What Is Chainlink (LINK)?

Learn how Chainlink pioneered blockchain interoperability, through oracles that link smart contracts to real-world data and traditional financial systems.

Introduction to Chainlink

Web3 demands blockchain interoperability, but many blockchains struggle to communicate with other protocols and external data sources. 

Founded in 2017 by Sergey Nazarov and Steve Ellis, Chainlink (LINK) is a decentralised oracle network (DON) that fills this critical gap. It provides the infrastructure for smart contracts to ‘talk’ to events, payments, and APIs beyond the blockchain.

Chainlink has since grown to become the leading provider of cross-chain and off-chain connectivity for Web3.

What Is Chainlink: The Decentralised Oracle Pioneer

Chainlink was among the first platforms to connect real-world data, governments, enterprise systems, and thousands of blockchains into unified applications, pioneering much of what is now called Web3. 

The oracle network brings external data like asset prices, weather, or sports scores on-chain for smart contracts to use. Without oracles, smart contracts would be isolated and unable to respond to real-world events.

Its flagship innovation, the Cross-Chain Interoperability Protocol (CCIP), facilitates secure communication between blockchains. This is vital for DeFi, tokenisation, and enterprise applications seeking to move assets across networks.

Chainlink 2.0, introduced in 2022, significantly expanded the network’s functionality to include:

• Hybrid smart contracts leveraging on-chain and off-chain resources
• Greater scalability
• A more intuitive user interface 
• Enhanced confidentiality and cryptoeconomic security
• Fair transaction sequencing (reducing exploitation by bots and other bad actors)
• Trust minimisation (via decentralisation features such as guardrails and cryptographic guarantees)

How Does Chainlink Work?

Chainlink employs a unique three-step approach to facilitate interaction between the smart contracts in the Chainlink ecosystem and external data sources:

1. Data Retrieval: Chainlink’s decentralised network of oracles fetches external data required by a specific smart contract.

2. Data Aggregation: The retrieved data is aggregated to form a consensus value, ensuring the final input into the smart contract is accurate and resistant to manipulation.

3. Data Delivery: The finalised data is securely relayed to the smart contract for execution on the blockchain.

In order to bridge two environments, Chainlink incorporates on-chain and off-chain architectures.

On-Chain Architecture

Chainlink’s on-chain architecture began with oracle contracts built on the Ethereum (ETH) blockchain.

Oracle contracts play a vital role in monitoring and handling user data requests. On-chain architecture forwards requests for off-chain data to the Chainlink network, enabling their processing within native blockchain smart contracts.

The on-chain architecture consists of three main contracts:

1. Reputation Contract: Assesses the credibility and performance history of an oracle provider, identifying and eliminating disreputable or unreliable nodes.

2. Order-Matching Contract: Plays a crucial role in logging user proposals within the network and gathering bids from oracle providers. Also analyses reputation contracts to help select oracle service providers.

3. Aggregating Contract: Consolidates data from the selected oracles and performs validation and reconciliation to ensure accurate results.

Off-Chain Architecture

Chainlink’s off-chain architecture retrieves data from external sources, such as data feeds and APIs, and returns it to the requesting contracts on the blockchain. 

Using mainly Chainlink nodes, which independently harvest responses to off-chain requests and listing services, the off-chain architecture enables Chainlink to provide secure and reliable external connectivity to smart contracts on the blockchain.

Does Chainlink Have Real-World Utility?

Chainlink’s primary utility is to open up blockchain to the outside world.

In DeFi, Chainlink’s Data Feeds is a core utility, powering price feeds for lending markets (e.g., Aave, Compound), decentralised exchanges, and derivatives protocols. These feeds are critical for:

• Fair liquidations
• Accurate yield calculations
• Stablecoin minting

Over in traditional finance (TradFi), Chainlink is being tested in pilots with SWIFT, DTCC, and ANZ Bank, where CCIP enables cross-chain settlement of tokenised assets. This marks a step toward bringing instruments like bonds, funds, and payments on-chain in a secure way.

Beyond finance, Chainlink has broader applications:

• Insurance: Parametric insurance smart contracts use Chainlink’s weather data to automate payouts.
  
• Gaming and NFTs: The Verifiable Randomness Function (VRF) provides provably fair randomness for blockchain games, lotteries, and NFT drops.
  
• Enterprise and supply chain: Chainlink oracles can bring internet of things (IoT) or logistics data on-chain to verify provenance or delivery.
  

Without the wide net of sourced, secure data from Chainlink, most dapps — from lending protocols to insurance platforms — may not be as well-equipped to function reliably and safely.

The Tokenomics of LINK

Launched through an initial coin offering (ICO) in September 2017, LINK functions as an ERC-677 token that inherits functionality from the ERC-20 token standard, allowing token transfers to include a data payload. 

The LINK token serves as both an economic incentive mechanism and a medium of exchange within the Chainlink ecosystem.

The token distribution was as follows:

• 35% to the token sale
• 35% for rewards and airdrops
• 30% for Chainlink Labs

In December 2023, Chainlink launched Staking v0.2, expanding the staking pool to 45 million LINK, and introducing a more modular design with liquid rewards and unbonding periods. 

The upgrade improved network security by letting more community members stake LINK, while giving stakers greater flexibility in managing rewards and withdrawals.

LINK has a max supply of 1 billion tokens.

The token hit an all-time low (ATL) of $0.1563 in November 2017 and an all-time high (ATH) of $51.62 in May 2021.

What Does the Future Hold for Chainlink?

Chainlink’s future is shaped by its ambition to become the standard middleware for Web3 and traditional finance, often described as the ‘Internet of Contracts’. This vision centres on connecting banks, enterprises, and dapps through secure, interoperable infrastructure.

The key driver of this strategy is the CCIP. Since going live in 2023, the innovation has enabled tokenised asset transfers, cross-chain lending, and enterprise pilots. By mid-2025, institutions including Mastercard, Visa, SWIFT, DTCC, and ANZ Bank had already trialled or integrated CCIP for functions ranging from crypto payments to tokenised fund settlements.

Alongside CCIP, Chainlink is rolling out the Chainlink Runtime Environment (CRE), a modular redesign of the network that expands what developers can build. CRE aims to:

• Improve security and resilience
  
• Unlock new oracle use cases beyond data feeds, such as off-chain compute
  
• Support hyper-scaling to meet global demand
  
• Simplify the developer experience with more flexible tooling
  

CRE is slated for a phased rollout through 2025.

Benefits and Limitations of Chainlink

How to Buy LINK on Crypto.com

Buying LINK and other major tokens is straightforward with the Crypto.com App. Users can use supported fiat currencies like USD, EUR, and GBP. 

Below is a step-by-step guide to getting started:

1. Download the Crypto.com App, available on the Apple App Store and Google Play. 

2. Complete the sign-up process. On-screen prompts are at hand to guide users. 

3. Funds deposited using bank transfers will usually clear within one to three business days. For faster access, users can also fund their account using Apple Pay or a prepaid/credit card. Please note that processing times and availability may vary depending on card issuer and other factors. 

4. Once the funds are cleared, users can start buying LINK, along with large-cap assets like Bitcoin (BTC) and Ethereum (ETH), plus an extensive collection of altcoins and meme coins.

Conclusion 

Chainlink bridges the gap between smart contracts and real-world data aggregation through decentralised oracle networks.

As the years go by, Chainlink’s role as the ‘backbone of blockchain’ appears increasingly cemented, with significant growth opportunities in capital markets, government adoption, and cross-chain applications.

For developers and institutions, Chainlink represents both the current state-of-the-art in oracle technology and a platform for future blockchain innovation. Chainlink 2.0 demonstrates that it is not resting on its laurels being at the forefront of Web3.

As much as Chainlink holds immense potential, investors eyeing the LINK token should still exercise due diligence as with any other cryptocurrency. LINK should only be added to portfolios after a comprehensive risk assessment and proper research into the project. 

Due Diligence and Do Your Own Research

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