Chainlink [LINK] has been one of the most talked-about topics of 2019. While cryptocurrencies are all about building the marketing hype around its developments Chainlink’s team is quite the opposite. Ethereum [ETH] one of the top coins on CMC who has never left the top 5 league. With LINK coming into the picture this king has some competition to beat.
Ethereum’s constraints of working with data outside the blockchain and how Chainlink is creating an oracle to get external data on-chain that would give smart contracts an immense boost in the potential use cases.
Diving into Chainlink
Chainlink is owned by SmartContract.com, indeed one of the best domains to have in this space! The company was established in 2014 and is led by its CEO Sergey Nazarov. Chainlink introduces itself as a decentralized oracle solution. The technology acts as an agent to bridge the gap between traditional data sources and blockchain projects. Additionally, it gets a whole new idea for literal smart contracts with its native coin LINK!
Chainlink doing smart contracts better than Ethereum
Let’s understand Chainlink in parts – its technology, its offering, and its integration.
Conventional contracts integrated into codes are centralized which leaves them subject to alteration, termination, and even deletion by an external party. When it comes it the current on-chain smart contracts such as the ones Ethereum offers. They have decentralized in a manner that these contracts are tamperproof which indicates that no party can alter them. But these smart contracts are limited to the on-chain data stored in their blockchain.
Chainlink fights the limitations of the current smart contracts by using an “Oracle” network. Oracles used by traditional networks are managed by centralized authorities. Chainlink differentiates itself from the centralized oracles by operating as a fully decentralized network. How?
When it comes to Ethereum, the smart contracts are extremely limited to the data based on the blockchain and have major oracle problems.
Let’s understand the oracle issue first
When you talk about a smart contract you see the coding and the instructions that self execute the given specifications on the blockchain networks. Oracles come in the picture when these smart contracts need relevant data, basically, they’re the sources that feed data. Since these smart contracts are self-amending, tamperproof and cost-efficient they act as the best medium of automating transactions with zero points of failure.
When you study a bit more about these smart contracts you understand they might not be as smart you think. There are pure instructions of code that are only executed when oracles feed data to them. For instance, if some kind of malicious data is fed, the smart contract processes the data as it is.
Here’s where Chainlink gets into the entire problem-solving statement. It is a decentralized blockchain that bridges the gap between smart contracts and oracles.
The nodes on Chainlink’s network act as smart contracts, each node has a job to perform; a particular, independent decentralized computation to validate the authenticity and accuracy of the data that the smart contracts intake.
USER-SC makes an on-chain request
CHAINLINK-SC logs an event for the oracles
ChainLink core picks up the event and routes the assignment to an adapter
ChainLink adapter performs a request to an external API
ChainLink adapter processes the response and passes it back to the core
ChainLink core reports the data to CHAINLINK-SC
CHAINLINK-SC aggregates responses and passes them back as a single response to USER-SC.
This is as good as a scalable Ethereum with the perks of decentralized oracles for on-chain and off-chain data!
How Chainlink Oracles fights issues:-
- Smart contracts will always function normally irrespective of the Chainlink oracle going down, it will simply switch to the back-up oracles.
- The data provided by Chainlink – all of it will be presented by multiple oracles to which one answer is then returned back to the contract. Since oracles form a consensus to what is not faulty and correct with the onchain mechanisms.
- Oracles support all connections, it has practical application within any and all contracts.
- Each oracle has on-chain identity and reputation verifiable by end-users and auditors alike.
Chainlink achieves Connectivity by integrating smart contracts on various networks to existing apps and even external data. Even transferring Payments from smart contracts to existing bank accounts and payment networks such as PayPal etc. Additionally, it gets in the feature of interoperability that creates secure cross-chain connectivity between smart contracts and any public or private networks such as Ethereum and Hyperledger.
Things that Chainlink does but Ethereum doesn’t:
- Decentralized monitoring over oracles, everyone present on the network can run their oracle software.
- Data aggregation through on-chain smart contracts.
- Full flexibility when it comes to connections to the outside world [outside blockchain]. It supports all data sources. Be it public data sources, subscription-based or completely private sources.
- A reputation system for users to fetch the on-chain identity of every oracle. This allows the user to have an idea of the quality of the oracle they use.
- When an oracle accepts a request, the user has to put forth LINK as collaterals. Just in case, malicious data is fed into the oracle it forfeits the tokens and degrades its own quality check scores for future references.
These features and points make Chainlink stand out in the Smart Contract game. Even though Ethereum has the leverage of higher adoption and a bigger community, Chainlink has the potential to disrupt it with its one-of-a-kind oracle!