Wednesday, September 15, 2021

KnowYourCrypto #15 - September 15, 2021: Chainlink (LINK)

If you are interested to the previous posts of this series, check it out here:

What is it?

Chainlink and LINK are respectively a protocol and the token used for the operation of this protocol, which have as their main purpose the integration of credible data flows within blockchains that use smart contracts and Distributed Apps. For those unaware of the nature of these developments and projects, the basic definition may seem very complex and convoluted. Smart Contracts are conditional and automatic execution contracts, which were introduced some time ago by Ethereum. They may have conditions that are triggered automatically when a certain value or event is reached. Until the arrival of Chainlink, these contracts could not rely on external data. Let's imagine we want to have a smart contract that goes into execution if the dollar were to reach parity with the Euro. With systems before Chainlink, it was impossible to have reliable data of this type. The first of the problems that are solved by the Chainlink project is precisely this: the protocol is able to insert nodes within the network that can be reliable data suppliers, which those who use smart contracts can use. We are also not just talking about financial data. In general, we can incorporate data that comes from IoT devices, but also from other types of tools. Those who are capable of programming should imagine Chainlink as a series of APIs that can provide reliable, real-time data to blockchain tools. This is done through so-called oracles. The creators of Chainlink obviously also asked themselves this question: what interest should a node have in providing reliable data? Why shouldn't he manipulate them? Because there is an internal system that assigns a reputation score to each node and therefore can expel anyone who behaves incorrectly. In addition, the so-called oracles receive payments in LINK in the event that they provide reliable data used by the projects that communicate with the network.

How does it work?

There are several very interesting, not to say unique features of the project, which have made it one of those followed with the greatest attention by investors and cryptocurrency enthusiasts. Link between blockchain and data from the outside world This is the first aim of the project: to offer the possibility of having access to data from the outside and real world within blockchain-compatible environments. To give an example, we could have the quotations of EUR / USD - the pair that compares the euro and the US dollar - for the activation of a smart contract, when a certain price is reached. Which, before Chainlink, no project was able to provide. With the security of the blockchain The blockchain that integrates smart contracts is a more secure environment, because it is based on distributed consensus and on third-party intrusion-proof validation mechanisms. Chainlink has combined this feature of blockchains (and smart contracts) with the ability to draw data from the outside. This happens, as we will see in the section dedicated to oracles, through special connecting nodes, on which the whole network votes, to define their stability and reliability. The randomity generator One of the biggest problems of past and present computer science is having a random generator that is ... actually random. Within it, Chainlink also integrates this type of functionality - which could allow distributed applications that organize lotteries or other types of use by the general public, based precisely on a functionality of this type. External support also to other blockchains Chainlink also functions as a top layer that can be applied to any type of blockchain project. It behaves, to be clear even among non-IT experts, as a higher layer capable of retrieving data from its nodes and transferring them to other blockchains. This way of functioning of the project allows it to be crucial within the world of the latest generation cryptocurrencies, those that need reliable and above all certified data for the automatic execution of their contracts. Chainlink also acts as a certifier. LINK: the reward for the nodes LINK is the cryptocurrency of the project, the one that is used to pay the nodes that offer data from the real world. This type of operation has several implications: whoever wants to retrieve data from Chainlink must contribute with this token. The token therefore has an intrinsic value, because it is a utility for accessing all the vast services offered by the Chainlink protocol.

Where to store it?

The best hot wallets for LINK are MyEtherWallet, TrustWallet and Atomic Wallet. If you want more security, a cold storage like Ledger or Trezor is the right choice.

Pros&Cons

*DISCLAIMER* These lists are subjective, it depends from person to person

Pros

  1. Commercially strong project
  2. Technically reliable project
  3. Concrete use

Cons

  1. (I personally haven't found any. If you know one, share your opinion in the comment section)

Posted by at
Labels:

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)