Chainlink: The Bridge to the Blockchain World
In 2009, Bitcoin pioneered the blockchain and trustless movement. It allowed people to have a digital decentralized ledger for financial transactions. However, it had very little functionality outside of conducting financial transactions.
In 2015, Ethereum took the blockchain concept a step further by allowing smart contracts. This way, developers could interact and build on the network. This allowed different projects, Dapps to emerge. However, it was still limited to on-chain data. It can only work with data that is already on the network.
As we can imagine, it will remain relatively niche and not suitable for real world use cases if it cannot reliably bring on off-chain data. To access off-chain data, it needs an oracle. Creating a reliable decentralized network of oracles is the main problem chainlink is solving.
What is Chainlink?
It is a decentralized network of oracles. It allows smart contracts across different blockchains to access off-chain resources such as data feeds, web APIs, and traditional bank account payments. Currently, it is already working with the Ethereum network. It gives your smart contract “provably secure access to data feeds, APIs and payments”.
“What differentiates ChainLink from other oracle solutions is its ability to operate as a fully decentralized network. This decentralized approach limits the trust in any single party, enabling the tamperproof quality valued in smart contracts to be extended to the end-to-end operation between smart contracts and the APIs they rely on.” — Chainlink Whitepaper
What is an Oracle?
Oracles are a bridge that connects data from the real world (off-chain) to the blockchain (on-chain). Currently, there exists centralized oracle solutions. However, this creates a single point of failure. These do not pass the trustless and tamper resistant requirements needed by smart contracts.
ChainLink offers a decentralized alternative by creating a network of decentralized oracles that can pull data from data pools, application program interfaces (APIs) and other real world sources. It opens up the possibility for smart contracts to use any data source at all. Real world data can now take advantage of the secure and trustless nature of blockchain and smart contracts.
It must be noted that Chainlink can also securely input data back into off-chain networks/databases in behalf of a smart contract. This closes the loop so even legacy systems can make use of blockchain systems without overhauling their entire system.
Chainlink Components: Off-chain and On-chain Systems
Chainlink offers a simple on-chain contract data aggregation system, and a more efficient off-chain consensus mechanism. It also has supporting reputation and security monitoring services.
Chainlink has an on-chain architecture consisting of the following components:
- Reputation contract — keeps track of oracle-service-provider performance metrics
- Order-matching contract — takes a proposed service level agreement, logs the SLA parameters, and collects bids from oracle providers
- Aggregating contract — collects the oracle providers’ responses and calculates the final collective result of the ChainLink query
These three components act as a check and balance to optimize the results for the user. It tracks performances and penalizes bad oracles to provide the best results even with its decentralized nature.
- Purchaser specifies requirements that make up the SLA (Service Level Agreement). This include number of oracles, reputation level and query parameters.
- SLA is sent to an order matching contract.
- Chainlink nodes / oracles that pass the requirements decide whether they would like to bid or not.
- When an oracle bids, they also attach the penalty amount that would be lost due to misbehaviour as defined in SLA.
- Bid are accepted as long as they are passed within the bid window.
- Unchosen oracles get their penalties back
- When the finalized SLA record is created, selected oracles are notified.
- Oracles perform the assignment detailed in SLA
- Oracles report back their results and are fed to the aggregating contract
- Aggregating Contract tallies the collective results and calculates a weighted answer.
- Validity of each oracle response is reported to the Reputation Contract.
- Weighted answer is reported back to the Purchaser.
- Purchaser have the option to decide how to deal with outlying data.
ChainLink started off with oracle nodes connected to the Ethereum network for off-chain data. Later on, they will support other major blockchain networks. These nodes independently harvest responses to off-chain requests. Below are the components as outlined in the whitepaper.
Chainlink Core — The core node software is responsible for interfacing with the blockchain, scheduling, and balancing work across its various external services.
External Adapters — Beyond the built-in subtask types, custom subtasks can be defined by creating adapters. Adapters are external services with a minimal REST API. By modeling adapters in a service-oriented manner, programs in any programming language can be easily implemented simply by adding a small intermediate API in front of the program
Subtask Schemas — ChainLink currently operates with a schema system based on JSON Schema, to specify what inputs each adapter needs and how they should be formatted.
The Chainlink nodes have already been installed next to the public blockchains and private enterprise networks. The core task of the Chainlink network is to make it possible to run them in a decentralized fashion.
Chainlink Sample Use Cases
- Money and Finance — the need for reliable data in the Financial sector cannot overstated. Securities smart contracts such as bonds, interest rate derivatives, and many others will require access to APIs reporting market prices and market reference data, e.g. interest rates.
- Payment —Given that many banks have data that are very siloed, Chainlink allows smart contracts to connect and interact to these legacy banking system. With Chainlink’s blockchain agnostic nature, it can help bridge payments from one cryptocurrency to another, seamlessly.
- Insurance smart contracts — Anybody who has tried claiming an insurance surely knows how much of a hassle it is to prove certain information. With Chainlink, insurance companies can tap into IoT data related to the insurable event in question, e.g.: did the flight you had insurance for arrive on time. Just imagine the surge of new insurance products that insurance companies can offer when they can reliably calculate as well as certify different data points they need.
- Enterprise systems — Chainlink can connect legacy database systems to smart contracts. This not only helps improve existing companies but also allows new blockchain projects to easily onboard new clients.
- Supply chain —trade smart contracts will need GPS data about shipments, data from supply chain ERP systems, and customs data about the goods being shipped in order to confirm fulfilment of contractual obligations.
- Utilities — Imagine being able to track the downtime of your internet service provider and asking for a rebate based on this data. Another possible use case is with the greenhouse/CO2 emission laws. Governments can accurately penalize companies that are causing more harm to the environment with help of blockchain and IoT devices.
- Gambling — Smart contracts can provide verifiable, tamperproof outcome probabilities through web APIs for odds. This now allows customers to really know the odds they are playing against instead of just taking the house’ word for it.
- Government — With tamperproof records, governments and its citizen can finally achieve a more fair society. From voting, to public personal records such as citizenship, smart contracts can revolutionize society. With this technological capability, the question then shifts to will citizens and government want to implement this?
- Authorization and Identity — Tamperproof records will be needed for IP, Signatures, Biometrics and even log in credentials. Chainlink can help verify you and your records reliably.
You can read the article “44 Ways to Enhance Your Smart Contract With Chainlink” from the Chainlink blog to get more detailed use cases for each.
Link Token Usage
The Chainlink network will utilize the LINK token to pay Chainlink Node Operators for the following:
- Retrieval of data from off-chain data feeds
- Formatting of data into blockchain readable formats
- Off-chain computation
- Uptime guarantees they provide as operators
Sergey Nazarov — CEO, Starting his career at FirstMark Capital, he left to join the cryptocurrency revolution in 2011. He is a serial entrepreneur and founder of tech company SmartContract, Secure Asset Exchange and CryptoMail — a decentralized email service.
Steve Ellis — CTO, Previously a software engineer and team lead at Pivotal Labs, where he worked on securing sensitive HIPAA compliant data and building scalable payments automation software.
Votes of Confidence from Industry Partners
- Google Cloud announced Chainlink as an official Cloud Partner. As part of this partnership, Google plans to use “Chainlink oracle smart contract” to establish a bridge between Ethereum-based smart contracts and its data warehousing and business intelligence solution — BigQuery.
2. Chainlink has teamed up with Intel, Hyperledger, and the Enterprise Ethereum Alliance to unveil the Trusted Compute Framework (TCF) later known as Hyperledger Avalon. The framework will help blockchains to significantly enhance the computational abilities while simultaneously catering to enterprise requirements for scalability and privacy.
“Chainlink: 3 contributors that will contribute to the TCF’s plans for how to integrate with decentralized oracles and attested oracles, which will be able to provide both TCF computations and various on-chain computations”
Some notable members include: Alibaba, Baidu, Consensys, IBM, Microsoft, Oracle.
3. ChainLink’s partnership with the SWIFT banking transaction network could be it’s biggest one yet. SWIFT is one of the largest global financial networks, processing millions of financial transactions and success with them could lead to many other partnerships within the finance industry from banks to payment processors to insurance outfits. See the possible finance use cases section above.
4. Oracle and Chainlink have partnered up together to do a blockchain innovation project. They’ve chosen 20 startups.
The collaboration, which Ribeiro said had been in the works months, entails Oracle’s blockchain experts working with the Chainlink team to help startups use Chainlink’s decentralized oracle tech to monetize APIs via smart contracts on the Oracle Blockchain Platform, the software giant’s “business-ready” distributed ledger.
ICO Price: $0.11
ICO Date: September 19, 2017
Total Raised: $32,000,000
Current Price: $4.72
Circulating Supply: 350,000,000 LINK
Total Supply: 1,000,000,000 LINK
ICO price: $0.10
As blockchain tries to bring the world to the next level, they will need access to off-chain data. Chainlink is solving a real problem not only for existing companies but also for other blockchain projects. Chainlink provides them with a secure and decentralized solution. It also provides interoperability between blockchains.
As we can see, Chainlink has enabled a ton of new use cases that different companies can build on. Chainlink is merely a bridge, but without this bridge, blockchain may not be as transformative as it can potentially be. With working projects and partnerships with some of the biggest companies already, Chainlink is no vaporware. I have no doubt it will go places (top of Marketcap) It already has the vote of confidence from much bigger companies. Chainlink is definitely a project we can expect a lot from both technological and financial point of view.