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Chainlink is a cryptocurrency that incentivizes computers to provide real-world data to smart contracts running on top of blockchains. For those new to crypto, smart contracts are agreements that execute when certain conditions have been met. They’re used throughout the crypto industry for developing new crypto assets and novel crypto products.
The Chainlink network was launched in June 2017 by SmartContract co-founders Steve Ellis and Sergey Nazarov. They published the Chainlink white paper in September 2017 with Ari Jules, who worked as an advisor at the company. After the white paper, they soon launched an initial coin offering (ICO). This ICO raised $32 million by selling 35% of the LINK cryptocurrency. Of the remaining tokens, 35% were used to incentivize node operators and 30% were distributed to SmartContract to support the development of the Chainlink Blockchain.
The issue Chainlink aims to solve is that smart contracts need to rely on external data to execute their terms. This means they could be executed based on false or out of date information. To solve this problem, Chainlink incentivizes data providers (also known as oracles or oracle nodes) to act as a middle man between blockchain smart contracts and external data sources. Every oracle within the Chainlink network is incentivized through a reputation score. The more accurate their data, the better their score. To further motivate oracles, LINK (Chainlink’s cryptocurrency) is awarded for accurate data.
Chainlink got off to a very successful start, expanding its vision beyond supporting Ethereum and has now set the goal of supporting all blockchain-based smart contract networks. On the Chainlink website, the team also has their own official project tracker, which provides regular updates for investors.
As of August 2021 Chainlink has a market cap of $11,372,388,875 with 450 million tokens in supply. It has a total supply of 1 billion tokens and an estimated diluted market cap of $26,412,478,210. One chainlink token costs $26.44 and reached highs of $52 in May.
Chainlink’s oracle network creates a bridge between blockchains and off-chain data sources. This solves the issue of trust and incorrect data for smart contracts.
Chainlink is designed to be used with any blockchain. As it continues to grow, it could be integrated with most cryptocurrencies in circulation.
At the moment over 50% of the supply remains under the control of SmartContract. There are also no restrictions regarding the distribution of rewards for oracles, which could cause some distrust in the market.
The oracle network is also still limited. There are only 185 oracles, which could lead to problems when scaling. To further this, it also means the cryptocurrency isn’t as decentralized as it could be.
How does Chainlink work?
To ensure smooth communication between users and external data sources, Chainlink has developed its own steps. Here’s how they work.
Oracle Selection – Chainlink users create a service-level agreement (SLA) that outlines a set of desired data requirements. The software uses this SLA to match the user with oracles who provide data. Once the parameters have been defined, the user submits their SLA and deposits LINK in an order-matching contract. This accepts bids from oracles.
Data Reporting – Oracles connect with external data sources to obtain real-world data. This data is then processed and sent back to the contracts running on the blockchain.
Result Aggregation – This is the final step. During this phase, the data collected by oracles is tallied and returned to an Aggregation contract. This contract analyses the responses, assesses their validity and returns a score to the user. This score is created using the sum of all the data received.
Three contracts are used by Chainlink.
Aggregating Contracts – These collect data from oracles and match the results with the smart contracts that need them.
Order-Matching Contracts – These match smart contracts SLA with the best bidding oracles.
Reputation Contracts – These verify the integrity of an oracle by checking its track record. This includes the number of completed requests, LINK staked and average response time.
Chainlink also interacts with oracles outside of its own blockchain.
The oracle node is made up of two components:
Chainlink Core – Reads newly filed SLAs and routes assignments to the Chainlink Adapter.
Chainlink Adapter – Acts as the bridge between the node and the external data. The adapter can read and process the data and write it to the blockchain.
How to buy Chainlink online
You can buy Chainlink on most popular exchanges. Common options are Binance, Kraken and Coinbase.
Start by opening an account on any of these exchanges. If you already have one, log in.
Make sure your account is funded. You can buy LINK with cryptocurrency or fiat. Once your account is funded search for LINK.
Select the number of tokens you want to buy and click “Buy”. Double-check your wallet to make sure your LINK tokens are in your wallet.
How to trade Chainlink
LINK is traded on the same platforms listed above. To trade your LINK, search for the cryptocurrency you want to trade it for. Popular options include Bitcoin (BTC) and Ethereum (ETH). Select the number of the tokens you want to buy and trade your LINK for them. When completed, check your account to make sure the trade was a success.