Chainlink

LINK is the cryptocurrency of the decentralized Chainlink network, developed by Sergey Nazarov together with Steve Ellis, and is used to pay node operators. Chainlink, in turn, connects smart contracts with real-world data and features a reputation system. This is why node operators who have accumulated a lot of LINK payments can receive larger contracts. However, if they fail to provide accurate information, they risk having LINK tokens deducted from them.

Chainlink’s decentralization allows smart contracts to communicate with external data, so that contracts can be executed based on data that Ethereum itself cannot access. The Chainlink blog describes a series of use cases for its system. Historically, a blockchain running smart contracts cannot support native communication with external systems, and the potential offered by smart contracts has been limited by their inability to connect off-chain.

Today, the solution to this problem is to introduce a new feature called an oracle, which provides connectivity to the outside world. However, oracles to date have been centralized services, meaning that any smart contract using such services has a single point of failure, which negates all the benefits derived from the decentralized nature of smart contracts. To fill this gap, Chainlink was developed as the first decentralized oracle capable of providing external data to smart contracts. As a result, the security and reliability of smart contracts can be combined with the knowledge and breadth of real-world external events.