The issues of connection, conversion, and interoperation are often hard to deal with in the blockchain technology. The digital contracts that are the available operating medium on the blockchain need input from the outside world. For example, the experimental or proven data collected from a financial market needs to be the suitable input onto the blockchain for investment purposes. Or for another instance, the data collected in the form of observations or insight needs transitional input for the related insurance claims.
These conversion processes are taken care of by the middleware entities that connect to the blockchain for facilitating the conversion and input. Not only the informational or transaction input but also the outputs need conversion and similar middleware medium — for instance, the payment transaction through the banking system along with the blockchain network.
The Idea of Chainlink (LINK)
Chainlink is the essential oracle service that functions for a decentralized blockchain network. The “oracles” are responsible for attaining the data from the external factors and transform them into the usable input for the forms on the blockchain network. The intervening medium, or what is known as the digital contracts, are used for connecting to the application, the data input medium, or the mode of the transactions. The revolutionary aim of the Chainlink blockchain middleware is to facilitate the functionality between the major payment gateways or apps and the blockchain entities.
These digital contracts utilize the data from the outside world to supplement the input. Additionally, the operational or output data variables from the decentralized blockchain are also passed through the digital contracts. This means that any possible involvement of a third party or an intermediary is entirely unnecessary with the help of the Chainlink oracle service.
The launch of the technology took place back in 2017. Later in the year, the trading for the LINK token began. The LINK token is the basic form of cryptocurrency that is used to operate in the Chainlink environment. The Etherum functional LINK token empowers the functioning of the decentralized oracle network for the blockchain protocol.
Sergey Nazarov has been the man behind the origin and execution of the Chainlink (LINK) revolutionary technology. He expressed his clear intentions to make Chainlink as the leading solution provider by building the perfect oracle network for the decentralized blockchain technology. Sergey is a former student of New York University who had a keen eye for entrepreneurship, after passing with his degree in Philosophy and Management. His prior involvement with the sector involves a brief 6-month stint at Firstmark for the task of technical analysis.
Oracle Network and Smart Contract Interconnection
Oracle, in the simplest of form, is the entity that is responsible for the understanding and transmission of the real-world data to a blockchain. The data must also justify that all the set requirements for the smart contracts are duly met for meaningful interaction and functioning. While most of the processes and the related data remain on the blockchain, the issue occurs upon the transition to the “off-chain” entities. For example, a transactional status that is imprinted on the blockchain will boast the essential safety and tamper-proof features; however, the off-chain entities do not have the same liberty or assurance.
The ability to handle the oracle entities are distributed through the various nodes of the decentralized blockchain. This means that any discrepancy in the data has to be an overall discrepancy in the inputs from all these nodes. It means that none of the concerned smart contracts is dependent on a single user or source for the data variables. The key points that this factor would serve are:
- The ability of all the involved nodes to modify the data for the appropriation
- Penalization of the involved node or the user in terms of reputation or credibility upon discrepancies
- A security mechanism that works on the basis of the open-source network to eliminate the single authority for manipulation of data
- Involvement of various data providers and inputs for the security of a given task
Understanding the Essential Technicalities
Chainlink (LINK) Cryptocurrency
The Chainlink cryptocurrency is the fuel that powers the decentralized blockchain network. The cryptocurrency is available across the ten major exchanges within a short span of time. However, there is no facility for the exchange of the LINK cryptocurrency directly against the fiat currency through these sources. The cryptocurrency can easily be stored on major operational digital wallets.
The cryptocurrency enables the use of the oracle entities for the further fetch and input of data for the network usage post-transition. Upon the initial coin offering and exchange, around 350 million of the LINK tokens were distributed to the operators and the partners.
The plan to distribute an equal number of these to the integral node operators would follow. In addition to this, around 300 million of the LINK tokens are to remain with the Chainlink founder team and the company. The remainder will be used for the purpose of development and branching off in the future.
Structure and Workability
The basic structure for the Chainlink functioning is subdivided into 2 major categories:
- On-Chain Structure
- Off-Chain Structure
The on-chain structure is what deals with smart contracts. The smart contracts or the oracles are the responsible entities for fetching the essential data from the external or the off-chain sources. A request through the on-chain contract for the involvement of external data fetch can be raised by a user. This fetched data is matched with the existing contract for the request raised by the user to match the eligibility credentials. The parameters of the inclusive contracts on the chain are:
- The reputation contract does the verification of the source and authenticity.
- The data that is collected from the authentic provides through the oracle network will pass through the order-matching contract.
- The aggregating contract will hold the accumulation and balancing of data for the results to comply.
Through the Oracle selection, the user can decide the heavy points for the basic needs through the service level agreement. The user can fix the parameters such as type of data, resources involved, the reputation of the source of the oracle, etc. When the off-chain oracles proceed with the data factors, further data transmission to the on-chain process nodes is carried out. The results that are, hence, compiled through these modes and the oracle network shall provide the results to the user.
The highlight of the process transition is that for the right sort of authentic contribution to the data transmission, the nodes are compensated with the LINK tokens — these further the stake of theirs into the off-chain and also the on-chain section. The use of external aids in the form of plug-ins is enabled by the off-chain nodes to smoothen the data harbouring and transition.
The associated safety features of an open-ended network source are all associated with the Chainlink. This means that the safety features are integrated through every node for the given decentralized network. Also, off-chain features need additional security factor. Hence, oracle distribution is the chosen way out to prevent any tampering with the sources. Multiple oracle sources are scrutinized after the initial reputation contract. Thus, numerous resources or the user nodes are referred for the authenticity and suitability of the data. Upon the successful verification of the data, it is further integrated onto the on-chain section for further use.
Moreover, the Chainlink system uses a unique methodology called the Software Guard Extensions. These extensions are useful in the creation of enclaves, which are sections that provide honest oracle. These oracles cannot be changed or tampered. Hence, even if a user has marred or dual intentions regarding the task, this would keep the data authenticity at the optimum set level.
In the fluctuating market that has eroded the growth variables for even the other leading cryptocurrencies, LINK stayed pretty stable through the dull patches. SWIFT happens to be one of the biggest backings for the Chainlink, and its magnitude is humongous. The organization provides services to over 11,000 financial institutions across the globe for payments and securities.
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In the longer run, the idea of Chainlink to serve as the first and the leading service for filling the void between the on-chain contracts and the real world is highly fruitful. In addition, Chainlink also remains as the first firm to decentralize the oracles for the authenticity of data. It is also the first cryptocurrency that chose to function on this principle. With partnerships with various multi-billion firms for the development of its processes, the idea presents a lucrative prospect for the users. The ability to compensate the data-linking nodes i.e., the user, is an exciting prospect too.
Originally published at https://cryptomagis.com.