart contracts reintroduce the risks of traditional mechanisms (failures on the part of other parties to the agreement). Indeed there is a sense in which the risk is worse, because if “bad” data is allowed onto the smart contract, that contract will automatically execute on the basis of that data with either fewer or no means of recourse for the party that suffers from that bad data.
Given that most (but not all) of the potential use-cases for Smart Contracts involve the need for off-chain data (prices, weather events and so on) this raises the need for verification of that “real-world data”. This is where oracles come in, of which Chainlink is the industry leader (but not the only project.)
The way it works is that holders of its native token (“Link”) can operate nodes that process data. At the most basic level, its mechanism for achieving accurate information is to aggregate information (more tokens) and penalize inaccurate information (deduction). Since the actors (tokens, nodes) are decentralized the idea is that the balance of incentives are a powerful assurance of the quality of the data.
So for proponents of oracles in general, the value proposition comes from how fundamentally important “real-world data” veracity is to most potential use-cases of smart contracts. For proponents of Chainlink’s value proposition in particular, they see it as both the best technology and a far more developed network (critical to the decentralized aspect of the oracle mechanism) than any other oracle. As ever, prospective investors will need to reach their own informed views on the relative merits.
Image courtesy of chain.link
Another much-discussed feature of Chainlink is its so-called “blockchain agnosticism”. Meaning that it can straightforwardly run on other blockchains. In this respect, unlike many other projects in other areas, an investment here is not necessarily a bet on the success or failure of competing projects,
One more thing to note, which may ultimately prove to be very important indeed, is Chainlink’s ability to link “traditional” or “legacy” systems (i.e. many of the big companies and industries that already exist) to blockchains.
Given its token name is LINK, you can search “$LINK” on social media such as Twitter. There you will find an active advocacy community of “Link Marines”. A community that might be the source of valuable information for prospective investors. But you should be aware that there is a strong sense of humor and irony which means you ought not to take everything literally.
You can buy Chainlink tokens on various exchanges and we’ve reviewed and compiled the best Exchanges for buying Chainlink (LINK) here.