What is Chainlink?
Chainlink provides a bridge between real-world data and smart contracts on Ethereum and other similar cryptocurrency networks. Chainlink has gained a lot of attention because it has established partnerships and integrations with a number of notable companies, including Google, Intel, and Amazon Web Services.
Smart contracts are agreements that are carried out automatically by a computer program when certain pre-agreed conditions are met and the cryptocurrency network they live on approves that they have been met. Chainlink helps these smart contracts by connecting them to real-world data sources. This enables them to check factors external to the cryptocurrency network outlined in the agreement, for example the weather.
Basically, when a smart contract needs some real-world data, it can connect to Chainlink to get it. This is important if they’re going to be widely used because it means they can be used to enforce agreements that rely on a far wider range of contributing factors.
Take flight insurance as an example. Flight insurance policies pay travellers compensation in the event of a delay. Using smart contracts, insurers can pay these automatically when certain conditions have been met. Chainlink is vital to this process because it feeds external data set out in the details of the agreement such as the weather and flight times to the smart contract. If they meet the terms of the agreement, say the weather is proved to be bad, then the smart contract can then decide whether or not to pay depending on if the causes of the delay satisfy the terms of the original agreement.
Chainlink does this using ‘oracles’, which are essentially intermediaries that gather data from the outside world and translate it into a language that the blockchain is able to use. Chainlink oracles are decentralised, which means no one person or group is in control of providing the data, rather responsibility is spread across the network. This prevents there being a single point of failure and helps with security. LINK is the native token of the Chainlink network. It’s used to pay for services carried out on the network by oracles. LINK is an ERC-20 token that’s built on Ethereum.