Blockchain has seen a staggering rise in popularity since Bitcoin, the first cryptocurrency, launched in 2010. Blockchain has a number of advantages, including decentralization and security. The demand for a decentralized currency has catapulted Bitcoin and other cryptocurrencies to worldwide popularity.
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But blockchain has its limitations. These systems are inherently closed off from the rest of the world, which is good for security and integrity but also limits the input data they can accept.
Thus, there is a need for a sort of bridge that can help these systems see what is happening in the outside world. But in order for the system to work, the input cannot come from a single source. Why? Because it would then rely on a centralized source of data, which goes against the very nature of blockchain.
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That is the very problem Chainlink can help solve, as we will find out.
What Is Chainlink?
Chainlink is a decentralized oracle network that is poised to play an important role in the real-world implementation of blockchain technologies. The purpose of this network is to provide input on a variety of external sources of data.
Although blockchain is great at what it does — providing a decentralized, secure ledger for digital transactions — it isn’t so great at taking input for things happening outside the blockchain. There are many “off-chain” forces that influence markets, including fiat currencies, credit cards and even the weather and sports scores. As a decentralized oracle, Chainlink can provide input to what’s known as smart contracts.
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These smart contracts help the system respond to a wide range of input (if X, do Y). As the first cryptocurrency, Bitcoin and its corresponding blockchain can only process a small range of this input. But newer blockchains, such as Ethereum, have a wider range. That includes support for programmable smart contracts.
On that note, Chainlink was launched on the Ethereum blockchain in 2019, but it is meant to be agnostic. Thus, it can work with other blockchains, too.
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What Is LINK and What Is It Worth?
LINK is Chainlink’s native token. The token is meant to help finance the growth of the project and is similar to Bitcoin (BTC) and Ethereum (ETH). Both of these cryptocurrencies work on their respective blockchains. Just like BTC and ETH act as an incentive for users to mine, LINK does the same.