In 2020, the decentralized finance (DeFi) market has exploded, with the emergence of many well-known projects such as MakerDAO (MKR), Compound (COMP), Uniswap (UNI) and Synthetix (SNX). However, what is less known is that without oracles, these DeFi projects will not be able to achieve their core functions. As a leader in the oracle field, Chainlink has become the preferred partner of major DeFi projects and is well received by the market. So, what are Chainlink and LINK coins? What are their functions? How to invest in LINK coins? This article will provide you with a detailed analysis.
What is LINK and Chainlink?
Chainlink is a decentralized oracle network platform that was launched in 2017. It is based on blockchain technology and aims to provide reliable off-chain data for smart contracts. The so-called oracle refers to a tool that provides external data to the blockchain. LINK is the native token of the Chainlink platform, based on Ethereum's ERC-20 standard, with a total supply of 1 billion.
Why do we need oracles? What does Chainlink do?
In the blockchain world, on-chain data and off-chain data are independent of each other. On-chain data is stored on the blockchain, while off-chain data refers to data in the real world. The role of the oracle is to bring off-chain data onto the chain, thereby ensuring that smart contracts on the blockchain can be executed based on real-world data. For example, the results of the US presidential election can be provided to on-chain smart contracts through an oracle, thereby triggering corresponding on-chain activities.
There are two types of oracles: centralized oracles and decentralized oracles. Centralized oracles are provided with data by a single supplier, which is prone to problems such as downtime, data tampering, or hacker attacks. Decentralized oracles collect and verify data through multiple suppliers to ensure the authenticity and reliability of the data. As a representative of decentralized oracles, Chainlink can provide reliable data support for applications such as DeFi.
Advantages and disadvantages of LINK
Advantage
Accuracy: Ensure data accuracy and integrity by screening trusted data sources through identity authentication and contracts.
Reliability: Decentralization uses multiple sources of information to prevent the risk of a single failure.
Compatible and open: allows anyone to provide data, is compatible with multiple smart contract platforms, and is highly open.
insufficient
Complex and difficult to understand: The technical architecture and applications are relatively complex, difficult for ordinary users to understand, which limits their consensus.
Many competitors: There are many competitors, such as UMA, WINkLink, API3, BAND, etc., and the market competition is fierce.
Reliance on third parties: All data is provided by third parties, which poses a risk of collusion and fraud.
The future prospects of LINK
Whether it is DeFi or other blockchain projects, as long as it involves data on-chain, it requires the support of oracles. Chainlink has become a leader in the oracle field with its first-mover advantage and technical strength. Chainlink has been applied to many fields, including games, NFT, DeFi, etc., and provides data services for well-known projects such as AAVE, Synthetix, DYDX, ENS, Compound, Pancakeswap, etc. In addition, Chainlink has also reached cooperation with Google Cloud, AWS, CoinGecko, etc.
As smart contracts and the blockchain industry develop, the demand for oracles will continue to increase, and Chainlink will benefit from this. Recently, the Chainlink team launched the Cross-Chain Interoperability Protocol (CCIP), and co-founder Sergey Nazarov believes that the protocol will promote the development of the blockchain industry and bring trillions of dollars in revenue to banks. This good news has caused the LINK coin to rise by 20% recently.
How to invest in LINK?
Since its launch, LINK has been mainly traded and invested in the secondary market. Common investment methods include:
Spot holding: long-term holding of LINK coins, waiting for the price to rise and then selling for profit. Users can also use LINK coins for liquidity mining, staking mining, etc. to obtain additional income.
Contract trading: Speculative trading through long or short CFDs. If you predict that the price of LINK will rise, you can open a long order; if you predict that the price will fall, you can open a short order. This trading method is risky and needs to be operated with caution.
Summarize
As leading projects in the oracle field, LINK and Chainlink have shown great market potential with their unique technical advantages and broad application prospects. With the continuous development of blockchain technology and smart contracts, the value and influence of LINK will continue to increase. For investors, LINK is undoubtedly a digital asset worthy of attention and research.
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