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Chainlink (LINK) In Practice

Some smart contracts need to bring data from off-chain to the blockchain. Find out how Chainlink’s blockchain-agnostic oracle is bridging the data bridge.

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Chainlink provides an effective, reliable, and secure connection to external data sources that supply data to blockchain smart contracts. Many experts consider Chainlink to be a viable solution to the “oracle problem,” so the project has enjoyed a number of significant partnerships and exciting developments. To learn more, read this overview about how Chainlink works and serves as a decentralized oracle network for smart contracts.

Chainlink’s Enterprise Applicability

Chainlink focuses on providing a decentralized oracle network for smart contracts that need secure and reliable connections to real-world data from outside a blockchain network. Because smart contracts can be developed on many different blockchain platforms, Chainlink itself is inherently blockchain-agnostic. At its core, Chainlink does not prefer one blockchain to another, and does not include any features to make it easier for developers to build exclusively on a certain blockchain.

Initially, Chainlink was built to connect with the Bitcoin, HyperLedger, and Ethereum blockchains because they already had a good deal of support and integration with large businesses and institutions. The Ethereum blockchain is also widely considered the current gold standard for programmability, which is vital to the development of smart contracts — one of the key areas where oracles provide value to a blockchain. Chainlink is continuing to build external adaptors to facilitate interoperability with all blockchains.

In parallel, Chainlink is also building out functionality to integrate with a wider variety of data sources by becoming increasingly interoperable with a growing number of application programming interfaces (APIs) representing real-world data feeds. Only a minimal amount of coding is required to make an existing API Chainlink-friendly. Once optimized for Chainlink, an API can provide data to smart contract requests through Chainlink’s oracle system. The specialized adapters that Chainlink requires have been designed for easy setup in any programming language, which increases accessibility to data providers.

Chainlink also offers significant support and resources for software developers on both the client and data-provider sides. Chainlink wants to make it easy to connect smart contract developers with APIs that they are already familiar with; it also aims to provide opportunities for data providers — who can generate revenue from smart contract requests once their APIs become Chainlink-compatible. Chainlink is blockchain-agnostic; it allows data providers to sell their services to projects that operate on any blockchain network. Overall, Chainlink maintains an active role in building and maintaining productive interactions between smart contract developers and the data they need.

What Is Chainlink’s Real-World Use Case?

Chainlink continues to develop smart contract use cases that expand the breadth and depth of blockchain’s applicability in the real world. Smart contract developers can allocate more resources to developing useful smart contracts, knowing that they already have Chainlink’s reliable and secure data-delivery solution.

As an example, a smart contract relies on knowing the market price of a digital asset in order to execute a buy order. Chainlink’s decentralized oracle network requests data from various sources and synthesizes the results to provide much more reliable data than any single, centralized oracle could provide. With the resulting access to high-accuracy price data, traders can assess their risk more accurately and measure their profit and loss more reliably. With a growing network of reputable APIs and data providers, Chainlink has already implemented external adaptors for a number of cryptocurrency market price providers — e.g., CoinMarketCap, Crypto Compare, Brave New Coin, and more. Chainlink’s oracles provide some of the most accurate and reliable crypto price data in the industry.

Chainlink also seeks to bring secure, high-quality data to smart contracts that handle payment services infrastructure. Smart contracts can connect to traditional banking institutions through Chainlink oracles to integrate traditional banking information — like consumer bank accounts, direct deposit information, SWIFT international payment standards, and more — into their structure. Further, Chainlink is working hard to help established payment networks use smart contract technology. Chainlink external adaptors already exist for PayPal and MisterTango, and are easy for smart contract developers to incorporate into applications that require interaction with these two payment networks.

Blockchain-based smart contract technology holds immense potential and can be utilized for insurance claims, data storage, enterprise IT infrastructure, supply chain management, identity authentication and other security measures, regulated gambling, and government uses such as voting or land registries. The use cases mentioned here are by no means exhaustive. Overall, Chainlink makes it easier to bring an extremely wide variety of smart contract use cases to fruition.

Verifiably random number systems — which show that a number was not selected in bad faith — are useful for a variety of functions, including blockchain-based lotteries. In traditional lotteries, trust must be placed in whoever is running it to not cheat or alter the final outcome. A decentralized blockchain lottery removes this element of trust, and provides a system that is incorruptible by using numbers that are provably random. Chainlink has provided a means to generate random numbers with a verifiable random function (VRF). Smart contracts that want to prove they are using random number generation can easily use Chainlink’s VRF to do so.

Random numbers are also crucial in generating non-fungible tokens (NFTs), such as those that rely on the ERC-721 standard. NFTs enable the creation of one-of-a-kind collectible assets whose origin and uniqueness are cryptographically recorded via the blockchain. Because NFTs are unique and not interchangeable, they are commonly used to represent ownership of tangible real-world assets (such as land) or distinct digital assets (such as digital art). Random numbers and NFTs also have applications in the increasingly large blockchain-based video game and esports industry. Random numbers can be used to create unique NFT-based rewards, and can also help generate unpredictable in-game scenarios. Chainlink makes the randomized creation of NFTs simple and reliable with its sophisticated VRF capability.

Chainlink Partnerships and Community Growth

Chainlink has a grant program for promising smart contract applications and research proposals, which can be awarded upwards of $100,000 USD for developing integrations that complement the Chainlink oracle ecosystem. Requests for proposals can be submitted directly to Chainlink on an ongoing basis. Solana was the first of many grant award recipients of the Chainlink Community Grant Program.

Solana received a grant to integrate Chainlink oracles with the Solana blockchain platform, expanding Chainlink’s applicability for application developers, and ultimately furthering Chainlink’s goal of establishing itself as a platform-agnostic service. Solana incorporates a unique Proof-of-History (PoH) consensus mechanism to create a remarkably fast blockchain capable of processing approximately 50,000 transactions per second. To match its throughput, Solana partnered with Chainlink to develop an incredibly fast price oracle that can provide price data for digital assets in less than half a second.

Chainlink also hosts community events such as hackathons that put developers’ skills to the test in a competition setting, which provides developers with the opportunity to earn grants for further development. The winners of the 2020 virtual hackathon connected a Tesla Vehicle API to a Chainlink oracle via an external adaptor to create a peer-to-peer rental application that uses smart contracts to arrange agreements between owners and renters. This is just one instance of smart contracts enabling a new business model by using Chainlink oracles to connect a blockchain-based application to external, real-world data.

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