When Smart Contracts Need to Access “Dumb” Data: Understanding Chainlink Crypto

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Chainlink brings to smart contracts what Ethereum brought to standard ones. A better way of doing business, with smooth integration of historical protocols and blockchain technologies.  When ethereum rolled out the concept of smart contracts nearly half a decade ago, they had created a solution to a widespread problem. Improving the security of contracts while at the same time keeping a focus on transparency and ease of conditional language. 

However, what stops Ethereum’s smart contracts from going the extra mile is that they are incapable of accessing any information that doesn’t exist within the ethereum blockchain. This means that if a smart contract needs to access information from someone’s bank account, PayPal account, or so on and so forth- ethereum smart contracts will not work. 

Or they wouldn’t, that is until chainlink arrived. Chainlink currently partners with SWIFT, the Society for Worldwide Interbank Financial Telecommunication. SWIFT provides the network that banks use to send and receive information to all other banks in the world. Making that particular partnership a really big deal. Chainlink is chosen to be an official cloud partner of google, making its data collection ability even more expansive and improving google’s ability to collate and store query data. 

These partnerships, among a few others, have sent mutters into full plan chat over the obvious functionality of chainlink’s platform. Which has caused many online crypto exchanging platforms like renowned bitvavo, to start trading in LINK tokens, and offering more support for early investors. 

Flaws in Smart Contracts 

While smart contracts are definitely piquing the interest of industries and individuals worldwide, if you’re looking to create a contract that requires off-chain data, you’re fairly well out of luck. This is where chainlink steps in- offering a much-needed link between information held outside of any given blockchain, and the data that’s being created on the platform used to create a smart contract. 

In essence- if you create a smart contract on ethereum, the only data that include in that contract must be on Ethereum’s network. So say you need to add a clause that involves PayPal payment, bitcoin, or personal banking details? Not gonna happen. You’d first have to convert all types of payment into ether and use that token to make those payments. 

Chainlink offers a linking service that can receive data from off-chain sources (like PayPal, market and events data, APIs, etc.) and bring it to the smart contract platform (such as ethereum). Chainlink achieves this by using “oracle” nodes. These nodes then collect and deliver the necessary data to the smart contract network in terms that the smart contract can understand and utilize.  

Chainlink is currently the only platform that provides secure, trustworthy, decentralized, and tamper-proof “blockchain middleware”. Or put simply- a trustworthy intermediary between smart contract platforms and external events. 

Off-Chain Functions 

The off-chain functions are perhaps the most unique characteristics of Chainlink’s network. 

Oracle Nodes 

These nodes are verified process servers that work as intermediaries between the ethereum network and outside events. 

Data Collection and Processing 

For their contributions in collecting processing the necessary off-chain data, oracle nodes are compensated in LINK tokens. 

Trustworthiness of Data 

Any amount of data that is transferred between off-chain and on-chain networks must be verified before it can be passed on. 

On-Chain Functions

Users who wish to access off-chain data submit what’s called a “requesting contract” to the Chainlink platform. Chainlink’s network then takes these requesting contracts and matches them to particular oracle nodes, nodes that offer the expertise most appropriate for the request. These requesting contracts are then processed into Chainlink network-specific contracts:

Reputation Contracts 

Determine whether or not a particular oracle node is trustworthy and verifies it’s authenticity. 

Order-matching Contract 

This logs the requesting contract onto the network and then takes bids from responsible and verified oracle providers. 

Aggregating Contracts 

Gathers data from off-chain events and entities and then accumulates it. The oracle then filters the accumulated data for relevance and authenticity. The data that is verified is then sent to on-chain nodes for further processing. Fulfilling the original requesting contract.

If you’re wondering this based on the value of the system itself- then absolutely yes. Chainlink offers solutions that make smart contracts even more user friendly and viable. This type of technology is to surge in demand as more and more entities begin switching to smart contract services.

As far as a cryptocurrency value investment- that has yet to be seen. The token itself is extremely popular now, trading at close to $100 million per day. There are a few grumbles that believe the oracle nodes should receive payment in their own cryptocurrency, as opposed to Link. So there’s some suggestion that future forks may render Chainlink’s token useless. Regardless of how integral the platform becomes in the future.

So if you do invest in chainlink, do so wisely, and as always, make sure that you keep a close eye on what’s happening in the market and on your cryptocurrency exchange platform.   

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PR Manager

Press release about recent ICOs, announcement from startups, new cryptocurrency launch by firms and unlike.

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