What is ChainLink? The beginner’s guide

ChainLink is a decentralized oracle service. To manage data in smart contracts, a chain (blockchain) is required. This condition significantly inhibits their active distribution. Contractual agreements do not have a connection with everyday industries, which means that they are not able to verify the conditions specified in the contracts.

ChainLink oracles were created to translate the requested information from the outside into a form accessible to the blockchain. For example, if the fulfillment of one of the conditions of a smart contract requires accurate information about temperature, a change in the status of a payment order or price data for a certain period, the oracle will provide it in the blockchain.

Oracles connect digital contracts with the outside world. Now that this opportunity has arisen, the scope of application of smart contracts will rapidly increase. The development of this technology will make a revolution in many sectors of the economy.

Oracles in contractual agreements

Digital contracts have the need to receive data from the outside world.

For example, financial contracts require data on prices, market changes, or interest rates.

Insurance contracts will ask for IoT data that relates to the insured event (for example, whether the storage door was closed, whether security software was running, an insurer’s visit took place, etc.)

In investment agreements, GPS data, information from customs (for goods deliveries, for example), ERP resource management systems, etc. will be checked.

To clearly understand how the oracle is used in contractual agreements, you can consider this with the simplest example:

Let two members of the network decide to enter into a smart contract for the outcome of a sports competition. One side of the transaction put 1000 LINK on the victory of team X, the second — 1000 LINK on its defeat. The contract will be executed only if the network receives reliable data on the outcome of the game.

It is here that the oracles are needed: if the offline client has some kind of bookmaker company or a sports reviewer channel, then the data on the outcome of the sports game will be obtained by the blockchain and all the conditions of the contract will be met. That’s is how smart contracts work with the use of an oracle.

How does ChainLink works?

Developers offer the owners of a data channel, feeds or APIs to provide information to ChainLink and receive bonuses in LINK tokens for this to create a decentralized network of verified oracles.

ChainLink platform has two working parts:

• internal blockchain;
• external off-chain.

In order for the system to work reliably, both systems must constantly interact with each other. Blockchain checks oracles for compliance with the requirements of smart contracts.

Offchain consists of several clients (nodes) connected to the Ethereum network that receive data from different external sources independently of each other. Such a client may have, for example, a popular exchange that will provide informational data regarding trades in the current period. Or a payment system that can deliver data about their transactions.

At the moment, ChainLink has created a platform compatible with Bitcoin, Ethereum and Hyperledger.

LINK Token

LINK token is an intranet unit of payment for services provided from outside. The demand for it will grow with the development of the network and an increase in the number of participants. Its real indicator can be seen after the full launch of the platform.

Where can I buy Chainlink?

You can get LINK tokens, either as an operator of the node of the ChainLink platform, or by buying coins on the exchange. Anyone who has a useful service, data channel, local payment system or other API can become an operator of the ChainLink node.

If you do not have such data, you can use the trading platforms. Currently LINK token is trading on the following exchanges:

• EtherDelta;
• Mercatox;
• Binance;
• Huobi;
• Gate.io;

and others.