What Is Chainlink (LINK)?

Chainlink (LINK) is a decentralized system of nodes that aims to connect data and information from outside a blockchain to on-chain smart contracts. Chainlink enhances smart contract capabilities by allowing access to real-world data and off-chain computing while retaining the security of blockchain technology.

Smart contracts are like regular contracts; however, instead of being drafted on paper, these contracts run in the form of protocols on the blockchain. Since smart contracts work on the blockchain, they are immutable (cannot be changed) and verifiable (everyone can see them). This ensures a high level of trust among stakeholders that they accurately reflect the terms of the agreement and will execute it if and only if conditions are met. However, businesses cannot implement smart contracts in daily transactions for real-world applications, where most data and services do not reside on the blockchain. Since smart contracts require off-chain data in an on-chain format to build agreements, the challenge lies in linking outside information to blockchain smart contracts in a language both parties understand. 

This is where Chainlink comes in. The platform links off-chain and on-chain data through oracles that are software known as middleware. Oracles act as an intermediary, translating data from the real world to smart contracts on the blockchain and back again. Chainlink aims to provide a secure, decentralized, and therefore tamper-proof "blockchain-middleware" and an easy way to access the multiple inputs and outputs needed by a complex smart contract. Chainlink aims to accelerate the development of useful smart contracts through simple and secure access to important off-chain resources. 

To achieve its goals, the Chainlink network aims to deliver the following:

• Reliable, tamper-proof network: The platform connects extremely accurate data/APIs to any smart contract using decentralization, trusted nodes, premium data, and cryptographic proofs. API stands for application programming interface, and it allows enterprises to share data and functionality from their applications with third-party developers, commercial partners, and internal departments.  

• Seamless connection to any API: Create a framework for obtaining data from any API, connecting to existing systems, and integrating with any existing or future blockchain. 

• Proven, ready-made solutions: Integrate pre-built, time-tested oracle solutions that have already helped market-leading decentralized apps safeguard smart contract value. 

• Secure off-chain computation: To automate contracts, use a decentralized network of Chainlink nodes, eliminating the need for manual intervention and centralized servers. 

As per the whitepaper, the platform's foundation is built on decentralized oracle networks, or DONs for short. A DON is a Chainlink network maintained by a committee of nodes and performs functions as decided by the committee. The intent of DONs is to enhance and expand the capabilities of smart contracts on a target blockchain by providing more functions than available natively. DONs accomplish it by providing security to the three core computing resources: networking, storage, and processing. 

Coming to the token, LINK is the native token of the platform. Users can pay Chainlink node operators using LINK tokens. The token aims to finance the platform's growth and provide an incentive to users to create more tokens. Users can pay node operators for their services using LINK tokens. Chainlink node operators stake LINK in the network to indicate their commitment to the network and reward good service. LINK is also used to govern the network. Hence, nodes having a higher stake are more likely to be chosen to fulfill data requests (and thus earn LINK tokens for their services). Similarly, the Chainlink network penalizes faulty or dishonest nodes by taxing their LINK stake.

History of Chainlink (LINK)

Sergey Nazarov is the cofounder of Chainlink. He cofounded SmartContract, which connected smart contracts to external data and widely accepted bank payments. He was also the cofounder and CEO of Secure Asset Exchange. The updated whitepaper, called Chainlink 2.0: Next Steps in the Evolution of Decentralized Oracle Networks, was released on April 15, 2021.

How Are New Chainlink (LINK) Tokens Created?

Staking in Chainlink involves nodes, or network members, depositing liquidity in the form of LINK tokens. The staked funds serve as an explicit incentive and are liable to forfeiture if a node fails to deliver services or misbehaves. A comparable implicit incentive exists in the Chainlink network, referred to as future fee opportunity (FFO). Users pay fees to nodes that have a good track record or reputation. Any misbehavior by these nodes jeopardizes potential revenue earned through network participation. This process is known as slashing in the blockchain world. 

To summarize, in the growing Chainlink network, there are two key economic incentives for correct oracle node behavior:

• Explicit incentive for staking (token deposit stake)

• Implicit incentive for future fee opportunity (FFO)

These two incentives are mutually beneficial. Oracle nodes can simultaneously participate in the Chainlink staking protocol, generating a steady stream of staking from users while also benefiting from their good behavior collectively. 

How Many Chainlink (LINK) Tokens Are There?

The maximum supply of LINK tokens is 1,000,000,000. 

How to Buy Chainlink (LINK) Tokens

The token is available on various decentralized exchanges, including but not limited to Coinbase. Coinbase is a NASDAQ-listed cryptocurrency exchange that provides a wide range of DeFi services and an advanced trading platform for institutions and retail traders.