Blockchain technology has seen a staggering rise in popularity since the emergence of the first cryptocurrency in 2010, bitcoin. This one obviously offers a number of advantages, including decentralization and transaction security. Nevertheless, it also has its limitations.

The blockchain structure is inherently closed, which provides anonymity and integrity, but also limits the input that can be accepted. There is therefore a need for a kind of bridge to help systems “see” what is happening in the outside world. However, for the system to work, the input data cannot come from a single source. Why? Because then it would rely on a centralized data source, which goes against the very nature of blockchain.

This problem can be solved by Chainlink.

Chainlink – definition

Chainlink (LINK) is a cryptocurrency and technology platform established in 2017 that enables non-blockchain companies to securely connect to blockchain platforms. It works by using middleware to connect blockchain-based smart contracts with external data, such as stock prices. The platform’s currency, the LINK token, pays Chainlink network operators and secures smart contracts on the network.

Companies using Chainlink can access any major blockchain network, including Ethereum and Solana. The project is hosted on the Ethereum platform, which uses the Proof-of-Stake operating protocol. In addition, Chainlink is an open source project, which means that anyone can review the project code and contribute.

How does Chainlink work?

Some of Chainlink’s features include:

– Supporting decentralized data sources – data from multiple sources can be securely collected and processed for hybrid smart contracts;

– Providing verifiable sources of randomness – we are referring to applications, such as games, that require cryptographically secured randomness;

– Enabling automation – Chainlink’s smart contracts can automate critical functions and event-driven tasks for enterprises;

– Supporting cross-blockchain interoperability – Chainlink can connect blockchain platforms to support the exchange of messages, tokens and specific actions.

Chainlink decentralizes the process of moving data on and off the blockchain through “hybrid smart contracts.” LINK tokens are used to reward Chainlink network operators for retrieving data from off-chain channels, formatting the data in available formats and performing off-chain calculations.

The network is a system of nodes that follow established protocols. Node operators are required to lock up a certain number of their LINK tokens. At the same time, these set their own fees based on off-chain resource requirements.

How is Chainlink different from Ethereum?

The Chainlink network is, in a sense, a complement to the Ethereum network and other blockchains. Chainlink can facilitate secure communication between Ethereum projects and various off-chain data. Because Chainlink’s LINK token is built on the Ethereum platform, LINK is compatible with the protocols of the Ethereum platform.

Ethereum tokens can be used to spend on purchases, facilitate smart contracts and pay miners to operate the Ethereum network. Chainlink tokens have only one use case, which is to pay node operators on the Chainlink network.