What is Chainlink? Information about LINK Token
Chainlink is a decentralized Oracle network founded by Sergey Nazarov in 2017. Initially operating on the Ethereum blockchain, its primary function is to bridge the gap between smart contracts and external data sources, ensuring secure access to off-chain information for these contracts.
However, with the introduction of innovative products like the Verifiable Random Function (VRF), Automations, and the Cross-Chain Interoperability Protocol (CCIP), Chainlink has significantly expanded its capabilities beyond being a mere Oracle provider.
What Problems Does Chainlink Solve?
Smart contracts on the blockchain have a critical limitation: they need off-chain data to function effectively but cannot directly access this data due to the isolated nature of blockchain environments. This limitation significantly constrains their real-world applications.
To bring data onto the blockchain, the most common solution is through an Oracle—a middleware that fetches data from the outside world and brings it into the blockchain. However, relying on a single centralized Oracle poses the “Oracle problem,” where the smart contract’s outcome could be compromised or manipulated by that Oracle.
Chainlink addresses these challenges by constructing a sophisticated system comprising both on-chain and off-chain components:
On-Chain: This includes smart contracts and Oracles that handle user data requests.
Off-Chain: These are Oracle nodes operating outside the blockchain, connected to the Ethereum network. These nodes gather and process off-chain data before transmitting it on-chain via the Chainlink Core software.
Off-chain Oracle nodes are incentivized through the receipt of LINK tokens for their data collection and transmission services.