What Is Chainlink, And How Does It Work?
Chainlink (LINK) is an open-source blockchain project that aims to connect the world’s smart contracts with the real world by enabling secure access to external data feeds and other APIs.
By facilitating these connections, Chainlink allows smart contracts to become useful beyond their current scope in a far wider range of applications, including supply chain management, payment services, insurance services, and more. Read on to learn more about what ChainLink is and how it works.
What Is Chainlink?
Chainlink is an Ethereum-based middleware, allowing smart contracts on Ethereum to access key off-chain resources like data feeds, various web APIs, and traditional bank account payments.
This technology enables anyone to write a smart contract that can use services traditionally only accessible to centralized applications (such as Google Sheets or PayPal). The LINK token (LN) powers these transactions.
As such, we believe it will become an essential part of every serious blockchain project. To understand why let’s look at some examples of what you could do with Chainlink today:
- A smart contract can query any publicly available data source, including stock prices, weather updates, and sports scores. If your business logic requires real-time information from one of these sources to function properly (for example, if you are building a decentralized exchange), then Chainlink would be your solution.
- You could pay someone using a credit card or PayPal directly from within your smart contract. Using Chainlink, you would simply connect to one of these existing payment providers via API and send them money when certain conditions are met (e.g., when goods are delivered).
- You could pay someone in cryptocurrency directly from within your smart contract. In other words, you could create a system where two parties can make trustless peer-to-peer payments without ever interacting with a cryptocurrency exchange.
All of these capabilities are possible today, but they require manual configuration by developers and cannot be used by smart contracts out of the box. Chainlink aims to solve these problems by creating an open standard for dApp developers to request off-chain data, crypto payments, and more while paying LINK tokens for each transaction made through their network.
Originally published on The Tech Trend